S&P 500: correction has begun

by George Hatjoullis

S&P 500

A bold statement you might say, and rightly so. However, every time the index has hit support it has made a new high. Not on this occasion.The last bounce stalled at around 2068, the same level as the previous bounce. One might also see a head and shoulders formation, with a little imagination. The conditions for a deeper correction are in place. The key support is the 200 day moving average which comes in at around 1994. The potential is 1820.

The fundamental conditions are also supportive of a correction. Earnings could well sag for global stocks, if only because the US Dollar is so strong. Most important the Federal reserve seems set on raising interest rates soon irrespective of the US dollar and the CPI trend. This will weigh heavily on stocks at least until it actually happens. Finally, the US market has led the way and there is reason for catch up in other markets notably europe. A 15% correction from peak to target is not a huge move in the great scheme of things and quite consistent with the context.

Advertisements