S&P has reached price levels where resistance is very strong and RSI divergencies suggest we should take a break and let the market make a pull back and back test the break out level of 1900.There has been lots of time since we last saw S&P make a downward correction of more than 1% and I believe that now that the bearish sentiment is at its lowest and bulls feel overconfident, we should be ready for a drop of nearly 20 points.
I expect S&P to start at least a wave 4 correction lower towards the Ichimoku cloud support just above 1900. The 38% Fibonacci retracement is at that level. If market is to continue towards 1950-1970 we should see a downward correction towards 1900-1897 where the last buy opportunity will come before the last upward thrust of this wave pattern.
The preferred strategy to follow is to be cautious. Bulls could use the short-term support at 1916 as stop or the Ichimoku cloud at 1890. Taking profits is a strategy preferred currently as Bulls have more to lose at current levels than bears. Trend for now remains up but the first sell signal will come if 1916 is broken downwards. The RSI divergence in the daily chart provides another warning for Bulls, signalling that stops should be raised.
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