The US stock market as measured by the S&P 500 (SPX) could be in the first 10% decline since the September 2020. The turn down from SPX peak on 05/07/21 and the Dow Jones Industrial Average top on 05/10/21 has been strong and steady.
The SPX 30 – minute chart courtesy of Trading View illustrates the characteristic of the decline.
So far, the SPX appears to be forming an Elliott five-wave impulse pattern. If this count is correct, it could be just the first wave down of a larger developing five-wave pattern. Note the smooth and relentless manner of the intraday declines. The bulls can not mount a successful counterattack.
The daily SPX chart shows this decline in terms of the bigger picture.
SPX daily RSI is still not in the oversold zone, and daily MACD lines haven’t even crossed the zero line.
Fibonacci retracement levels are usually the first place to examine when looking for where a market movement could terminate. A .236 retrace of the SPX bull move from 03/23/20 to 05/07/21 is at 3755.00 near the bottoms of the minor January and March corrections. The 200-day moving average is such a widely followed indicator it sometimes becomes a self-fulfilling prophecy. In about two-weeks the 200-day moving average could be at or just above the .236 retrace level. Chart support, Fibonacci level, and the 200-day moving average could be where there’s aggressive buying.
Traders are holding 50% short from SPX 4170 and 50% short from the 05/12/21 open at 4135. Continue holding short.