For a while now I've been expecting at least a 10-14% correction to separate the second leg of this cyclical bull from what I expect will be at least one more leg up before this bull expires.
Friday's intraday low got close at -9.7%. The pattern has been for the correction between the second and third leg to be larger than the one between the first and second. We've now accomplished that goal also as the correction in July racked up a 9.5% decline.
As you can see in `04 the correction turned into a multi month affair finally bottoming in August. This time it appears to be unfolding much faster (which is the norm by the way for bulls with our DNA).
We are still a bit short so I'm not sure this is done just yet but we're in the range of what I've been looking for. At this point I think we are probably just waiting on the dollar cycle to top. Today is the 17th day of the daily cycle which rarely runs much longer than 25 to 30 days so we are in a live area for a top in the dollar and probably a bottom in everything else.
I'll also note that we are close enough to March that this bottom should also mark a yearly cycle low. As the last two major cycle lows have occurred in March I am expecting this year to continue to follow that pattern.
I'm not really expecting this decline to make it all the way to March as sentiment is already reached bearish extremes, but I think we are close enough that we could get a slightly shortened yearly cycle bottom any time now.
I'll also add that the rallies out of yearly cycle lows tend to be extremely powerful. The average rally out of a yearly cycle bottom since 2000 has been 19% with the median being 15%.
Even if the bull has topped (which I doubt) we should expect a violent bear market rally soon.