The Future of the Correction

This morning’s jobs report was as bad as the market feared and although the market is in negative territory at midday the damage to the indices appears contained because yesterday’s action seems to have for the most part priced in today’s report.

There will be plenty of time for us to discuss this morning’s data but for now what is of importance is how the market reacts to it. That will likely give us a clue as to how much further the correction has to run.

To put it succinctly, the market very badly needs a reversal day. That would mean a finish on the major indices above yesterday’s closes and on higher volume. While such a setup wouldn’t necessarily result in a march to new highs it would likely lead to further upside next week and then a possible retest of the correction lows, clearing the way for ultimate upside resolution.

Anything short of this kind of setup probably means lower prices at some point over the next week or so. And that would mean a likely test of the September and perhaps August lows.

That certainly wouldn’t preclude the possibility of the uptrend resuming but as intermediate term traders we’re not interested in that scenario, which could mean a correction on the NASDAQ in the area of 10+%. We’ll take profits in remaining positions should today’s close not favor this morning’s low as the bottom of this correction.