Yesterday we had a few indications that price may have reached a potential short-term top:
- The trend line resistance from the 2007 top has been reached. This area is the right spot for the awaited top of the wave (3) of (C).
- A potential bearish weekly Hanging Man / Spinning Top can be in the cards.
- KBE (Bank etf) probably already topped on Monday. Yesterday it closed with a bearish engulfing candlestick. Here, if the my SPX scenario is playing out, price should now unfold a corrective wave (4) with a target range = 20.70 - 20
- SPX yesterday gap up followed by a negative close can be considered an exhaustion gap. But since price has not breached by eod the TL1, bears need follow-through to the down side, in order to conquer an eod print below 1306.06. If the s/t trend reversal is confirmed I expect +- 1 week pullback with a potential target in the 1280 area ( weekly gap = 1289; 0.382 retracement = 1283.56).
The assumed wave (4) should unfold a Zig Zag / DZZ; Flat or a Triangle.
- Yesterday I mentioned that in the short-term time frame price could have traced a triangle followed by a thrust up with the FOMC announcement. That up leg has been almost fully retraced. Yesterday's action clearly can be considered the first step of a potential reversal, which needs to be confirmed by a lower high & a lower low.
To sum up:
- Price has reached a potential reversal area.
- A first step has been made in order to confirm a s/t top.
- But follow through to the down side is needed.
Have a great weekend!!!!