US Stock Market: Beginning A Corrective Decline

In our previous September 19th update, we pointed out that the S&P 500 (SPX) was situated in a trading range, above primary support at 2950 but below its 3028 July 26th all-time high. We said:

“We are closely watching our CPM (Correction Protection Model) and Asbury 6 key market internals, as well as other market metrics we track, as a coincident if not leading indication of whether the US stock market finishes 2019 in a strong way, at new all-time highs, or begins a long-overdue corrective decline.”

Chart 1 below, a newly-updated daily chart of SPX, shows that the broad market index actually peaked on September 19th, failing to take out its 3028 high, and subsequently fell back into primary support at 2954 to 2941, testing it for the next 5 trading sessions.

(Click on image to enlarge)

Then, as of the close on October 1st, our Correction Protection Model switched to a Risk Off status while 5 of the Asbury 6 (see Table 1 below) turned Negative — both indicating market internals were weakening.SPX opened 17.00 points lower the next day, October 2nd, and proceeded to collapse by 84.00 point or 3% into today’s 2856 low.

(Click on image to enlarge)

SPX is trying to recover today, after getting within 1% of major underlying support at 2822 to 2800 as shown in Chart 1 above, but the current corrective decline will remain intact below former support at 2941 to 2954 which now becomes primary overhead resistance.