SPX500 seems to have carved a meaningful top just below 3400 mark. The indice had reversed sharply towards 3354 levels yesterday, before pulling back higher again. The indice futures are trading around 3390/93 mark and might be preparing to resume lower again.
SPX500 lower degree wave counts suggests an impulse drop between 3395 and 3354, the recent boundary. If the impulse count is correct, prices should stay below 3400 and resume lower again towards 3200 mark. Also note that 3200 is the medium term support on the daily chart.
The indice had earlier dropped between 3393 (sub 3400) levels through 2200 between February-March 2020. The subsequent rally has managed to just pip the past high and print 3395 (Spot). The entire structure since February 2020 might be a part of an expanded flat.
If the above is correct, SPX500 should be heading lower at least towards 2200 mark going further. Once it breaks below the 3200 support, it would confirm that SPX500 has carved a meaningful top just below the 3400 mark.
Also note that the daily chart has produced an Engulfing Bearish pattern the day before yesterday. This could be a potential trend reversal signal until prices stay below 3400 mark. It would be interesting to see how prices react around 3393/95 levels.
SPX500 ideally remains a great candidate to be sold on rallies. Even if prices are able to break above 3400 levels, the upside remains limited. We would be looking to go short again at higher levels.
Short against 3400, targeting below 2200