SPX500 futures carve meaningful lower top at 4237.7

Technical Analysis:

SPX500 seems to have print a lower high around 4237.7 levels yesterday. The indice inched higher to terminate lower degree wave v of C of 2 around 4237.7, before reversing sharply lower to 4209. The impulse drop confirms a potential top in place.

SPX500 had earlier managed to reach 4245 highs before turning lower towards 4035 levels around May 13, 2021. The indice had unfolded the above drop into 5 waves, making an impulse, marked as Wave 1 on the chart here.

The subsequent rally unfolded as a 3-3-5 standard flat, labelled as A-B-C. Please also note that Wave C clearly sub divided into 5 waves; and lower degree wave iv was an expanding triangle that terminated around 4213 levels.

The lower degree wave v was the final thrust wave that reached 4237.7 highs before reversing sharply. Furthermore, 4213 support was also taken out indicating a potential top in place. If the above structure holds well, SPX500 might resume its decline anytime soon as Wave 3 unfolds.

SPX500 downside potential remains towards 3900 and 3700 levels respectively as Wave 3 resumes lower. Please also note if Wave 3 is an extension, we might witness much lower levels before the indice finds support.

Most traders might be preparing to initiate fresh short positions around current price action (4225/27) with a risk above 4245 levels respectively. A break below 4209 confirms that Wave 3 is in progress; and is heading towards 3900 and 3700 levels.

Prepared by

Finacademy Technical Team