The S&P 500 correction appears to be over - or is it just beginning?

I posted at the start of the year, that there could be a market top forming but we need to see the confirmation before we call this a major reversal. Well it did turn into a pullback but the major reversal or correction has not materialised yet. I wrote in my post on the 4th Jan that this could take until late May to unfold and it looks like it will. The main thing I am looking for to confirm a major correction is a lower high/lower low on the weekly chart like what occurred back in late 07 as shown in my post on the 4th of Jan. We don't yet have a lower low in place on the weekly because the support held. Maybe that is coming. If we get a rejection off 1800, where the SPX is right now, that will be our lower high and an extreme bearish signal if it was followed by a break below the current support at around 1750 (this would give us the lower low). I don't expect that will happen but as long as the weekly indicators are in downtrend we don't rule anything out of the equation. This could turn into a bull trap as it becomes clear that there is no economic recovery.

The post that I wrote on 4/1/14 you can see it here.


Below: The S&P 500 daily chart showing a perfect bounce off the major long term uptrend line. I am now expecting a rally into late May in the absence of any unforeseen developments. The SPX could well make a new high before we see a major 20% correction. Lets see what the weekly chart is telling us below.

Below: The S&P 500 weekly chart is showing that the major support has held. I must say this was a surprise to me but there we have it. The three indicators are in downtrend divergence so we must respect the power of those indicators. The RSI is still above 50. If that was to go below 50 on the weekly then we are looking at something more serious but I don't think that will happen just yet.  We really need to see the weekly chart break out to a new high or new low before we can fully understand what is going on here. Lets have a look at the VIX below this chart.

Below: The VIX daily is confirmed in downtrend as fear in emerging markets is easing. The problems certainly have not gone away at this stage. If anything they are getting worse but the interbank lending rates are what we need to be watching. The emerging market repo rates are still at very dangerous levels.

This Dow Jones 1 minute chart shows how the HFT alogo's take out the stops and then start buying into the panic. This is typical on these bad announcements. Bad is good even though the Fed taper is well under way. Are the markets thinking that the Fed will have to un-taper? I don't know. I would have said that they would un-taper until I realised what the true motivation behind all this was. The taper was designed to crush the emerging markets who have been buying the gold. Therefore I don't expect any un-taper at this stage. The market is still very high. The Fed would not un-taper until the market got down near the 100 MA on the weekly. That is just my take on it. Lets see how it goes.