S&P 500 Ripe for a Correction

Money Morning

[After predicting the sell-off in oil prices last week, Murray turns his attention to the S&P 500 which he believes is ready for a sharp sell-off towards 2700 or over 8% below current levels. Click on the picture to find out what the key levels are to focus on.]

The double whammy of a disappointing US Fed commentary after the rate cut and Trump’s new tariffs has caused a weekly sell pivot in the S&P 500. So, until we see a weekly buy pivot the S&P 500 is in weekly downtrend according to my model of price action.

Last week I said that oil prices looked like they were close to a large sell-off and a few days later we saw the biggest sell-off in oil prices in over four years. I think there’s more to come on that front but as always, the charts will decide and all I have to do is react to the signals.

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The most important thing to work out is where you are proven wrong, because the size of the position you can take on will be decided by where you place your stop-losses. The model I have been showing you, which relies on an analysis of buy and sell pivots across different time scales combined with an understanding of how trends and ranges develop, is useful because it is proven wrong very quickly. All I need to see in oil prices to change my bearish view is a weekly buy pivot. Simple. Until then I will stay bearish.

You need to combine the buy and sell pivots with an understanding of how trends and ranges develop. On their own buy and sell pivots aren’t worth much. When you combine them with an understanding of where markets often change direction your strike rate goes up substantially.

That brings us to the current situation in the S&P 500. As I explain in the video, prices have reversed in the most compelling zone of all. 25–61.8% above a key range. That is the area where you get the biggest bang for your buck as prices head back towards the point of control.

If none of this makes sense to you, then all you have to do is click on the picture above to watch a short video explaining it all in detail.


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