sp500 just finishing a normal correction ?

I am starting to think that the sp500 may just be finishing a typical garden variety correction instead of a new down trend.  It really depends on whether or not the recent testing of the breakout range of 1560 is complete, or if it was an initiation move for a further decline.

The market so far has reacted north from a bullish gartley pattern and the jury is still out whether this bullish gartley pattern was a signal of an ending correction or simply a pause in a downtrend.

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The Russell 2000 and the Biotech index and the XLF financials seem to be holding up quite well.  It is a fact right now however that on the daily chart of the sp500 and most other indices as well that we are still trading within a downward trending channel.  The market needs to break up and through the down trend line of this channel before we can start to conclude that this correction is over.  The second option is a drift back down to the 1560 range for another attempt to crack the lows. 

The way the sp500 is setup now it seems like a 50/50 proposition towards either direction.  The possible tri star doji pattern I mentioned in a previous post is not really showing any effect as of yet.

I like to keep an open mind still.  We have to keep an open mind to the possibility that the retest of the initial breakout range (See second chart in this link) was a successful one allowing the market to trade higher again.  If this correction was simply a retest of the 13 year breakout resistance line, then it would start to make the market comfortable to trade to new all time highs again.  This is the bullish interpretation and still a good possibility. 

The bearish interpretation is a swoon back down to the 1560 range and then a failure to hold support… It is all up to the market now…

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6 comments on “sp500 just finishing a normal correction ?
  1. CHET says:

    take a yearly Nikkei chart from 1914-2013 you’ll notice it has the same pattern as SP500 today (it has the angle)

  2. Tom Tom says:

    Thank you for your comment. I have looked at the Nikkei in the past, but definitely have not looked at the Nikkei back to 1914 as it is hard to find that much historical data on it.

    However I see your point that the Nikkei has been in a bear market since the 1989 top. But the Nikkei never really managed to trade in box type trading range as the sp500 has. The powers that be in America have managed to keep the sp500 trading in a large box type trading range over a 13 year period.

    The Nikkei on the other hand has repeatedly hit lower highs and lower lows over a 20 year period.

    So there is definitely a difference. The most important factor to determine for USA markets is whether we are in a normal retest now of the 13 year trading range or onto something a bit more sinister (a break of 13 year support line and new bear trend).

    Whatever the answer I think it is going to happen in slow motion as we hit the summer trading period. But still keep watch on this August 8, 2013 possible turn point date. That may be a key turn point date for the USA.

    P.S. I have not written much about the Nikkei in the past, but I actually think there is a decent possibility the Nikkei is in the very early stages of a major new bull market…

  3. Chet says:

    Japan, Nikkei 225 yearly chart for 99 years
    http://i.minus.com/iO6x0B6AtTqyS.jpg

    If Japan breaks-out it will be , because of the U.S. market
    The Dow & SnP leads all markets. SnP will make its first top like the Nikkei did in 1989-90
    Nikkei will make its second top @ 60,000 ?

  4. Tom says:

    Another good point. And by that reasoning then the US markets should continue higher and drag the Nikkei up with it.

    But I do think that a reversal of roles can still occur (ie. continued bull run in the Nikkei and sluggish to down USA markets). The Nikkei did peak after all in 1989 and USA markets took off from there, so there was that huge long term divergence.

    Sometimes these worldwide capital flows just play a game of musical chairs. Anyway, it will be interesting to see if the USA markets are able to continue to power higher and the Nikkei along with it, or whether one will have to suffer at the expense of the other.

  5. Tom says:

    Oops I forgot to look at your chart. Wow ! That is one of the most fascinating charts I have ever seen! Thank you for sharing that chart.

    If you do not mind I may do a posting on the Nikkei and include that chart with my upcoming posting.

  6. chet says:

    I simply found the chart on the web. The chart does have a copyright statement on it. He seems to have a Facebook chart site called

    Barton’s Global Market Trends : https://www.facebook.com/bartonsglobal

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