an tSionna {S&P 500}

I've said recently that a correction wouldn't surprise me.  The market being down 4% in the last two weeks makes us take a deeper look into our charts and money flows into stocks.  The chart above shows a few lines in the sand that should give us some idea as to where we might be headed.  

Of course back in April the markets also looked like they were poised to break down.  Instead they turned around and posted this last leg up.  This time may be a bit different.  The sharp gyrations we've seen the last week or so have reintroduced volatility into trading and posts such as this from Pragmatic Capitalist indicate that small investors may be starting to return to the markets.  Markets feel a bit heavier now as well, as if there's been some real selling in the last week or so.  

We've been at a little higher cash positions for awhile right now and so no reason to change that.  We are also currently NET MARKET NEUTRAL in the shortest and intermediate time frames that we measure and have been that way since the end of February.  You can go here to see what that term suggests but basically it means we have been neutral in our purchases of stocks except for new money from clients where applicable.  It is not nor should it be interpreted to be a market timing device.  

Stocks are not oversold enough quite yet to get us to review our positions in terms of potential buys except where mandated to do so by new money.  As we mentioned last week we do have the defensive pages of the playbook nearby.

*Long ETFs related to the S&P 500 in client and personal accounts.  

Update:  Thursday Morning 8:05 Chicago time.  I should have mentioned yesterday that another juncture on this chart is the 50 day moving average.  It's hare to see above but it's that orangish line that rests just below trend line 1 that I've drawn.  Thanks to Business Insider.com citing research from Miller Tabak for pointing this out.

I'd also like to remind folks that stocks don't have to necessarily decline during a correction.  Stocks can correct by time, a period of churning in a trading range, as well as price.  The devils advocate in me would also note that in every year since 2010 we've seen a summer fall correction that has wiped out all or virtually all of the gains stocks made in the first half of the year.  Not saying that's going to happen this year but thought I'd throw it out there.