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?
Woot woot
Hi. Can u please tell us what your moving averages are & time frames. Are they 9/20/50/200? DAILY SMAs?
I can tell you that my 65min chart mid-term MA is 55EMA setting at “low”
What sectors do you think lead? tech, energy?
Tech/semis will probably continue to lead at least towards end of the year. Energy might early next year along with lagging sectors such as small caps, transport, industrials.
I think they can actually start to see a rally as early as mid November, KAy!
What do you think of the mid-term for IWM? It’s been beaten down badly.
Also, if you look at the monthly oscillator for SPY, it crossed back down whilst the monthly VIX crossed up. What are your thoughts on this?
AFter 2022 decline, IWM never recovered and been just moving sideways all year long. IWM is near the May lows so I think, there is a chance a pop back up to recent July highs.
My monthly oscillator hasn’t crossed down on SPY. VIX monthly oscillator can whipsaw many times near the lows if the SPY gets into a trend to the upside.
I started buying the 3x shares on all the laggards this month!
which laggards?
Russell, financials and dow
Also, what are your thoughts on the mid-term for TSLA and PLTR? PLTR looks like it could explode (“catalyst” may be eligibility for S&P inclusion if the earnings next month show profit). If you look back at TSLA, it exploded when it became eligible for S&P inclusion. PLTR seems to have been chopping around for a long time and this could be the reason for a huge move.
TSLA looks bullish as long as it breaks out of the symmetrical triangle pattern https://x.com/2kaykim/status/1713982002758582449?s=20
But, it always gets tricky when you are dealing with consolidation pattern such as TSLA is in now. Watch out for head fakes and traps.
PLTR also looks bullish if it can hold above 15-16. I see the golden cross on PLTR with my long term moving averages which is generally signaling long term trend reversal signal.
161.8% rally to 507.70, what will be the 50% retracement level from there?
That would be around 460s
I need this move badly Kay!!!!
I actually think we can get to 500 by end of the year fingers crossed
I’ve been observing you for many years, and I have to say you are currently the best in the business forecasting SPY.
Thank you for your viewership 👍🙏
Thanks for the response Kay. Been watching you since May 2020 (back in the days when you used to do Friday videos covering different stocks and looking at the Daily charts). You were the only one bullish on YouTube that I found at the time.
– N
N, Thank you for your viewership and follows 👍🙏
Hey Kay, good stuff. Been looking around the website and saw your publicly posted hit rate and performance. What are some of the lessons learned from 2022? Any modifications to your process since then?
Since 2022, only few select sectors are moving such as Tech, Semis & largest cap stocks. Everything else have been heavily lagging the entire year this year notably the banks, biotech, small-caps, utilities, energy and so on. You had to balance your portfolio in a right way to make gains this year. It’s been very difficult market if an investor is trying to find that few home run stocks.
Hey Kay did us dipping slightly below last weeks weekly candle mean it might not be the end of the small correction? Or does it this weeks weekly candle have to close below in order to invalidate a continuation to the upside?
It’s intra week so the weekly candle is not finalized until by end of the market close on Friday
The weekly candle needs to stay above the last week’s candle body low which (as of today) we are still slightly above it.
Legendary analysis KAY KIM!
Do you believe recession still coming in CY24 and at what point do you let Macro world events change your view regardless of technicals? Thank you for the content. You provide much value and I constantly watch the videos.
I received this exact same question during 2016 and during2018 & 2019 and during 2020 and during 2022. The answer is, I dont know. No one does. Too many people focus on that. Instead, I would focus on what is happening now in the long term. By the time we get to the ATH–most people will be like deer in the headlight (yet again).
Does the structure of the S&P equal weight ETF ($RSP) give any warning sign right now? This ETF is a barometer of breath in the market, which seems negative at the moment. What are your thoughts?
– N
RSP does look weak (chart look similar to IWM) but i usually dont put too much weight on that. My long-term analysis still seems to favor the buyers in the mid to long term.
-K
Thanks Kay
– N