S&P 500: downside risk remains

We seem to be going through a rather mild correction in US stock markets. In other international markets the declines have been more significant.
As we said a few months ago, the second half of the year will be more difficult to navigate, and that continues to be the case. Is the correction (almost) over? Or is there much more to come? It is hard to tell. I think we will get another leg down, but not a major market crash, as some observers have been calling for.

Let’s have a look at the situation in the S&P 500 (click for larger image):

S&P 500

The S&P has reached our minimum downside objective by touching the bottom trend line (blue), but that doesn’t imply the correction is over. We got a bit of a bounce back last week, but we are now entering a new lunar red period, so another move lower is quite possible at this point.

Technically we see that the Earl indicator has climbed back above zero, but the slower Earl2 is still going down. This means there is room for another dip lower. Likely downside targets are now just below 1600, and around 1500 if we get a more serious drop.

Our LT wave chart for September has been correct so far this month, and it is also suggesting weakness for the rest of September.
So, I prefer to stay on the sidelines and then we will see if there are any buying opportunities towards the end of the current lunar red period.

Good luck,


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By Dan

Author of LunaticTrader and Reversal Levels method. Stock market forecasts based on proprietary indicators, seasonal patterns and moon cycles.

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