Is the Correction Over?
The market had a strong day today, following the conclusion of the midterm election. The S&P 500 climbed 2.1% and the Nasdaq Composite outperformed with a 2.6% advance.
Does this mean the correction is over? Let's take a look at four key signals in the daily S&P 500 (above).
1) The S&P closed above it's 50 MA for the first time since October 4th. This is a great first step.
2) However, the 10 MA is still below the 50 MA. It has to get above it for the market uptrend to continue.
3) RSI-20 crossed above the 50 level, a classic 50/50 signal for a shift in the balance of power (above 50 favors the bulls). The market is strengthening.
4) Today's high tested the last high from October 17th, but price did not close above it. So technically, there is "no" higher high yet. If the market blows through this price level in the next severals days, it would be very positive sign.
Summary: We are likely at the end of the correction. But signals suggest the market needs a little more time to strengthen before advancing with ease.
It's time to look for stock setups or recent breakouts. Buy signals can now be given greater credibility. Stepping slowly back into the market is clearly in order, at present.