Technical Outlook:

SPX500 might have carved a meaningful lower top around 3230 handle over the last week. The indice had reversed sharply since then, closing the week lower by almost 6%. It is now expected to stay below 3230 levels, and continue lower towards 2200, going forward.

The larger degree wave structure is as follows: SPX500 had dropped from 3400 through 2200 in 5 waves, making it an impulse Wave (1) in the chart. The counter trend rally was sharp, unfolding as a zigzag A-B-C correction, Wave (2) on the chart.

If the above counts hold well, Wave (3) is underway since 3230 handle. SPX500 should proceed sharply lower towards 2200 and beyond, as Wave (3) unfolds. Immediate price resistance is at 3230, followed by 3400 respectively.

Looking at the lower degree wave counts, SPX500 might have completed Waves 1 and 2 within Wave (3) at 2965 and 3153 levels respectively. If the above lower degree counts are correct, we should witness Wave 3 lower from current price levels (3115).

Alternately, SPX500 may print a shallow high above 3153 within a day or two, before reversing lower again. Ideally prices should stay below 3230 and broadly below 3400 levels, going forward. Believe it or not, the indice is preparing for a sharp reversal lower towards 2200, 1750 and further.

SPX500 remains a great candidate to be sold on rallies until prices stay below 3400 levels. Bears are expected to carve lower lows and lower highs from here on.



Trading Strategy:

Aggressively 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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