SPX500 carves a potential top around 4720-30

Technical Analysis:

SPX500 might have carved a meaningful top around 4720-30 zone in the past hour. The new all-time high has been accompanied by bearish divergence in RSI on the 4H chart here. A break below 4670 and subsequent trend line will confirm a trend reversal.

SPX500 has rallied 4272 and 4725 subdividing into five waves terminating Wave 5 as marked here. Also note that the indice seems to have completed its fifth wave at multiple degrees. If the above structure is correct, a meaningful bearish divergence should be underway soon.

The indice needs to break below initial support at 4631 now, which is a lower degree fourth wave, to ascertain a trend reversal. Upside remains limited from here as bears prepare to come back in control soon. Potential remains for a drop towards 4272, which is previous Wave 4 of a lesser degree.

Alternatively, if bulls are able to push higher above 4730, SPX500 could test 4750-60 zone before finding resistance again. In that case the above bearish reversal would be delayed further. Either way, as discussed earlier, the upward momentum is declining.

Traders might be inclined to initiate aggressive short positions around current levels at 4723-25. Risk remains above 4790 and potential target is towards 4270 in the next several weeks.

Prepared by

Finacademy Technical Team