Today 01/20/22 the S&P 500 (SPX) broke below the bottom made on 12/03/21, eliminating the presumed Elliott wave – Horizontal Triangle that’s been examined in recent blogs.
Something else significant happened which is illustrated in the daily SPX chart courtesy of Trading View.
The basic definition of a bull market is a series of higher highs and higher lows. Since the beginning of the bull phase that began in March 2020 almost every multi-day correction has been higher than the previous correction.
The one exception was the minor decline that terminated on 08/19/21. This bottom was subsequently breached during the correction that ended on 10/04/21.
Today’s break of the 12/03/21 bottom is also a lower low and increases the chances that a significant top may have been made on 01/04/22.
If an important top is in place it implies at least a multi-month bear phase. In the short-term more price action is needed before entering bearish positions. Additionally, we need to see how US stocks react to the FOMC decision on interest rates at their 1/26/22 meeting. FOMC decisions can frequently trigger large moves in either direction and you don’t want to get caught on the wrong side of the reaction.
Be patient, if a multi-month decline is underway there will probably be several short entry points. Currently evidence is leaning to the bear side, we need more bearish evidence before entering a short side trade.