SPX (S&P 500) – Ending Diagonal & Bearish Divergence

SPX (S&P 500) indeed commenced the previously posted Bullish Rally in Primary 3 (orange).

As per the Wave Counts labeled on the charts below, SPX very much looks like it’s trading within the Grand Super-Cycle ABC (red) Structure.
Wave Count is suggesting that a Deep Bearish Contraction could possibly occur for SPX, as multiple signs point towards 2500.00 Levels as being a Significant Resistance, which could push SPX towards 2350.00 Levels.

SPX – Full Cycle – Weekly Chart:

Weekly Chart Bullet-Points:

• Price Action surpassed the 100% Fibonacci Extensions of Grand Super-Cycle Waves A & B (red), which suggests that Grand Super-Cycle Waves C (red) could have an Extension towards the 150-161.8% Fibonacci Extensions.
• Super-Cycle (III) (black) ended its Bullish Rally at the 150-161.8% Fibonacci Extensions of Super-Cycle Waves (II) & (II) (black).
• Bullet-Point above would make a Wave Trader consider Significant Bearish Swings at or around the 61.8% and 100% Fibonacci Extensions of Super-Cycle Waves (III) & (IV) (black).

S&P 500 – Daily Chart:

According to the Wave Count and also the measurements on the Daily Chart, SPX would still be trading within a larger degree Cycle Wave III (green), with an Extension in the Primary Sequence.

SPX – Daily Chart – Wave Count:

• Cycle Wave I (green) started the overall Up-Trend with consistent Impulses with a clean 5 Swings Sequence, determining the Bullish power and control.
• Cycle Wave II (green) only retraced 38.2% of Cycle Wave I (green) which is abnormal for a 2^nd Wave and according to the rules, it should have shown a 50-61.8% measurement. According to the Law of Alternation on Corrective Waves, this would lead a Wave trader to consider looking forward to a deeper fall in the later to come Cycle Wave IV (green).
• Cycle Wave III (green) still has two more legs to unfold before it could be considered finalized and a deeper Correction would take place.

Cycle Wave III (green) – Wave Analysis:

• Primary 1 (orange) started the Extension and Bullish Rally with clean swings in its Impulses.
• Primary 2 (orange) is showing a Complex Corrective Structure labelled as Intermediate (WXY) (red).

Because of the fact that Price Action did not unfold as a clean Zig-Zag in Primary 2 (orange), the Law of Alternation would be considered for Primary 4 (orange), making a Wave Trader willing to look for a fast and deep Intermediate (ABC) (red) Corrective Structure.

• Primary 3 (orange) is to be considered as an Extended Wave because of the fact that Primary 2 (orange) overlapped with Cycle Waves I & II (green).

Primary 3 (orange) – Bullet-Points:

• Primary 3 (orange) unfolded with an Extension in Intermediate (3) (green).
• Intermediate (5) (green) is showing a very possible Ending Diagonal in which all Swings would occur with 3 Waves in each Minor degree (blue).

Primary 3 (orange) – Fibonacci Measurements & Projections:

Technically speaking, SPX shows multiple signs on why 2500.00 Levels would pose as a Major Resistance. Let’s see why!

• 2500.00 Levels sit at the 61.8% Fibonacci Extensions of Super-Cycle Waves (III) & (iV) (black).
• Fibonacci Extensions of Cycle Waves I & II (green) point towards the 150-161.8%.
• 2500.00 Levels are also showing a 200% Fibonacci Extension in Primary 3 (orange).
• The Ending Diagonal is pointing towards a possible completion of Minor 5 (blue) which itself would complete the Intermediate (green) degrees and also Primary 3 (orange).
• The Bearish Divergence is to be closely watched as this is popular at 5^th Waves ending. Volumes are decreasing while the Trend is still rising which technically is a sign of Bulls exhaustion, leaving room for Sellers to possibly take advantage.

SPX (S&P 500) – SELL Position:

• Entry – 2490.002 (2500.00 if Conservative)
• SL – 2550.00
• Target – 2350.00

Safety Measures:

• When in the green, one would move SL to break-even or in profit.
• Waiting for a Bearish Divergence confirmation before considering Bearish views at 2500.00 Levels. Watching Volumes on lower time-frames for weakness or not enough liquidity injected by Buyers.
• If Conservative, one would wait for a Bearish Breach of lower Trend-Line and after that also look for a possible Flag Formation.

Interactive Chart (click PLAY to load new bars):


Many pips ahead!