S&P 500 IndexShort
SPX500 Possibly Facing a 10-15% Correction Soon
This is my first published idea, so things might not look well formatted or anything. Guess I'll see how it looks after I publish it!
Since it's my first idea, here's a brief intro about me and my trading methods:
I've been on TradingView for 4 years, mostly lurking in chats and using it mainly for charting instead of participating in ideas posted by others.
I'm almost entirely a technical trader. Fundamentals/news don't usually come into play when I make predictions and open positions. My most used tools are simple: trend lines and chart patterns. Occasionally I will use other tools such as Fib levels and very rarely RSI/MFI. Over the years, I have come to the conclusion that most/all indicators are absolutely garbage and cannot be relied on. On the other hand, I've found simple trend lines to be the most reliable, with simple patterns such as wedges and triangles.
I also tend to cross-reference the data between the currently hot markets that drive the price action, to confirm that all markets show similar signs to similar direction. (Currently the 'hot markets' that drive the action are things such as oil, natural gas and bitcoin/crypto.)
Now, to the actual analysis:
There are many reasons to currently expect a sizable correction in the market. Fundamentals aside (with the Omicron, Fed, Evergrande fallout and whatever have you), there are several technical reasons pointing towards a decent correction over the next month or so.
As we can see from the chart, the price is currently sitting close to top of the long term ascending channel that has been going on for past 10+ years. Ascending channels almost never break upwards, and even if they do, they are at constant risk of a pullback. In fact, just a few weeks ago, the price tried to go above the channel, only to fall right back into it.
We can also see that the price has not touched the monthly MA/EMA 20 and EMA/MA 50 ever since the COVID crash in March 2020, nor has it had a correction larger than 5% in the past almost 2 years. Historically, the price visits these moving averages every so often to test the waters.
We can also note that monthly candles for both Jan 2020 (before COVID crash) and Nov 2021 look very similar, both commonly known to signify a possible reversal (shooting star/doji).
Overall, even if we are still in the bull market and remain bullish, a correction to monthly MA/EMA 20 (the first light green line at around 3900-4000 level) looks very likely at this point, resulting in around 15% drop from the ATH. Such a drop would serve to fuel further bullish rally, as the price can currently be seen stagnating and unable to break higher.
Barring an armageddon, I don't see the price breaking below MA/EMA 20 and visiting MA/EMA 50 on the monthly chart (the next darker line at 3300-3400 range) at this time, unless we are entering a bear market due to Fed decisions or Omicron becoming a larger nuisance than expected. It is too soon to tell.
PS. Test Tickle is the best indicator, obviously :P
Since it's my first idea, here's a brief intro about me and my trading methods:
I've been on TradingView for 4 years, mostly lurking in chats and using it mainly for charting instead of participating in ideas posted by others.
I'm almost entirely a technical trader. Fundamentals/news don't usually come into play when I make predictions and open positions. My most used tools are simple: trend lines and chart patterns. Occasionally I will use other tools such as Fib levels and very rarely RSI/MFI. Over the years, I have come to the conclusion that most/all indicators are absolutely garbage and cannot be relied on. On the other hand, I've found simple trend lines to be the most reliable, with simple patterns such as wedges and triangles.
I also tend to cross-reference the data between the currently hot markets that drive the price action, to confirm that all markets show similar signs to similar direction. (Currently the 'hot markets' that drive the action are things such as oil, natural gas and bitcoin/crypto.)
Now, to the actual analysis:
There are many reasons to currently expect a sizable correction in the market. Fundamentals aside (with the Omicron, Fed, Evergrande fallout and whatever have you), there are several technical reasons pointing towards a decent correction over the next month or so.
As we can see from the chart, the price is currently sitting close to top of the long term ascending channel that has been going on for past 10+ years. Ascending channels almost never break upwards, and even if they do, they are at constant risk of a pullback. In fact, just a few weeks ago, the price tried to go above the channel, only to fall right back into it.
We can also see that the price has not touched the monthly MA/EMA 20 and EMA/MA 50 ever since the COVID crash in March 2020, nor has it had a correction larger than 5% in the past almost 2 years. Historically, the price visits these moving averages every so often to test the waters.
We can also note that monthly candles for both Jan 2020 (before COVID crash) and Nov 2021 look very similar, both commonly known to signify a possible reversal (shooting star/doji).
Overall, even if we are still in the bull market and remain bullish, a correction to monthly MA/EMA 20 (the first light green line at around 3900-4000 level) looks very likely at this point, resulting in around 15% drop from the ATH. Such a drop would serve to fuel further bullish rally, as the price can currently be seen stagnating and unable to break higher.
Barring an armageddon, I don't see the price breaking below MA/EMA 20 and visiting MA/EMA 50 on the monthly chart (the next darker line at 3300-3400 range) at this time, unless we are entering a bear market due to Fed decisions or Omicron becoming a larger nuisance than expected. It is too soon to tell.
PS. Test Tickle is the best indicator, obviously :P
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