A stock market correction appears to have begun this week. The primary driver of this correction in my opinion is the tightening of monetary stimulus and rates in China and the overarching reach of our government in trying to control and tax our banking and investment industry.
Today's selloff has pushed stock prices below short-term support and set up a downward price channels as reflected below. Already a number of our stop losses have been hit and our exposure reduced. We will likely wait for a bounce to the top of the trading channel, see below, to further reduce or cover exposure.
Where is the correction likely to lead? Here is our best guess. We will again use the Nasdaq Index.
So this would target 2200-2205 on the Nasdaq from its current 2262 (last trade)...so we are looking at possibly another 2.8%-3.0% downside. Short-term the market is pretty oversold and I would not be surprised to see a bounce on Friday that would provide a possible point to reduce short-term exposure further.
Medium-term and Longer-term up trends still remain in place.
Disclosure: Hold QQQQ