S&P 500 Topping Pattern - Playing Hard To Get, But Close At Hand

Topping patterns are notoriously difficult to identify with picture perfect precision, and anyone who says otherwise is not being completely honest. There are a host of reasons, but from an Elliott Wave perspective, one reason is that there are multiple Fibonacci levels the index can extend to and react from. More often than not certain Fibonacci extension levels solicit a reaction, which is why we tend to take a half position short at these fib extension levels using shares of the ProShares TR/Short S&P 500 (SH), or the ProShares UltraShort S&P 500 (SDS), and then add to this position once we have a confirmed high in place.

The move off the Christmas 2018 low best counts as a WXY pattern for a B-wave. In English, this means our expectation is still for a move down to the 2,351 to 2,154 region for a C-wave to complete Primary Degree wave 4. However, until the 2,866 level is taken out to the downside, we are expecting a final move up into the 2,918–2,935 level to complete the entire B-wave move up sometime this week or next. So, if this analysis is correct, we should see the SPX begin to break down in the coming days. See the 15-Minute SPX Chart below that shows our concluding upside projections. A break below 2,866 could nullify this expectation and would change our upside count, and more likely indicate that the top is in.

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