S&P 500 Ripe for a Correction

[click on the picture above to see why the S&P 500 is possibly close to seeing a correction to 2650 at least, which is over 6% below current levels. The ASX 200 will struggle to rally in the short term if that eventuates.]

The most interesting technical analysis situation in the market at the moment is the S&P 500, having had a false break of the all-time high from last year and confirmed a weekly sell pivot a couple of weeks ago.

The most recent pivot on the quarterly charts is still the sell pivot from the December quarter last year, so the big picture is still telling me to be wary and now the weekly charts are pointing to the potential of more selling pressure in the short term.

This is a great example of using multiple time frames to build up a detailed picture of market behaviour. Often the best trading opportunities look for trades based on the very long-term charts, but with entry signals defined by the short-term charts, so that risk/reward is managed more effectively.

In today’s update I take you through the last 20 years of trading in the E-mini S&P 500 futures and show you why the quarterly pivots have been a great indicator of future market direction. We then drill down into the short-term charts and I give you exact levels to focus on over the next few weeks.

I have been writing articles to you outlining the method I use to define market behaviour. It involves combining a theory of wave development with an understanding of how distributions of prices occur around a point of control. Combining these ideas across different time scales allows me to build a detailed picture of where the market is in and out of balance, which leads to solid risk/reward trades.

The current situation in the E-mini S&P 500 futures is a fairly rare set up with fundamental reasons backing up my expectations that a decent correction isn’t too far away.


Murray Dawes,
Editor, Alpha Wave Trader

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Murray Dawes is the Editor of Pivot Trader and contributing Editor at Money Morning. He was one of five, from 5,000 applicants, chosen for a graduate position with the Swiss Banking Corporation — now part of banking giant UBS. The bosses quickly cottoned on to his potential and pushed him up the ranks as a futures broker on the floors of the Sydney Futures Exchange. Murray later broke out on his own and developed custom trading systems to trade leveraged financial instruments like futures. Due to his success, Murray became the ‘hired gun’ trader for Australia’s rich and famous. Today, Murray runs a trading service through Fat Tail Investment Research to help everyday Aussie investors use his advanced trading methods.

Money Morning Australia