US markets due for correction?

The US markets look set for a correction. A look at the main indices- DJIA , S&P500 and Nasdaq Composite- reveal a sharp drop in RSI & a sharp rise in -ve DMI. MACD for all three indices, which have not done a negative crossunder, may do so on further weakness. These 3 indicators gave similar reading just before the correction in June-July 2009 & in January-February 2010 (demoted as 'A' & 'B').


Chart 1: DJIA's daily chart as at Apr 27, 2010 (Source: Stockcharts.com)


Chart 2: S&P500's daily chart as at Apr 27, 2010 (Source: Stockcharts.com)


Chart 3: Nasdaq's daily chart as at Apr 27, 2010 (Source: Stockcharts.com)

We shall note that the SSEC index has failed to recover from the bearish downside breakout of its triangle. A correction in the US markets (if it panned out), coupled with the ongoing turmoil in Europe and the bearish outlook in China, could deal a severe blow to the global equity markets, which look ripe for some correction after a long rally.


Chart 4: SSEC's daily chart as at Apr 27, 2010 (Source: Stockcharts.com)