S&P reached yesterday our first target that we ‘ve been talking for so long since the downward correction has started. Ok we were talking about 1620-10 price level and yesterday’s low was at 1622. I think I got the main move overall….however we have to be cautious regarding the upward potential because the downward pressures might still not be over. The first bounce from the 1620 support was a good bullish 18 point upward move but still trend remains down. We still believe that it is more probable the downward correction is still the main scenario. We still see the 1600-10 level as a probable bottom. This price target will be achieved if prices break below 1622.
Short term trend remains down and the sequence of lower highs and lower lows confirms it. We believe that this will change if prices break above 1663. The downward move from 1687 is an overlapping pattern thus making the downward move just part of a correction and not an impulsive move down. Our view will turn to bullish only when the sequence of lower highs and lower lows is canceled. For this to happen, S&P must break above the blue downward sloping trend line and close above 1663.
Our main scenario as mentioned several times before and shown in the above chart is that we currently are in a downward correction. This downward move will continue to be labeled as correction as long as the form of the decline does not show any impulsive signal. We believe that the blue support area shown above will be the maximum level the decline could go. In order for that support level to be broken, the decline must unfold in an wave.
As always, thank you for taking the time to catch up on my thinking.