Today's selloff was insufficient to conclude that a more sustained correction is underway. Downside continuation on Monday could confirm the correction. In any case, the market action appears more and more every day like a rising wedge, which should lead to a correction in the Dow to the 7200 to 7250 area.
I was a little surprised to hear a constant drumbeat on CNBC today that traders do not believe in this rally, and that many are in fact increasing short positions. This type of talk on CNBC is very rare and, I believe, quite bullish for the market.
Two stocks of interest that are now pulling back after 5 wave advances are TSO and RGLD. Traders could look to buy a 50% to 61.8% retracement of the March 9 to March 26 rally with a stop below the March 9 low, or buy a breakout above yesterday's high. I typically do not put a stop any closer that 3 ATRs (10 day).
Gold is still holding up despite a multitude of calls from the bears for a retest of the November low. As long as the March 18 low holds, the trend is up.
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