Full post of 27 Sep 2021 writeup - 'Lo & behold, the S&P500 Index corrects!'

Dear Followers, I'm putting up the full post of my 30 Aug writeup 'An Incredible Tale of two Greats!' on my blog today on 30 Sep 2021. POEMS clients of mine & PATREON subscribers receive it on 30 Aug 2021. To subscribe to PATREON, pls click here.

Enjoy!

"Dear Clients

A quick recap on what I said in my 30 Aug writeup:

'..I remain biased towards the bearish case and in conjunction with the Negative Seasonality which lasts til October, I'm of the view that we are more likely to see a garden-variety pullback or correction in SPX within the next 1-2 months..'

Lo & behold, the SPX kicks off the selldown in the month of September with a 5.32% pullback from 2 Sep high to the 20 Sep low.

So what do we have on our plate now?

Every time SPX pulls back a bit, everyone thinks it is the beginning of the end of the World. I reckon some time down the road in the next 1-3 years, that may be a real event, but at the moment it is, IMHO, still likely a garden variety correction.

As usual, clients who have been following me know how I use the Bollinger Bands (BB) to decipher if the SPX trend has changed. Put simply, if the correction is not over, price action is likely going to respect the midpoint of the BB and ease off considerably from there. If price action breaks above convincingly, the overall bearish angle may quickly turn into a neutral or slightly bullish slant. So key point to note this week & next is how price action reacts to that BB midpoint +/-.

Now. with the SPX giving us so little in terms of pullbacks in the past one year or so, will this correction just end at 5.32% on 20 Sep or is there something more sinister just hiding round the corner?

If you ask me for my bias, I would really prefer to see one more low as an Elliot C Wave down in the current A-B-C correction waves (pardon the technical jargon!). Assuming if current price action tops at SPX4475+/- as a B wave high, a C-wave down potential target will be around 4235+/-, since A=C (minimum) in length, with a side probability to go down as low as 4100+/- (where 200-day EMA resides). Further, this less damaging downside target 4235 will coincide nicely at the previous Cup & Handle breakout (resistance) level now turned support!

For some reference:

At 4235, SPX will be down 6.85%

At 4100, SPX will still only be down 9.8%

Both retracements are well-within the definition of a normal correction.

Truth be told, Mr Market (aka SPX) frankly does not care about my bias or how I think. It will do what it wants to do. The above scenario is only one of the many potentials that Mr Market can take. Technical Analysis thus only offers a framework or structure to help me assess whether I should increase or reduce risks. There really is no crystal ball, only guideposts.

But just like any sport, it ulimately still boils down to the consistency of the seasoned sportsman that truly matters. If you wish to see my track record, click this link https://www.thom-ng.com/patreon to see how I have used a variety of TA methodologies to identify high probability & major turning points in the S&P index successfully over the past years (obviously some self-advertising here!).

To sum it up, I'm still a long term bull, reasons being explained in previous write ups. The current pullback is something I have red-flagged 2 months back and once completed is likely to usher in a new longer term rally. But let's not get ahead of ourselves and see how this pullback develops.

Lastly, for the HK market, with new info incoming everyday (latest being Evergrande saga last week), do drop me a line to pick my brains.

Live Long & Trade Well!

Thank you & regards

Thomas Ng, CMT

Principal Trading Representative

首席股票经纪

www.thom-ng.com

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