S&P500 short-term: Impulsive Decline!

Thursday, the market showed surprising strength, and i remarked on a comment thread, that this might be an exhaustion gap on the small cap index. Friday, the markets were overdue for a correction, and would have gone down on the slightest excuse (Goldman or not!), and they did. The decline was impulsive suggesting more downside ahead towards 1176. We are surely at a significant short-term top, but whether it's a significant medium-long-term top remains to be seen.

Head & Shoulders

First thing to take note is the red channel break. Then, SPX got oversold, and bounced right off an important short-term trendline (purple). Price is forming a slightly declining Head & Shoulders, with left shoulder at 1200, head at 1214, and right shoulder at 1198. If it works out, we can expect a decline towards 1176 area initially. Good support is at 1150 area. A break of 1200 upwards, may retest the highs at 1214.

As an aside, RUT looks like it has a bit more upside to go.

Short-Term Trading Idea

I may take a short-position right here with a stop just above 1200, and a target of 1176.

Latest EWT

So is this the start of a regular correction at the end of wave 5, with more upside to come? Or is it the end of a corrective C of some kind, with serious declines ahead? The latest Elliott Wave Theorist, from Robert Prechter of Elliott Wave International, presents a very impressive, and comprehensive timing analysis going all the way back to the 1900s. Here's an article which drops a few hints as to the content. Without giving away too much, he explains the surprising strength of this "rally", why a very significant long-term top for US markets may be close at hand, and the nature of the declines to come. No one can predict the future 100%, but this newsletter is definitely worth a read. :)

As most of my trades are in the short-medium term, i'll stick mostly to analysis in these time frames. Will be posting again with an update of sentiment, and slightly longer-term charts, after watching the current decline. Meanwhile, keep in mind that the medium-term uptrendline is at the bottom of the chart (in grey).

As always, be safe and remember to use "protection". All the best!