SPX500 continues to print higher highs with each day passing and prints 3501 (Spot) today. The indice trades around 3495 for now and could be poised to test 3550 before reversing lower. Believe it or not, upside remains limited from here as the rally is accompanied by a strong bearish divergence on Weekly RSI. Prepare for a bearish reversal from here, sooner than expected.
SPX500 rally from 2190 lows in March 2020 can be sub-divided into 5 waves as labelled here. Hence the earlier wave structure presented through the past several weeks stands invalid. Furthermore, the indice has exceeded 3400 mark and is trading around 2.6% higher.
SPX500 might have rallied through its larger degree Wave ((5)) between 2190 and 3501 levels respectively. If the above count is valid, we might witness a sharp decline towards 2190, which is larger degree Wave ((4)).
We need to see a break below 3354, which is immediate short term support to confirm the first step of a potential bearish reversal. Also note that prices would break below the trend line support while attempting a break below 3354, which is also constructive for bears.
In a nut shell, the indice remains vulnerable for a bearish reversal from current levels and it could be better to sell on rallies through 3550 or after a break below 3354, going forward. The fibonacci extensions are pointing towards 3580, for Wave 5 to terminate.
Watch out for a bearish reversal from 3550/80 or from current levels (3490). Also note that Dow Jones has failed to print above 29600 highs. This is also a bearish divergence and constructive for a potential reversal.
Flat for now, prepare to sell again.