In
my previous post on S&P500 written on July 4th 2014, I wrote the
following,
1.
Upside in US market is extremely limited from here to the tune of
1% to 3%
2. It is time to book profits and/or incorporate
hedges for your portfolio.
3. Expect 10% plus correction in US equity
markets
The US markets
peaked out at 2020 and have corrected 7.5% to make recent low of 1874. Although
I have been bearish on US markets since start of this year, it took almost 9
months before the market finally peaked out and have started correcting.
If we look at
the first chart of S&P500 we can see that the trend line S&P500 has
clearly broken the trend line it was following since May 2011. Since I assume
that the trend line has been convincingly broken the current downtrend in US
markets should cut deeper and will last lot longer than people are hoping for.
In the second
chart we can see the worst case target for the current fall. Since we have been
trading in a channel the worst case target will be at the lower end of the
channel which could be as low as 1650 – 1700 levels.
