The State of the Markets:
From my seat, the most important question on this fine Monday morning is if stocks are currently in the "retest" stage of a waterfall decline, which means that we are likely closer to the end of the correction than the beginning - or - if we are still in stage one, aka the initial decline. (To review, I detailed the various stages that tend to occur during waterfall decline last week in a missive titled, Checking The Playbook.)
In case it isn't obvious, there is really no way of knowing what's next in Ms. Market's game and I learned a LONG time ago that it is a fool's errand to try and predict what the market will do in the near-term. However, given that we know what type of environment we are currently faced with (a corrective phase), there are some clues that we can look at including the current price action and the state of the indicators.
From a short-term price perspective, the stock market starts the week in a very precarious position. Cutting to the chase, the S&P 500 finished the week with two consecutive closes right at its 200-day moving average. This, in and of itself is important because this seemingly important line of demarcation usually brings out the fast money masters of the universe and their trading computers. In other words, typically when the market approaches an important technical level, traders get busy. But this time, the venerable large cap index managed to close right on the line two days in a row. Interesting.
While I haven't been a fan of using a 200-day moving average as a "signal" since the 1980's, the popular press and a great many analysts see the 200-day as a line in the sand between ...