The last few days of 2014 and the first few days of 2015 brought on a nice correction that began in the lightly traded last few days of 2014 in stock index futures and the underlying stock indices. Having seen more than a few of these over the the last 18 months, I asked myself: "Is this correction a beginning of something bigger? Why is this correction any different than those that came before? Previous corrections were met with vicious and quick rallies that took indices into even higher highs....."
These are some of the thoughts running through my head as I try to analyze / speculate what's ahead for stock index futures. I try to get clues from the charts, spotting previous price patterns in an attempt to devise a good trading plan for the future.
For the bulls among us, it seems that the 1978 -1985 area may be a good spot to go long. Measuring the last correction that took place in the beginning of December, it seems that this correction may extend to 1978 where it will either need to bounce or break lower.
For the bears amongst us, this little sell off happens to coincide with an Elliott Wave termination of Fifth wave, which Elliott Wave theorists believe could lead to a test of the previous fourth wave at 1961.
At this point I am standing on the sidelines, looking to see price and market behavior around the 1961-1985 area and telling myself I need to stay nimble and not "get married" to one market view or another.
Break below 1978 could trigger 1909.
One thing is for sure: If the first few days of 2015 are any indication of the year to come, it is going to be a wild ride.....
MINI SP500 daily chart:
This move can be played either way depending on price action. One can use straight futures, spreads between the indices as well as options.
There are many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains - this one is not different. If you need help creating a trading plan, visit our broker assist services.
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