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S&P has managed last week to draw bulls back into the market. S&P has reached the 61.8% Fibonacci retracement of the entire decline from 1897.28. The decline can be counted as an impulsive downward move with the 5th wave being the shortest as can be seen in my first chart below. The upward bounce is clearly not impulsive and in three waves and has reached a price level where bulls start feeling strong again, late buyers come in, and usually is a turning point according to wave guidelines.

spx60m

Now I expect the S&P index to come downwards once again and this time I expect 1800 not to hold. I expect the index to break lower towards 1760. As when the index was making slight higher highs without making a new high in the RSI I was bearish saying that a correction should be anticipated, this time the same holds in reverse. We should expect a lower low in the S&P index and a divergence in the RSI to have some clues for a potential upward reversal. So we still believe that above 1850 bulls have more to lose and there are increased chances of a break below 1800.

SPXD

Our longer-term view remains bullish as we believe we have just started a deeper than normal downward correction that will bring S&P back towards the lower wedge boundaries as shown in the chart below. The last chart below shows this upward sloping wedge channel that we expect to see a challenge of the lower blue trend line.

SPXD2

Of course it is also important to place a stop to this scenario and trade view. This stop is the all time highs. This scenario will be canceled if 1900 is breached upwards. If new highs are made, then the downward correction will be over and a new upward trend towards 2000-2200 will have started. For more help trading this index become  a member today. As always, thank you for taking the time to catch up on my thinking.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.