2nd Quarter Corrections Continue

One week we are up the next week we are down.   As I stated previously, I expect this quarter to remain in a corrective mode.  Last week the market closed down 2.4%, but still within the expected trading range.  The long term sentiment (Chart 1 - green line) has still not peaked indicating that the market is likely to move higher.  Furthermore, the slope of the 200 day simple moving average has turned positive another long term bullish indicator.  I believe that long term sell signals will not form until the 4th quarter of 2012.  The expected trading range this week is +/- 3.61% or between 1,319 and 1,418 as shown in Chart 2.

An article written by Michael Baron of The Street titled, "Market Preview: A Welcome Correction?", does a good job of spelling out my expectations.

Chart 1: S&P500 Sentiment Signal 5/7/12

Chart 2: S&P 500 Weekly Expected Range 5/7/12