US index

I have been biased in my negative view on S&P at least since last one year.  As I have mentioned my previous post 12^th December 2014 S&P500 is trading in a channel and was unable to violate that channel on the upside for an entire year. It kept slogging at the upper end of the channel without breaking out or breaking down of that channel.

Had S&P been able to break out of this channel it would mean a strong bull market and a quick upside of 20% - 30%. I don’t see any probability of this happening. Moreover S&P has always corrected whenever it touched the channel resistance. If I connect all the dots, I think a significant correction in S&P500 is inevitable.

It’s frustrating to see index moving against your call for entire year, still I will persist with my call and avoid making the mistake I ma. de in analyzing crude. The structure of Crude was extremely bearish and I made the right call when I wrote about crude on Jan 2014 but lost my patience and changed my call in mid 2014 due to a minor counter trend rally and since then we have had this spectacular collapse of crude prices.

Similarly the structure of S&P is extremely bearish but still the index is not cracking, its waiting for something.  I have this fuzzy theory about time and price trends (this is not proven theory but my own observation) that market trend changes with change in time period.  

As per my fuzzy theory market did not corrected in 2014 as they were not destined for correction in 2014. The entire year market kept on bidding for their time and closed 2014 almost on a new all time high. As soon as market has stepped into a 2015 they have started correcting sharply. Now only time will tell whether this correction turns out into a 15% - 20% correction or just a minor pull back as it happened in previous year.

If we look at the given chart S&P500 is trading in an expanding triangle. This is one of the most painful patterns to trade as index continues to make new highs and new lows on either side. This is also one of the rare reversal patterns we observe in the market.

If the market is trading as per this pattern then S&P500 should make a low of around 1750 in this current leg of selling.  The ultimate downside target for S&P remains at 1650 levels

Some stocks in US are looking excellent. One such stock is Wal-Mart. The stock gave 40% CAGR annual returns from 1975 to 2000 but since then it went sideways. After consolidating for 14 years Wal-Mart gave a spectacular breakout from its consolidation pattern in November 2014. If this breakout sustains I won’t be surprised to see WMT doubling in prices in next few years.