With S&P retracing nearly 50% of the drop from it’s all time highs, bulls feel like they have the upper hand in this ongoing battle. But is it really over or should we expect another round of selling pressures that could push the index towards 1700? The decline in S&P feels and looks impulsive. Prices have reached the 50% Fibonacci retracement of the decline. Volume bars as shown in the charts below still do not convince me that an important bottom is in and that this is just an upward corrective bounce part of an ongoing larger correction.
Through our exclusive for members twitter account we added to our long positions at 1747 where we saw an important support and we believed a bounce towards 1800 was highly possible.
Our analysis when prices were collapsing near 1740 was suggesting we should remain and add to long positions with 1795-1800 target. We still believe that the upward bounce could still have more upside towards 1810-14 but we could first see a pull back towards 1780 before testing 1820.
The decline as mentioned before looks impulsive. The upward bounce has reached 50% retracement and if not over yet, we could see this upward move from 1737 finish near 1810-14. Our target area for a short-term bottom was correct and both our support trend lines were not broken.
However other indices have not retraced as much as S&P. DJIA for example has only reached 38% and this is a weakness sign. We expect DJIA to make a pull back and then move towards the 50% retracement to complete the upward correction.
Our main view is that the downward correction that started in 1850 is not over. We believe that the move down to 1737 was only wave A. This scenario will have its chances lowered only if S&P moves above 18290-29. Bulls should be very cautious near these levels. We would like to take our profits and if the upward sloping channels break we would take short positions. It is also very important to watch closely how the market falls. We expect this next move down to have an impulsive form. Concluding we start again above 1790 and near 1810 to be bearish expecting at least a double bottom in S&P. For more detailed analysis and a view on my trades, become a member today.
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