SPX500 completes impulse drop to 4500 mark

Technical Analysis:

SPX500 might have carved a meaningful top at 4745 on November 22. The indice has dropped through 4500 lows before finding support. Also note that the above drop has unfolded into five waves, carving an impulse at a lower degree. It is marked as Wave 1 on the daily chart here.

If the above proposed lower degree wave structure is correct, SPX500 might be preparing to produce a counter trend rally back towards 4550-60 zone. The index already rallied through 4593 on Thursday and futures are trading around 4578 at the time of writing.

The fibonacci 0.618 retracement of Wave 1 is seen around 4651, which is potential termination point for Wave 2 going forward. High probability remains for a Wave 3 decline towards 4340 and 4270 levels at least, thereafter.

The SPX500 should stay below 4745 mark for the above bearish structure to remain intact. Bears are looking to drag towards 4270 support, which is also Wave 4 termination of one lesser degree. A break there would confirm trend reversal at a larger degree.

Traders might be inclined to initiate fresh short positions around 4650-60 zone with risk above 4745 going forward. Watch out for the counter trend rally to accelerate soon.

Prepared by

Finacademy Technical Team