SPX500 Approaches Near Term Support Around 3200

24 September 2020

SPX500 has managed to carve a substantial top around 3588 levels before reversing. It has also broken below 3350 initial support and is now approaching next support around 3200 mark. Bears continue to remain in control and the indice might be good to sell on rallies.

SPX500 probable wave counts are as follows: The rally from sub 2200 lows in March was in 5 waves making an impulse. A larger degree Wave ((5)) seems to have terminated around 3588 levels before bears took control. It also implies that a similar degree corrective wave might be underway.

An impulse wave is ideally followed by a corrective wave in the opposite direction. In this case it may not be true since SPX500 has terminated a larger degree Wave ((5)) and the correction might be deeper than expected. The first wave of the proposed drop might hit 2200 mark.

Looking at the short term wave counts, SPX500 might have carved lower degree Waves 1 and 2 around 3329 and 3384 respectively. If the above proposed structure holds true, the indice might be on its way to unfold Wave 3 lower towards 2900/3000 levels.

Alternately, Wave 2 might still be unfolding and reach 3450/80 levels before terminating. Either way, SPX500 is expected to remain below 3600 mark going forward. It would be interesting to see how price action unfolds from here on.

Traders might be inclined to hold short positions initiated earlier and also add more if prices reach the 3400/50 resistance zone. Protective stop might be placed above 3588 levels and projected targets towards 2900/3000 in the near term.

Prepared by
Technical Analysis Team

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