When to Buy the Correction

Another day, another “rip ‘n dip” market…

For the second day in a row, stocks shot off to a hot start, only to trickle lower and finish slightly in the red. Once again, the major indexes failed to reclaim enough territory to buck the short-term downtrend. Tuesday also marked the fourth day in a row that saw the Dow fell back right at its 50-day moving average.

But don’t worry— you can untether yourself from your computer monitor early today. The markets close at 1 p.m. And thanks to Independence Day falling on Thursday, we get a lonely Friday trading session to finish up the week. Expect low trading volume through Friday.

Even though this is a slow week, it’s still important to get your bearings. If stocks do follow through with another move lower, where will they land?

S&P 500 Large Cap Index

I think we’ll see the broad market sneak lower from here. Futures are a little off this morning, upside momentum is gone, and we’re entering the summer doldrums. All of this adds up to a sideways or falling market for a little while—which is great news for investors.

No, I’m not suffering from heat exhaustion. This correction is actually a good thing. Let the market bleed out the latecomers. Get the bull market stories back off the radar. That will set us up nicely for a meaningful bounce toward the end of the summer.

My best bet is that we see stocks bounce as the S&P approaches 1,525. That’s the area that will provide you the perfect low-risk entry point for new investments.

As for right now, the game plan remains unchanged. If you’re stubbornly sitting on open gains, take a little off the table. You’ll have a chance to buy again soon enough…

Regards,

Greg Guenthner
for The Rude Awakening

You May Also Be Interested In:

Famous Names, Tough Times

Today’s Rundown reviews reader mail from Wednesday’s discussion of Harley-Davidson, takes a look at GE’s huge earnings miss, and checks in on the markets this morning.

Greg Guenthner

Greg Guenthner, CMT, is the editor of The Rude Awakening Pro, The Seven Figure Formula and Seven Figure Signals. Over the past decade, Greg has helped build the small-cap and technical research teams. His analysis has appeared in Forbes, Yahoo Finance, Bankrate, and countless other publications. Greg is a member of the CMT Association and holds...

View More By Greg Guenthner