Technically Speaking: Is The Correction Over?

As I discussed yesterday, the now “official correction” was not a surprise. It was something that I have been discussing repeatedly over the last several months. The only surprise was the magnitude of the opening drop.
The question on everyone’s mind now is simply whether the correction is over, or is there more to come?
The honest answer is that no one really knows. The bulls are “hoping” that the worst is over and that the current bull market will resume its upward trend. However, there is ample evidence suggesting that something else may be afoot from slowing domestic and international growth, collapsing commodities and falling inflationary pressures.
Furthermore, from a fundamental standpoint, earnings growth is deteriorating, and valuation expansion has ceased. As I addressed in “Shiller’s CAPE – Is There A Better Measure:”
“The need to smooth earnings volatility is necessary to get a better understanding of what the underlying trend of valuations actually is. For investor’s periods of ‘valuation expansion’ are where the bulk of the gains in the financial markets have been made over the last 114 years. History shows, that during periods of ‘valuation compression’ returns are much more muted and volatile.
Therefore, in order to compensate for the potential ‘duration mismatch‘ of a faster moving market environment, I recalculated the CAPE ratio using a 5-year averageas shown in the chart below.”

This post was published at StreetTalkLive on 25 August 2015.