That's it?

A week ago, I spotted another sell signal and argued that we might see another selloff. Here is what I said: I’m expecting more downside next week! It could be just a brief and shallow 1% quick drop or it could be as severe as last time with 100 points tank. We will see when it happens. But I don't expect a long lasting correction as of now. The overall trend is still upwards moving forward. This is to just kill those overly euphoric herd who are chasing highs without knowing the risks involved.


We got a 30 points drop last Tue. Since I already said that I didn't expect a strong selloff, it will be convenience for me to just argue now that this is the correction I was looking for and that's it. But I must be honest with you that I'm not so sure yet. Since this is kind of rare sell signal, it typically involves a selloff in the range of 50-100 points for S&P per the history. And I was really also looking for some panic in the market which didn't show up at all. This leads me to think that the market god is playing with us again by fooling as many people as possible into thinking that the mini correction has been done and all is fine now. Then it will suddenly strike again. Let's try to get some hints from the technical side whether this is a reasonable speculation. See below the S&P chart. As you can see, S&P is showing a clear upward channel since early April. It hit its top band last week, a strong resistance for which I warned for a potential correction. It did come down a bit but it is very possible that it will continue to go down in the days ahead at least towards its 50 DMA at 2677. If enough panic is triggered by this move with another 30 points or so, then we may see the correction finally done. But if a more severe correction is coming, then it may very well just go all the way down towards the bottom of the channel, which is by coincidence perfectly lined up with its previous downtrend line (yellow) and its 200 DMA at about 2630ish. So folks, don't just discount the strong possibility of another leg down in the next week or two. I cannot tell you which one is more likely at the moment as it all depends on the sentiment and TA when we get there. Therefore I continue to advise, don't chase highs for now!