Short-Term Correction Underway, In Two Phases

Current Position of the Market

SPX Long-term trend:  There is some good evidence that we are still in the bull market which started in 2009 and which could continue into the first quarter of 2021 before coming to an end. 

SPX Intermediate trend:  May continue until SPX recaches 4150 in February.

Analysis of the short-term trend is done daily with the help of hourly charts. They are important adjuncts to the analysis of daily and weekly charts which determine longer market trends.

Short-term Correction Underway

Cycles:  Looking ahead!  90-yr cycle – last low: 1932. Next low: 2022 

7-yr cycle – last low: 2016.  Next low: 2023

Short-term low:  1/18-1/20

Market Analysis (Charts courtesy of QCharts 

SPX-IWM daily charts

IWM did not give warning ahead of the ongoing correction which would suggest that it will only be a short-term affair.  

 

SPX daily chart

The SPX traded in a narrow range for six days after touching the top of its channel.  This has created a congestion pattern twice that broad on the P&F chart, pointing to a potential short-term correction down to the 3690 level.  This could come in two phases, both of which determined by the bottoming of two short-term cycles.  The first is due to make its low on Tuesday or Wednesday of next week and may only take the index down to about 3730.  After a short rebound, the index could then continue its correction into the end of the month when the next short-term cycle is due, reaching its full count of ~3690.  If this projection is reached right away, we would probably see lower correction levels by the end of the month.  

The short-term correction which got underway on Thursday has already retraced down to 3766 and, with the futures already leading the way after Friday’s close, should continue the decline to its initial objective of at least 3730.  

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