All hell broke loose on Monday as the Dow slid to nearly -1,600 points lower on an intraday basis before closing down over 1,000 in the worst point decline in its history. The sell-off had the feel of panic, at least in the short-term, but at that point the indexes were only down about 7-8% below their recent peaks. That qualifies as an intermediate correction, and on Friday the indexes undercut their December lows, triggering a big undercut & rally (U&R) move from there.
This is quite evident in the daily chart of the NASDAQ Composite Index which undercut its December lows and came down right on top of a prior area of consolidation that formed in November. At that point, with stocks in extreme oversold positions, the market was set for a logical reaction rally, as I tweeted early in the day yesterday. This is something I have talked about many times in my reports in terms of assessing when the market might be ready for an oversold bounce. Yesterday that played out to a “T.”
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