A steep and fast decline in US and European indices abruptly ended the all time highs party. The downward correction is welcomed in order for the bullish trend to re-energize. Health in a bullish trend means that corrections are welcomed in order for the market to find its equilibrium. The current decline in S&P is labeled corrective but of a bigger degree than usual. Support levels at 1815-1800 were broken and whoever did not gave importance to those signals is going or has already paid a high price. Unfortunately we were positioned on the long side and did not capture this downward move but at least we were protected by our stops. The longer-term trend remains up as prices are expected to continue this corrective move towards the intermediate-term support area of 1750-60.
Prices are expected to move inside the Ichimoku cloud support and test the blue upward sloping trend line. We believe that the bottom of this corrective move that started from 1850 will end inside the yellow area shown in the chart above. In the short-term we should expect a bounce towards 1805-10 if the index moves above 1796. However I believe more downside pressures will come back that will eventually bring the index towards our target area.
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