Readers would be aware that I have been bearish on US and Gobal
equity markets since January 2014. The basic premise was that S&P500 was
trading in the channel and was hitting the upper end of the channel. Hence the
only option for S&P500 was to correct and fall towards the lower end of the
channel.
As you can see from the below chart which was uploaded on my
blog on 12th December 2014 S&P500
was trading at the upper end of the channel.
And as you can see from the current chart S&P500 has now
corrected towards the lower end of the channel. In the recent correction in January
2016, S&P500 made a low of 1812 which was dot on the lower end of the
channel. Hence the first leg
or correction in S&P500 is over.
Although, this correction did not
pan out exactly as expected. I was expecting simple price correction but this
correction was complex and contained a larger element of time correction as
well. So what should we expect from here?
There are two possibilities from
here.
1) S&P500
will bounce back break the previous highs and move into a new bull market
2) S&P500
will break the lower end of the channel and fall further 15% to make a low or
around 1500 -1600
To come to a conclusion let’s see
the charts of how global equity indices are placed and also see if we can get
any clue from S&P500 itself.
Below are the charts of 5 Major
global equity index
As you can see most of the index are
themselves into trading into a channel and have either broken down or are about
to break down.
Moreover if you look at the
yearly chart of S&P500 you will see that we are forming a evening star
pattern on the candlestick charts.
Hence I will conclude that the
global equity correction which started somewhere in 2015 will continue in 2016.
Summary:-
1) If
S&P500 will fall below 1800 the next target is in the range of 1500 -1600.
2) Don’t
buy S&P500 unless it breaks above 2050 on weekly closing basis.
3) I
see the probability of further correction in global markets to be more than 70%
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