Three Possible Paths for the S&P 500

On 06/02/22 the S&P 500 (SPX) bottomed early in the session then persistently rallied 2.5% closing the session slightly off the high of the day.  Typically, in a stock bull market   the next trading day would have at least marginal gains.  On 06/03/22 – SPX  opened the session down 1.1% and  trended down during  most of the day. Could this drop be a  pause that refreshes  or the start of a larger decline?

First we need to examine  the daily SPX momentum with a chart courtesy of BigCharts.com.

The BigCharts.com –  Stow Stochastic indicator is  very effective in identifying potential trend changes.  In late May, daily Slow Stochastics reached  the overbought zone above 80% then had a bearish crossover.  This  signal implies at least a multi-day decline may have begun.

The hourly SPX chart courtesy of Trading View examines a potential bullish Elliott wave count.

In this wave count the presumed Minute wave “v”- boxed is extending. If this scenario happens the SPX could climb  to at least 4300. The daily Slow Stochastic would most likely flatten in the overbought zone – if the SPX were to soon exceed the 06/02/22 high.

A  move below SPX 4074.37 could open the door for a  moderate bearish wave count illustrated in the SPX – 15 – minute chart.

In  this  wave count the presumed Minute wave “iv” is a Combination wave composed of an Expanding Flat followed by a Single  Zigzag.  Typically wave “Two”  or  “B” retrace about 60 to 66% of the prior waves “One” or “A”.

The second SPX hourly chart shows a very  bearish wave count.

In this  wave count the move up from the SPX 05/20/22 bottom is a  Double Zigzag  correction.  The next down move would probably break below the 05/20/22 bottom.

The 05/31/22 blog “S&P 500 Momentum Update 05/31/22” illustrated a bearish divergence on the SPX – hourly RSI.  At the SPX 06/02/22 peak there was a  double bearish RSI divergence.

Traders  are  long  100% SPX non-leveraged  funds.  Raise the stop loss on half of the position to SPX 4074.36.  Use a  move below SPX 4050.00 as a stop loss on the remaining  position. 

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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