S&P 500 - Bearish Divergence Calls For A Decline To 3,775

S&P 500 - Bearish Divergence Calls For A Decline To 3,775 

A bearish divergence has been building for the RSI indicator since January 2018 where the indicator peaked near 88 on a monthly basis. In Elliott wave counting a peak in the RSI is most likely the end of wave 3 of 3 and therefore we should expect more upside to come as wave 3 finally came to and end in January 2022 and gave way for a correction in wave 4 and finally the ultimate run in wave 5 a new all time high at 6,147. 

When testing the 6,147 high the S&P 500 also tested the pitch fork resistance-line, which hasn't been tested since the 2000 peak at 1,552. 

In conjunction with my April 1 post, we now have two different analysis calling for a lager correction in the S&P 500. This fits nicely into all the uncertainty Trump currently is unloading into the markets, with tariffs etc. 

I will be looking for a decline to at least 3,775 which marks the 38,2% correction of the rally from the 1932 low at 4.4 to the 6,147 peak in 2025. 

We could well look into another lost decade as we did from 2000 to 2009.  

US 10Y - US 2Y Yield Says A Major Correction In The S&P 500 Should Be Expected

US 10Y - US 2Y vs S&P 500

On January 30 - 2024 I made a post calling for a major correction in the S&P 500 index once the US 10Y - US 2Y yield pushed above the zero line (You can see that post by clicking here). After the US 10Y - US 2Y yield had been inverted since July 2022 this inversion finally came to an end in September 2024 indicating that a major correction in the S&P 500 should be expected in the near future. 

This indicator is of cause not a timing tool, but a clear indication that the S&P 500 is ready to start building a top. In the current case it looks as the a top has been build from November 2024 to February 2025 and a major correction should unfold during the coming years. 

The first major downside target to be looking for is seen near 4,855, while a continuation lower to 4,056 would be very likely. 

Once we get down there I will review the possibilities of maybe even lower targets.