S&P500

I hope finally the fall in global equity markets began today. As readers know I have been bearish on equity markets since starting of 2014. In my last two updates on 11 January 2015 and May 7 2015, I have maintained my bearish view.

If we look at the given chart of S&P500 index we can see that from last 4 weeks S&P500 has broken below trendline. Based on my intuition I think this time the breakdown will work and will not be a whipsaw like we saw in September 2014.

The next chart is a quarterly chart of S&P500. Although we have got one more trading day left before we close this quarter, I am guessing that S&P will form a gravestone doji in the quarterly candle. In order to form this pattern, S&P500 will close below 2067 and preferably between 2040 – 2067 in tomorrow’s trading. Once this is confirmed we should have a nice follow up downtrend in the market. 

The third is of EURO STOXX50. We can see that the index is trading at 16 years resistance and it won’t be easy for the index to move above it looking at the news flow emanating form Eurozone. On the contrary it looks ripe for a substantial correction.

Whether we are in a big market correction or not can be confirmed only once S&P breaks below 1980, but right now looking at how global equity index, news flows from Greece and other a market rally which is more than 6 years old I think  correction is highly likely.

Summary:-

1.       Its advisable for long only buyers to move some part of the portfolio in cash and initiate some hedging for the portfolio.

2.       Stop loss for short trades can be kept a today’s high or 2100 levels.

3.       Correction in global  equity market looks highly likely in next six months to one year

4.       The magnitude of the correction may surprise most of the market observers; I personally feel it can be as bad as 20% or a 25% cut.