Karpel’s Corner: What would be a healthy correction after S&P hits 2000?

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

The S&P 500 is one percent away from the milestone of 2000. We have all the offensive sectors pulling ahead, especially the Small and Mid caps ($IWM & $MDY), which needs to continue if we are going to see this quest for new heights to continue.

But what I want to really talk about today is what would be considered a healthy correction.

If we look back at the last 2 years of this bull run, we have had 6 corrections since 2012. The deepest pullback was in July of 2012. Since then, the remaining pullbacks have been smaller.

The most recent pullback of 4 percent in May 2014, was right at 1800. This is the level that we would watch to hold on any pullback.

A break of 1800 in the S&P ($SPX) would put support in the 1700 level. I am not suggesting that this is a move that is on the horizon, but I do want to balance the euphoria as we get closer to new heights.

See you next time at the Corner!