Is the correction over ?

Last week I wrote: “We remain in a lunar green period so I expect this to be a bouncing back week, with upside targets of 4350 and even 4450.” But even that was too pessimistic as the Nasdaq has already climbed to 4484. Does that mean the correction is over? Not necessarily, as I also wrote: ” … What happens next will tell us whether we are in an ongoing correction/bear market or in a continuing bull market.
We will find out soon what happens next. This market is not out of the woods just yet, as can be seen on the following S&P 500 charts (click them for larger images). First a longer term chart:


Since the 2011 lows the S&P has moved within a broad channel. The recent decline has not changed that. A pattern of lower lows and lower highs may have started (green channel). Within the next few months we will see whether the long term up trend prevails or not.

A more close-up picture:

S&P 500

The market has bounced back very strongly from major support just above 1800. Overhead support is now around 1980. Technically my slower Earl2 is turning up, which bodes well longer term. But the faster Earl is in overbought territory already, signalling we need a bit of a pullback first. We are starting a lunar red period, so I think the S&P will take a step back before it can take another step forward. A quick retest of the 1800 support area remains possible, but the more likely scenario is a milder “give-back” before marching on again.
A drop below 1800 would probably result into a mini-crash.

Good luck,


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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