The S&P 500 closed flat on Wednesday with investors wondering if the rally had run out of steam – or if the market had merely paused before another push higher.
Looking at fundamentals it’s possible to make the case for both a sell-off as well as a rally.
When fundamentals are conflicting as they seem to be right now, the pros often consult technical analysis for additional insights.
And few technicians understand chart patterns better than BofA Merrill Lynch analyst Mary Ann Bartels.
In a live interview on CNBC’s Fast Money, Bartels reminds us that September is often a terrible month for stocks and her proprietary research suggests this September will be no different.
“I think the market is set up to correct,” she says.
Bartels has been looking at a lot of technical signals one of which is the relationship between the Vix and the S&P. And the divergence between the two indexes is at again at a level that’s been a problem, historically. “This is where the market has sold-off in the past,” she says.
Also she says small caps and transports are not confirming advance. And she doesn't like that the market has gained on low volume.
All told, Bartels says, “I think we’re set up for 8-10% correction.”
You can see all the charts used in the analysis in the video.
Posted by CNBC's Lee Brodie
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Trader disclosure: On August 22, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Tim Seymour is long BAC; Tim Seymour is long MSFT; Dan Nathan is long DS SEPT 90/80/70 PUT FLLY; Dan Nathan is long INTC SEPT 25/23 PUT SPREAD; Dan Nathan is long CSCO SEPT 16 PUTS; Dan Nathan is long MSFT OCT 30/28 PUT SPREAD; Dan Nathan is long DELL SEPT/OCT 11 PUT SPREAD; Dan Nathan is long SDS CALLS; Dan Nathan is long SEPT VIX 20 CALLS; Brian Kelly is long SPY PUTS; Mike Murphy is long WFC; Mike Murphy is long TOL; Mike Murphy is long LNG; Mike Murphy is long ANR; Mike Murphy is long TWI; Mike Murphy is long LEN
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