World Stock Market Indices Due for a Correction?
Stock-Markets / Stock Markets 2011 Jan 12, 2011 - 01:39 AM GMT
The world Indices are due for a short-term correction, but the larger trend is still bullish. On January 10th last year we wrote: "The S&P500 has now touched the current upper trend line as formed since early last year. On January 15th 2010 we are also 45 weeks or 225 trading days after the March 2009 bottom. In Gann terms this point in time is typically a hard angle that typically come in as a high." We now seem to be exactly at the same time for a correction to occur.
After some cycle inversions in the second half of 2010 the cycles are now aligning to come in sync again. We are now 52 weeks or in Gann terms 360 degrees away from the top in January 2010, so we could expect a turn at such a point. The FTSE100 has likely started to turn at exactly the same time as last year, but this is not yet confirmed. The S&P500 last year turned nearly 9 days later last year, so we expect the S&P500 in topping phase, unless we close above the latest high. All indices have been overbought some time which add strength to our assumptions, but whether a short-term top has been set need still to be confirmed.
However the medium term cycle crest our MTC4 is not due for some time yet, so we expect this to be only a minor correction or a consolidation on an up trend still intact. We have posted our short-term market position on our MTC cycles 2 and 3 below for both the FTSE100 and S&P500. Many other world indices are in the same position right now.
The short-term outlook
Using our MTC2 (Red) and MTC3 (Blue) dominant cycle we now expect the short-term top has occurred for the FTSE100 and possibly also for the S&P500 and many other World Indices. See below charts on the S&P500 as well as the FTSE100.
Like last year the S&P5oo top could be well some 8 to 9 days away from now as the MTC2 cycle(Red) could still be forming its crest. You can expect a 4% to 9% correction once the short-term top has set in and will run for a couple of weeks into end of January 2011 and beginning of February 2011. Price Target: 1238-1195 +- 20 points. If we close lower than 1173 or higher than 1278 on the S&P500 this scenario is likely to be invalid. Be careful the main trend, a larger cycle than mentioned in this analysis is still forming its crest to be completed a couple of months to go. The typical correction expected could therefore be smaller than the earlier mentioned targets.
For the FTSE100 the MTC3 (Blue) has already turned and the MTC2 (Red) has just formed its crest and we closed lower on Friday. So a short-term top could likely have been set at the same point in time as last year.
You can expect a 6% to 10% correction on the FTSE100 once the top has been confirmed (a close lower than the low of last week) and this downturn will run for a couple of weeks into end of January 2011 and beginning of February 2011. Price Target: 5872- 5641. If we close lower than 5519 or higher than 6090 on the FTSE100 this scenario is likely to be invalid. Be careful the main trend, a larger cycle than mentioned in this analysis is still forming its crest to be completed months to go. The typical correction expected could therefore be smaller than the earlier mentioned targets.
The medium term view
For the longer term we stay on the bullish side, unless we close lower than lower than 1173 or higher than 1278 for the S&P500 and for the FTSE100 if we close lower than 5519 or higher than 6090.
Conclusion
We are now 52 weeks or in Gann terms 360 degrees away from the top in January 2010, so we can expect a turn at such a point. The FTSE100 has already started to turn at exactly the same time as last year. The S&P500 last year turned nearly 9 days later last year, so we expect the S&P500 in topping phase for a short-term correction. All indices have been overbought some time which add strength to our assumptions. However the medium term cycle crest our MTC4 is not due for some time yet, so we expect this to be only a minor correction on an up trend still intact. Be careful this larger cycle is still forming its crest to be completed and in the end phase it is probably more powerful than the smaller cycles.
The typical correction expected could therefore be smaller than the earlier mentioned targets, or we could have only a sideways movement for a couple of weeks. Many other world indices are in the same position right now. For the medium term we remain on the bullish side, unless we close below the low or high on the prices mentioned in this analysis for the respective indices.
We will post more analysis as the next cycle turn develops. We will publish our roadmap and longer term view shortly from now once our services are setup. Please read our Happy New Year article on our new services. Take care and stay tuned.
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