Monday, 20 September 2021

Stock Market: How Low Is this September Pullback?

 Nobody knows of course. For my view, i stick to what i said in my last stock market post Stock Market: QQQ's Recurring Consolidation Patterns.

I reproduce the chart in that post here again for ease of reference.

(Click chart to enlarge)

Price of QQQ didn't make it to O, and only rallied just shy of 10% from the breakout at M, not 11 - 13% as i expect it would. 

But.....Specifically, i want to quote the 4th paragraph from the bottom in that post,

Let me put it as clearly as i can. I think prices move from M to P. But it won't do so in a straight line. Instead it moves from M to O (because of the breakout) and then back down to P. We don't know where O is. I argue for a 11 - 13% above M. But it could be 8% or 18% from M. But where O is doesn't matter if it immediately comes down to P. ❞

However, i want to point out that when i say the price would come down to P, i really mean a point on the extension of HJM line in the chart above where price would come down to intersect.

Here's a more close-up and updated chart (as of 10:45AM, NYSE time, 20 September 2021), and P is the zone in the red box. I expect this is where price would target in this pullback, which translates about 6.5% to 7.5% decline from ATH.

(Click chart to enlarge)

For SPX, this translates into about 6 - 7% from ATH.

(Click chart to enlarge)

We probably have more volatile price actions in October.

No, i don't think we're going into the bear market (at least 20% decline, by definition). There's very low odds of that. It may drop more than the 6 - 7% i depict above. But probably does so in October, if at all, after a bounce. Market likely rebounds from the red box and fails at the 50 dma, and then does a double bottom (more or less). And then more downside in October, perhaps.

I'll keep an eye on that possibility. But i'm not prepare to make any call about October just yet.