Last time I wrote about what could possibly go wrong with S&P500 index spotting a fundamentally overvalued reason and Price action on quarterly charts. This time it is more of a simple technical reason which explains why the 10% correction is due in S&P 500.
As of now Two Technical Indications explains a possible short term drop of 10% in SPX.
1)Rounded Top compression pattern
2)Bearish Island gap reversal pattern around 2530-2580 range
Island gap reversals are medium-term pattern which are most likely to be revisited with higher odds. Usually, the revisit will happen anywhere between 5 weeks to 30 weeks.
The good news is that there is two island gap reversal pattern which is currently open in the S&P 500. One around 2530-2580 range and another around 3300 levels.
The rounded top formation is a possible zone to look for short term correction towards Island gap reversal zone.
Which brings the potential odds of short term correction towards 2500 levels i.e approx 10% correction from current level followed by a potential upside target of reaching 3300 levels in next 6-7 months timeframe (i.e before 2020 presidential election results) in the medium term.