Is the stock market ready for a severe correction?

By 28/01/2021News
Morning Stock News

Gold  1837,29
(-0,34%)

EURUSD   1,2101
(-0,07 %)

DJIA  30158
(+0,25%)

OIL.WTI  52,515
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DAX   13514,50
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Wednesday was an atypical day for the US stock market. Stocks had been falling since early morning, then a reversal began during the US trading session. However, it did not last long. By the end of trading session the declines resumed. What lies ahead?


S&P500

S&P500

Over the past year, we have become used to almost any strong drop being bought out. Many assumed that the situation would repeat itself on Wednesday. However, something went wrong. And the day closed with the biggest drop in months.
It is important to understand that on this day the US Federal Reserve rate decision was announced + the Open Market Committee held a press-conference. Investors did not hear anything new. It was noted that rates will remain at record lows for an extended period. The asset purchase programme will continue at the same volume. The outlook for the economy is closely linked to the outlook for the coronavirus.
The only negative signal was the US Federal Reserve’s view that the pace of economic recovery is becoming more moderate.


What do you need to keep in mind?

We recently drew your attention to the fact that it is very important for the stock market whether January closes on the plus side or the minus side. If it is on the plus side, stocks are likely to rise throughout the year (100-year statistics). And if January closes in the negative, it could be a very difficult year for investors.
Above is a daily chart of the S&P 500. What do we see? A long candle, which has almost no body. That is, the price stands just in the middle of the monthly range.
It is very important how the last 2 trading days of January will end. Such daily declines are usually followed by the 2 most frequent variants. Either the next strong red candle comes. In this case January will close in the red with no doubt. Or a correction begins, with a slight increase in the following days.

11.00 EU Consumer Confidence Index for January
14.30 German Consumer Price Index for January
14.30 US GDP data for Q4


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