When the NASDAQ pulls back from the top of its channel down to the 50 MVA, as it just finished doing, is that both a "pullback" AND a "correction"? What's the difference? Also, you've cautioned that a deeper correction is likely sometime in the next three months. Just how far below the 50 MVA would the index have to fall in order to qualify for a more "meaningful" correction? (November 19, 2003)
The move within the channel of an uptrend is 'normal' in terms of that channel. Thus a move down to the up trendline that establishes the channel is not a correction. It is a pullback within the uptrend that holds the uptrend. If you are playing that trend, everything is more or less rosy. Of course you have to factor in how long the trend has run, how many times it has tapped the line, and how the leaders are performing (are they also behaving within their own trends?). That would make this pullback 'normal', but it is also growing longer hair.
It is at a critical point where it could turn into a deeper correction where the market or index breaks its current trend and makes a deeper correction. That typically involves forming another 'signature' pattern (e.g., cup w/handle, double bottom) at a lower level. If Nasdaq were to breakdown here the chart indicates a base forming with a bottom between 1700 and 1800. 1700 is another 10% or so from the Wednesday close. That is a 15% move off of the recent high. Corrections are said to occur with a 10% or better retreat. That fits the textbook description, but we are much more interested in where it holds with respect to prior highs and other support levels (e.g., the 200 day MVA).
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