Look for Stock Market Retracement

Six straight down days on the S&P 500 and 11 down days out of 13. Ouch, that hurt. I attempted buying a couple of breakout stocks as well as the SPY, which tracks the S&P 500, thinking we might pop higher then go down and boy was I wrong. Thankfully I had stops in place that protected my capital.

The chart below is a daily chart of the S&P 500 Index. That drop is not going to last at that rate, so watch for it to blow back.

Remember, no market goes straight down forever (or up), and after six down days, I'm expecting to see the market rebound a little. The big question is should we get short after some retracement? I'm waiting to see how strong the market looks at that point.

After going through two bear markets (defined as the markets going down 20% or more) in the past four years (and almost a third), I'm a little gun shy and always on the look out for a way to make quick money to the downside.

But looking at the weekly chart of the S&P 500 below, visually you can see the trend has been higher - even with a bear market along the way. The current market correction in this context doesn't look like anything extreme. It looks like many market corrections. The S&P has correction about 9% so far, which is healthy for creating new bases in top performing stocks.

Keep an eye out for top quality stocks that are forming bases. I'll be updating this all week with stocks that I'm watching. As always, let the market tell you where it's going, and when a rally begins, look to see how leaders do, and wait for your favorite stocks to break out on high volume.