The S&P 500 has been on a stellar rally this year, rewarding long-term investors who bought and held through market turbulence. However, the current technical and macroeconomic setup suggests a possible correction could be on the horizon. Here’s how to approach it strategically.
🛠️ Technical Analysis from the Chart:
1️⃣ **Resistance Zone (6025-6050):**
- The index is facing strong resistance in this red zone, indicating a potential **stall in bullish momentum**. Failure to break through this level increases the likelihood of a pullback.
2️⃣ Critical Support Levels:
- **5690-5628 Zone:** First significant demand zone. A break below could trigger deeper corrections.
- **5395-5365 Zone:** Key structural support from previous accumulation.
- Long-term potential target near **4500**, aligning with historical correction structures.
3️⃣ Weekly Close Watch (5977.8):
- A **close below 5977.8** could confirm the start of a correction, likely forming a 3-to-5 wave structure typical of corrective phases.
🌍 Macro Context – Inflation and Valuations:
- Inflation Data:
- In **March 2020**, inflation was at **1.5%**, and stimulus packages helped buoy the market.
- By **March 2021**, inflation climbed to **2.6%**, reflecting economic recovery and stimulus impacts.
- November 2024 inflation** sits at **2.7%**, signaling a moderating trend but with base effects and monetary policies still in play.
- Market Valuations:
- The **Buffett Indicator** (Market Cap to GDP ratio) shows the market remains significantly overvalued. This aligns with Warren Buffett’s recent positioning, where **25% of his portfolio is in cash**, waiting for better buying opportunities.
💡 Trade Idea:
📉 Prepare for the Correction:
- A correction to the **4500 level** would represent a compelling buying opportunity for long-term investors.
- Avoid shorting the market; instead, focus on cash preservation and building a watchlist of fundamentally strong companies.
📊 Long-Term Strategy:
- Stick to Warren Buffett’s principle: **"Be greedy when others are fearful."**
- Utilize cash reserves to capitalize on discounted prices during market panic.
📌 Key Levels to Watch:
- Resistance: **6025-6050
- Supports: **5690-5628**, **5395-5365**, and long-term 4500.
🚀 Optimistic Outlook:
Corrections are **opportunities, not threats**. They allow investors to buy quality assets at a discount and position themselves for the next bull cycle.
"Price is what you pay; value is what you get." – Warren Buffett 🐂✨
Let volatility work in your favor! 🌟
🛠️ Technical Analysis from the Chart:
1️⃣ **Resistance Zone (6025-6050):**
- The index is facing strong resistance in this red zone, indicating a potential **stall in bullish momentum**. Failure to break through this level increases the likelihood of a pullback.
2️⃣ Critical Support Levels:
- **5690-5628 Zone:** First significant demand zone. A break below could trigger deeper corrections.
- **5395-5365 Zone:** Key structural support from previous accumulation.
- Long-term potential target near **4500**, aligning with historical correction structures.
3️⃣ Weekly Close Watch (5977.8):
- A **close below 5977.8** could confirm the start of a correction, likely forming a 3-to-5 wave structure typical of corrective phases.
🌍 Macro Context – Inflation and Valuations:
- Inflation Data:
- In **March 2020**, inflation was at **1.5%**, and stimulus packages helped buoy the market.
- By **March 2021**, inflation climbed to **2.6%**, reflecting economic recovery and stimulus impacts.
- November 2024 inflation** sits at **2.7%**, signaling a moderating trend but with base effects and monetary policies still in play.
- Market Valuations:
- The **Buffett Indicator** (Market Cap to GDP ratio) shows the market remains significantly overvalued. This aligns with Warren Buffett’s recent positioning, where **25% of his portfolio is in cash**, waiting for better buying opportunities.
💡 Trade Idea:
📉 Prepare for the Correction:
- A correction to the **4500 level** would represent a compelling buying opportunity for long-term investors.
- Avoid shorting the market; instead, focus on cash preservation and building a watchlist of fundamentally strong companies.
📊 Long-Term Strategy:
- Stick to Warren Buffett’s principle: **"Be greedy when others are fearful."**
- Utilize cash reserves to capitalize on discounted prices during market panic.
📌 Key Levels to Watch:
- Resistance: **6025-6050
- Supports: **5690-5628**, **5395-5365**, and long-term 4500.
🚀 Optimistic Outlook:
Corrections are **opportunities, not threats**. They allow investors to buy quality assets at a discount and position themselves for the next bull cycle.
"Price is what you pay; value is what you get." – Warren Buffett 🐂✨
Let volatility work in your favor! 🌟
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.