The market correction is playing out in textbook fashion so far, but it is important to stay patient and not worry about catching the exact low.
After the big gap-down open Monday, there was a routine bounce, but that bounce failed, and selling accelerated once the early lows were undercut. Breadth is abysmal, with around 900 advancers to 7,150 decliners.
Close to 90% of the volume is to the downside. We now have 13 new 12-month highs to 213 new lows. That is fairly extreme negativity, but the key Monday will be the close. A poor finish is what will really ramp up negative sentiment.
From a trading standpoint, keep in mind that the biggest bounces almost always occur in the context of the worst markets. Big losses are eventually followed by big gains, but the timing can be extremely difficult. There is just no way to know what will suddenly trigger a counter-trend move.
The action today will cement the fact that the market is in a downtrend, but the indices are still not close to a bear market. The DJIA would have to fall around 5,000 more points to be 20% off the August highs. However, if you look at individual stocks, it is a much different story. Only 37% of stocks are over their 200-day simple moving averages, and many are deep into bear markets.
My best advice is to stay patient. If you do any buying, then keep it small and wait for strength before you buy more. We will see a snapback sooner or later, but this may not be severe enough selling yet. A gap-down open Tuesday would be the sort of negativity that will help to set up a good bounce.