SPX500 Technical Analysis, October 16, 2020

Exclusive Markets Analysts
Exclusive Markets Analysts

SPX500:


Technical Outlook:

SPX500 might have carved a lower high around 3545 levels early this week. The indice has reversed lower since then, and managed to print intraday lows at 3440 mark yesterday. Bears might be poised to remain in control, until prices stay below 3588 in a broader view.

SPX500 had managed to produce a meticulous rally from its March 2020 lows around 2200, through September highs at 3588 respectively. The indice sub divided into 5 waves, clearly carving an impulse wave. Ideally it should be followed by a corrective drop.

A 3 wave corrective drop might reach 2700 levels, which is also fibonacci 0.618 retracement of the entire rally between 2200 and 3588 levels respectively. For the above structure to hold true, SPX500 must stay below 3588 potential resistance, going forward.

The recent drop between 3588 and sub 3200 could be marked as the first wave, within the proposed corrective drop. Subsequent rally towards 3445 could be termed as the second wave of the correction and that the last leg might resume lower from here.

If the above structure holds to be true, SPX500 would drop below 3200 levels and reach up to 2700 mark to find support. A bullish bounce there, would resume the uptrend and push prices above 3600 mark, going forward. Bears might remain in control at least for the next few weeks.

Alternately, SPX500 might have carved a meaningful top around 3588 by terminating a larger degree Wave ((5)) as shown here. In that case, the indice would push below 2200 mark, going forward.


Trading Strategy:

Short against 3600 levels, target is open,

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