S&P 500 Ending Diagonal: No Confirmed Top Yet, but Upside Looks Limited

Good day to everyone! The S&P 500 recently moved to a new high, but it is now selling off after last week's hotter-than-expected US CPI figures. As you may know, I've been tracking a bearish reversal pattern called an ending diagonal from the June lows, so this reversal is something I'm watching closely.

An ending diagonal is a wedge-shaped, five-wave pattern with overlapping waves that usually shows up at the end of a trend, and it is often followed by a sharp reversal.

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The only question is whether the diagonal is already complete, or whether there will be one more push higher. The current reversal is quite concerning, especially with the dollar trading very strongly for the last few weeks alongside higher US yields. But the cash index closed Friday at 7,659, still above the lower trend line and the 7,625 support, so we cannot confirm a top just yet. A break below that level would suggest that an important top may be in place, with much more weakness potentially coming later on.

And even if we see another push to the upside, I don't think there is much room left, as the 7,900–8,000 area is a very important resistance for the end of this year.

I'll go through the S&P 500 in more detail in today's Elliott Wave Live webinar at 15:00 CEST, so feel free to join me live here: https://www.youtube.com/watch?v=mgEFmcqAMEY

Trade well,
Grega