Here’s The Evidence For A Correction

I believe the market may start to have the first well-deserved correction in
quite a while. Here is the evidence:

Fewer and fewer stocks are breaking out. Not the end of the world, but a sign
that progress from here will be tough.

Over the past few sessions and especially over the past 2 sessions, while the
major indices have held up, advance/decline and up/down figures have been
downright ugly. On the NYSE, decliners led advancers over 2 to 1 on both days.

A select group of leaders are starting to gag. I urge you to watch leading
stocks at all times.

The DOW and S&P 500 never confirmed the breakout of the NASDAQ and NASDAQ
100…as well as small-mid-cap indices. This is most definitely a negative
divergence.

I am finding shortable stocks for the first time in a while, and the number is
starting to pick up on a daily basis.

But all is not lost. I gather this is just the pause that refreshes…so far. I
just want you to take a step back here and let the market come back toward its
moving averages. I will be watching for leading names if they pull back to
support. Also, watch volume patterns. If heavy volume starts to kick into gear
on the downside, we may have to adjust more.

I would not want to see the NASDAQ and NASDAQ 100 violate their recent breakouts
at 1686 and 1265 respectively. The S&P and DOW — which did not break out —
have support at 974 and 8970 initially and then 962 and 8870. A break of these
levels will turn the correction into something a little bit more tough to take.