Where The Market Is Going Next

This post originally appeared on TraderPlanet.com.

The markets have been on a tear over the last few months and although at times it seems like this relentless bull market will never stop surging higher, yesterday’s bearish engulfing bar on the SP-500 reminds us that it’s not “if” but “when” a correction will come.

So let’s step aside from all the madness: take the pause that refreshes, and see where the market is likely to go in a correction, while still maintaining its overall up trend.

SP 1
Yesterday’s bar was the ugliest since we broke out to new highs in mid-January.  That breakout area around 1475 looks like to most obvious support/re-test level.

SP 2
However, the key to where support comes is will have to do with how fast a correction takes place.  A more rapid descent can take it back to 1475 support, but a slower, more orderly decent could take it higher up on the trend line that connect the 11/16 and 12/31 lows.

Sp-3

Finally, don’t count out the possibility that we could have an extended pullback that could take us to the longer term trendline connecting the 11/28/11 and 11/16/12 lows.  Believe it or not, that pullback could take us down anywhere from forty-five to eighty-five handles and still keep us in an overall uptrend.

Remember, even if this is the beginning of a multi-year bull run (which I think it is), the market won’t go straight up.  It will have peaks and valleys along the way, and pulling back a bit to see where it currently is, and where it is likely to go, will make your job as a trader and investor that much easier.

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  • http://www.wholesalegoldgroup.com Michael MacDonald

    Let’s hope that the economy will do well this year as compared to the past years. We need to keep our hopes high, after all it is more of a psychological game. If the investors have faith in the market, then only there is a chance of good growth in the economy.

  • http://twitter.com/dalegster1968 david legg

    hey Brian just curious as to why you think this is the beginning of a multi-year bull run?