Two weeks ago, the Market Internals were suggesting a higher probability of some type of correction to the uptrend in Stocks. Last week, the Transports and Russell suggested a possible strengthening but that was quickly negated at the beginning of last week. The divergence in the Transports and Russell with the other Indices have previously been an early warning signal of a possible countertrend move.
Going into the end of this week, the Internals were extremely weak, but the Indices did reach a point of being extremely oversold. If there is a lower low on Monday, watch Market Breadth carefully. If it is diverging, it will suggest some type of move back to the upside. Alternatively, if we get an immediate move back up, then how that move develops will tell us more as to whether the correction is over or not.
Very important support and resistance areas will be Thursday’s high and low.