The S&P 500 (SPX) may finally be ready for a little breather, and appears to be in the process of forming a complex corrective wave, with some indications that we may chop around for a bit. The entire move since 1491 presently appears corrective, which suggests it should ultimately resolve higher — however, the wave has considerable overlap, which makes it quite difficult to determine the exact short-term structure, and thus the market’s exact intentions.
I’ve outlined the preferred count for the rally since 1451 on the 3-minute chart below. I’ve also noted the possibility that the wave labeled as blue (iv) may be unfolding as a complex flat. The expectations of that count would be for the market to revisit 1490 +/- zone, which corresponds nicely with the rising red trend line, followed by a continuation higher. Note that there are more bullish possibilities, though, so a retest of 1490 isn’t a foregone conclusion. Trade below 1485 would open up more bearish potentials.
On the SPX hourly, RSI has registered a bearish divergence, and MACD is on a slight bearish crossover. Presently, this is expected to result in a sideways/down correction, but these are warning signs that traders should stay on their toes. It’s conceivable that red wave (iii) has completed in its entirety, but with the recent action, it’s simply too early to tell.
In conclusion, there are finally some signs the the rally may take a breather, though that isn’t a given — sometimes an overlapping wave is simply winding up to move higher. The first more serious warning sign for bulls would be sustained trade beneath the rising red trend line shown on the 3-minute chart; the second would be trade beneath 1485. Trade safe.
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