The post-FOMC rally took SPX right up to the top of its parallel up-channel from the April 21st low and then dropped into the close in what looks like an impulsive 5-wave move down. That should suggest a trend change to the downside and Wednesday's high should hold. But in all honesty the EW pattern for price action over the past month is such a choppy mess that I could come up with several wave counts. Therefore it's not as reliable a tool to use at the moment. I do see the possibility for one more push higher even for the price pattern that calls for at least a deeper pullback. Upside targets for that would be 883-888 and it's shown as the red dotted line on the 120-min chart. A drop below 847 would confirm the top is in while a rally above 890 would confirm the likelihood we should be looking for a strong rally leg out of the month-long consolidation.
SPX 120-min chart:
There is one possible wave count for an a-b-c bounce off the March low where the c-wave (the move up from March 30th) has formed an ugly ending diagonal and achieved 62% of the a-wave on Wednesday by tagging 878.68. The continued bearish divergences at the new price highs does not point to a sustained rally from here but price is king and we'll follow it where it takes us.
Another reason I haven't been leaning towards seeing a strong rally leg out of this mess is because of what I'm seeing in the techs. While I've made my arguments by showing the semiconductor index and even MSFT (both of which did not confirm Wednesday's new high for NDX), the NDX pattern also continues to look like a bearish setup. After rallying up to its 200-dma and broken uptrend line from November (again), it pulled back sharply into the close and left a bearish shooting star candlestick at resistance. But that reversal signal would not be confirmed until it's followed by a down day.
NDX daily chart:
The potential diamond-top pattern continues to hold on the SOX after being rejected at the top of the pattern. Thursday could be an important day.
SOX daily chart: