Last week we warned bulls that SPX was providing us with a bearish signal by breaking out of the bullish channel. Price broke below support at 4580 and is now trading at 4330. SPX was providing us with bearish divergence signals in the RSI when it was making consecutive all time highs.
Black lines - Fibonacci retracements
SPX is vulnerable to a pull back towards the 38% Fibonacci retracement of the entire rise from 2020 March lows. In the near term we could see SPX bounce higher because in the Daily chart the RSI is at oversold levels and a bounce higher is justified. There are many chances that SPX will eventually move lower towards the 38% Fibonacci retracement, but I would prefer to see a bounce first before opening short positions now.
