Wait to Buy Until Stocks Go 5%-10% Lower

Most stocks will likely pull back to their support areas
By Sam Collins, InvestorPlace Chief Technical Analyst

On Friday, U.S. markets were hit with a rush of profit-taking in reaction to a sharp sell-off in equities in Spain. Spain’s stock market fell 5.8% and its 10-year bond yield topped 7%, causing concern throughout Europeand a subsequent sell-off at European bourses.

After four days of gains, the Dow Jones Industrial Average fell 121 points to 12,823, the S&P 500 was off 14 points at 1,363, and the Nasdaq was down 41 points, closing at 2,925. The NYSE traded over 1 billion shares and the Nasdaq crossed 565 million. Decliners were ahead of advancers by 2-to-1 on the Big Board and by over 3-to-1 on the Nasdaq. 

For four days last week, the Dow Jones Industrial Average forged ahead, and on Thursday, it appeared to break the boundary — the bearish resistance line (red dash) — that had restrained it for three months. But there was just one small technical problem: The Dow Jones Transportation Average had failed to break its resistance line and confirm the breakout. ... Continue to read.