It’s only 10%

Context is required

If a 10% correction in the S&P 500 was to occur, we’re only back to March 2021 levels.

Hardly earth-shattering stuff.

In fact, a 12% retracement would see the S&P 500 kiss its 50 week moving average.

All quite healthy and plausible.

Currently, the S&P 500 is exhibiting a bearish outside reversal week.

As mentioned in my recent Macro Extremes note, it’s going to be an interesting week or two. The S&P 500 is also registering a weekly Overbought reading and my other indicators are also increasing probability for a move lower over the next 2 weeks or so.

My target for any decline is 4,022.

My medium term view is that equities move higher and any decline is merely a blip in the larger picture.

If ‘corrections’ concern you, it’s time to consider selling shares so to lower the amount of money exposed and at risk or consider taking out some insurance against ‘market risk’ such as buying put options or shorting the S&P 500 futures.

I bet many won’t do any of that.

August 18, 2021

by Rob Zdravevski

rob@karriasset.com.au