When is The Next Correction?
An Overheated Rally
The S&P 500 has been on a very strong rally for several months and is showing no signs of slowing down yet. Investors and analysts alike have been calling for a correction over the past few weeks.
The S&P 500 is showing signs of overextended price action and extreme overbought conditions on the weekly candles. These are some of the technical reasons why traders have been cautious recently. But always remember that the market can stay oversold for a long time during a very strong rally.
You can see in the chart below how the last time that both weekly RSI and KDJ were at these overbought levels, a significant correction soon followed.
Indecisive Markets
It is interesting to see that the past two weekly candles have printed doji stars. This shows investors' indecisiveness towards market direction. When I see dojis printing near all-time highs during a very overextended market, then I think that there could possibly be a pullback soon. Next week will be especially interesting with the Fed meeting and a triple witching day to provide plenty of volatility.
The Rally is Still Not Over Yet
Even though SPY is overheated, I wouldn't start selling just yet. The rally is still in full effect. Whenever any selling does occur, whether it be a big correction or a small one, no official downtrend has begun until the value of the Daily RSI drops below 50. That would put RSI in bearish territory, which typically coincides with some degree of a selloff.
Don't Jump the Gun
I wouldn't even consider selling any long positions until this occurs. But when this happens, there is no telling how long RSI will stay in bearish territory since the market has been so bullish. Recently, investors have quickly bought up the market as soon as there is any kind of dip into bearish territory.
So, what do you think? Will we see a correction very soon?
Good Luck Trading
As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Don't invest money that you can't afford to lose. Give some of your investments time and know when to cut your losses.
Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.
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Trade the trends via technical, fundamental, and macro analysis. Day Trades, swing trades, and long-term investments.
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BelleWeather : Bull markets tend to last a long time compared to bear, and the interim has only gotten longer in recent decades. I’ve just started trading (was buy and hold only until a friend was successfully swing trading my picks, so I joined in, practicing with crypto, and playing options leading up to earnings, and turned it into a game of making the number go up
.) But I think this is a failing of TA - it isn’t meaningful in this context. I am learning that it is very much so moment to moment for entry & exit points, though! There are many reasons that the bull will continue, only fears that it won’t. This is the fun part, I intend to enjoy it. 
(And looking back, market PE isn’t so high compared to that over the past 5-7 years.
All Also Taken BelleWeather: swing trading is fun but you don't make much money with it compared to the risk to have to take, and the work you have to do :)
BelleWeather All Also Taken: Yes, I actually stopped doing so in crypto when I analyzed and saw how much upside I missed! And it’s a lot of work, true! It helps me to follow along with people who explain things here and in other forums. Helps me guide my thoughts, etc. But mostly I look at volume, liquidity and trend - maybe support and resistance to optimize entry or exit when reallocating capital. And that’s how I swing trade, too, now - use some TA, preferably someone’s I trust more than my own, hahaha, to make changes to a portfolio while preserving the maximum capital. But the sad truth is, I might simply be better off not trading at all. In crypto for certain, I did well, but would have hit all targets had I not missed 250% of gains by swapping tokens and coins. Since I don’t have infinite capital, and am prone to so many mistakes, trading stocks is more a side effect than the plan. Options, I think, are the happy medium, if used as a tool, not a gamble (though I’ve done that too, haha.) They allow shorter time frames and are less subject to certain errors and battling algorithms; the Greeks are fun, too.
105291902 BelleWeather: hi