SPX500 Technical Analysis, July 24, 2020

Exclusive Markets Analysts
Exclusive Markets Analysts


Technical Outlook:

SPX500 (Spot) might have carved a meaningful top around 3280 levels. The indice reversed sharply yesterday and managed to close at 3235 levels. Bears are now inclined to continue lower towards 2750 and 2300 mark from here.

SPX500 larger degree wave structure is also indicating that the indice might have successfully carved primary waves (1) and (2) on the daily chart. The drop from 3400 through 2200 was in 5 waves, making an impulse Wave (1) on the chart.

Ideally, an impulse wave is followed by a corrective wave consisting of 3 waves in case of a flat or zigzag. SPX500 had produced a counter trend rally from sub 2200 levels, through 3280 mark recently. It seems to have completed the zigzag corrective wave there.

It has been marked as Wave (2) on the chart here. If the above holds true, SPX500 should stay below 3280 mark ideally, and turn lower towards 2750, 2300 and 2200 mark eventually as Wave (3) progresses. Bears are expected to remain in control from here on.

Also note that Wave (2) has rallied up to fibonacci 0.88 retracement of Wave (1), which is a typical property according to the guidelines of the Wave Principle. Wave (2) at times go much deeper into correction as the present one. Bottom line remains that it does not cross the beginning of Wave (1). This levels is marked as 3400 in our case.

Further, the indice has produced an engulfing bearish candlestick pattern on the daily chart, indicating a potential bearish reversal. A break below 3100 would certainly confirm that SPX500 has resumed Wave (3) lower.

Trading Strategy:

Short against 3400, targeting below 2200.

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Risk Warning: Trading the capital markets is risky therefore further knowledge and experience may be required. Apply appropriate risk and money management always and ensure the implementation of safe leverage.

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