Correction

A major index generally goes into Correction when the number of distribution days in the last five weeks rises to 5-6. The index has typically declined 5-7% or more from its recent high. Also, the index most likely breaches its support levels of 50-day and 200-day moving averages. Investors should avoid new purchases, get off margin, and raise cash. This is a good time to build your watch list of fundamentally-strong stocks that you would like to own when market condition improves.