The stock market is in a correction, it’s not bearish, yet

The stock market is still weak. All three indexes are below their long-term bullish trend lines and below the mid points of their late July highs and August 24 lows. The Nasdaq composite is stronger than the S&P and Dow. The current weakness is a correction. It will remain a correction until or unless it crashes through the August 24 lows. But these lows occurred on very high volume and will take at least as high volume to break below them. This is less likely than a continuation of the sideways movement because there was a powerful bounce off the recent low.


My graph of Cyclicals divided by Staples bottomed on August 21. It has risen to inside the bottom of its bearish trend channel. So, the cyclicals have been rising while the stock market indexes have been falling. The Cyclicals Group is up the most since Aug 1, twice the growth of the Staples Group. The Finance group is a big loser. It is hard to imagine the stock market turning bearish while cyclicals are beating consumer staples.


In the Cyclicals Group there were some sectors growing and others shrinking: The Transportation sector improved from -1.5% to  0.2%. The Machines sector dropped from 3.2% to 0.9%. In the Technology Group it was the same picture: the Semiconductor sector improved from  -2.4% up to 0.7%. The Telecom sector improved from 1.6% up to 2.8%. But, the Software sector shrank to -4.7% from -0.8%.


Below is the relative strength graph of the Software Sector:

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