The market made a knee-jerk low on last Monday when the cronavirus hit the wire hard over the weekend. It traded sideways for the next three days, then on Friday it took out the knee-jerk low and closed below it. This is the confirmation of the weekly cycle correction is underway.
The DOW peaked precisely with the turn of the business confidence model on Jan 18th, 2020, which often warns a reasonable correction in the 20% range is possible. Before the 20% correction is possible, S&P 500 has to take down the previous breakout line at 3100 level.
If 3100 level is breached, it could hit 2500 on its way down. In Q4 2018, it was a fast and furious panic sell off. This time it could be a slow process because the market has a way called alternating corrections. In other words, we don’t always get a V-shaped bottom. A lot of times, we get W-shaped or double bottoms.
Anyway, there is nothing to panic about this correction. This creates opportunities for the next bull leg which has a long way to go.