Week In Review

Remaining objective during stock market corrections is the best possible solution.  We can remain objective by viewing charts, and by blocking out any emotional related news that seems to circulate, when there is a sell-off at hand.  Remember, market corrections are a healthy process that cleanses out all the excesses, to the point that value creation emerges.  In other words, these are good times to be putting cash to work, which we have this week.  So let's view a couple charts below to understand better, how far down this correction could go.  

Source:  Shaw Investments, StockCharts.com

The above chart is of the S&P 500 index, which is one of the world's most watched index.  I tracked last year's market correction loss just to compare what we may be looking for at this precise moment. Last October's correction took the market down -9.89%.  We are currently lower from the recent high at -7.29%.  So we are closing in on last years percentage correction low.  In addition the market at this time is very oversold, and we should get a relief bounce higher at minimum, in the near future. 

Source:  Shaw Investments, StockCharts.com

The above chart depicts what is known as the VIX.  The VIX is also known as a fear gauge, based on how much volume is exhibited in the options market with put buying.  The higher the VIX spikes the more fear is said to be in the market.  The important thing here is to observe the extremes of the VIX. Based on that theory, the huge spike in the VIX could signal a sell-off stock market bottom may be getting close at hand.  The move higher is getting very close to matching last years VIX correction high reading.  

Bottom Line:  Great time to be adding to existing positions over the course of this correction.  The sell-off so far, is getting close to last years correction low, so we may be getting close to a bottom, if using last years sell-off on a comparison basis.  Thank you for reading.