SPX500 seems to have finally topped around 3350/55 levels yesterday. The futures are trading lower at the moment around 3325 and could reverse sharply from here. A break below 3200 immediate support would certainly confirm that the indice has reversed lower.
SPX500 wave counts are still clear with higher degree Waves (1) and potential (2) in place at sub 2200 and 3350 levels respectively. The drop from 3400 through 2200 was an impulse, which was followed by a corrective rally towards 3350 levels yesterday.
The recent rally up to 3350 levels had taken quite a few traders by surprise. But the Elliott Waves were very clear about a potential bearish reversal until 3400 remains intact. Today, could be the engulfing bearish pattern we have been waiting for to confirm a trend reversal.
Typically, Wave (2) would retrace up to fibonacci 0.618 levels of Wave (1) before bouncing back towards the major trend. But it has been seen repeatedly that Wave (2) can give a false notion about continuation of the previous trend. The recent rally had made investors feel the same.
Wave (2) has reached much deeper in this case, beyond the fibonacci 0.88 mark. The structure still remains intact since SPX500 stays below 3400 levels. We can expect a sharp reversal from here if 3400 resistance remains intact.
SPX500 might be considered a great candidate to be sold on rallies until 3400 resistance holds good. The downside potential remains through 2200 and beyond. Watch out for a break below 3200 support from here.
Short against 3400, targeting towards 2200 and beyond.