CORRECTION CALL
Late July, I’ve made a blog post here explaining why I believe that about -10% correction is on the way.
Market has corrected about -8.5% since the July peak (SPY 460) to the recent October lows on SPY (SPY 420). Now I am calling that the market is preparing to stretch its legs to climb to 500 on SPY.
Let me explain.
BOTTOMING SIGNAL
During March of this year, S&P corrected -8.7%. But what is interesting is how it reversed observing the weekly-candles.
As you can see below, during March, on the secondary weekly-candle (red arrow on the left side of the chart below), we have what is known as a “Shooting Star” candle (blue box). Many recognizes this candle as a ‘bearish’ candle because of the long upper wick. It is, only if it shows up after a prolonged uptrend; but in this case, it showed up after about -9% correction which is more known for a ‘continuation’ signal.
Let’s look at last few weeks of candles.
As you can see, we had a bullish “Hammer” reversal candle as of last weekend–which is viable because it showed up after -8.5% correction. And by end of this week, similar to during March, we have a “Shooting Star” candle. And I am labeling this candle as a ‘Continuation’ signal (after the bottoming “Hammer” candle previous week) as long as we see a follow-through move and the market do not breach below the bottom of the “shooting star” candle body by end of next week.
This is the exact same setup with the exact candle as to what we’ve seen during March of this year after about -9% correction.
RALLY AFTER CORRECTION
- Market performed +20% rally from October of 2022 low (SPY 349) to the February of 2023 peak (SPY 418) in 4 months (Oct – Feb)
- Market performed +20% rally from the March low (SPY 381) to the July peak (SPY 459) in 4 months (Mar – July)
FORECAST
- Expecting a +20% rally from this level, the October low of SPY 420, to SPY 500 possibly in 4-5 months (By March of 2024)
FIB RETRACEMENT & EXTENSION
- Measured from 2022 October low to 2023 March peak, market corrected/retraced to the 50% retracement level (highlighted)
- Market found support on the 50% retracement level in late March (SPY 380), and subsequently rallied until the 161.8% extension level (SPY 460)
- Measured from 2023 July peak to the 2023 March lows, market corrected/retraced to the 50% retracement level (highlighted)
- Market seemingly finding support on the 50% retracement level in the last three weeks (SPY 420), and possibly preparing to rally until the 161.8% extension level in the coming months (SPY 500)
👇 I WILL REPLY TO ALL QUESTIONS BELOW (*NO LOGIN REQUIRED)
- Do you agree with my analysis or do you think it might be different this time?
- What are some of the value investing stocks you got in this year or watching to get in?
- Do you believe that the correction is over and new bull market has begun?
- Or you believe that we are still in a bear market and we are only witnessing bear market rally now?
