Financials (XLF) broke below the all important 200 day moving average support level. We need at least one day to confirm the break by demanding another day close below this psychologically important level.
Nevertheless, the bears strengthened their position against the bulls today.
The S&P 500, Nasdaq, and Russell 2000 have all been downgraded from a sidelines rating to a weak downtrend rating.
This means that you should be accumulating cash in your trading account right now and not be putting on any new longs. I know there are some great values out their right now but you need to try and resist buying them up for now. Patience will pay off and you may be able to get these stocks for an even cheaper price than they are today. Do not chase anything in this market. Only consider buying stocks that have had a deep retracement. Chasing in this type of market is a fools game and in the blink of an eye you could be down 10% or more in a stock.
The market correction we are currently in is all about financials (XLF) as they are leading the major indices lower. When you think about the news, it really makes sense. These huge banking and financial institutions operate on a global scale. With debt ratings being downgraded across Europe, large banking stocks are riskier bets.
Keep your eyes on XLF. If XLF forms a V bottom reversal and bulls are able to retake the 200 day moving average over the next few days, then we'll go back into a sidelines rating. However, if tomorrow closes below today's low and we confirm the break of the 200 day moving average then the probability of a much deeper correcting will increase.