As mentioned during Friday's morning call
the S&P 500 formed a bearish engulfing candle on May 1 (circled) which is an indication of a top and reversal. Over the past couple of months the Index has formed a wedge-like pattern where is tested the lower rising trend line on Thursday.
Stock markets have been ripe for a correction and with the news coming out this morning regarding US/China trade talks and Trump's tweets, now seem to be the time. Volume has been falling during the uptrend, which is a sign of imbalance in the market – fewer and fewer buyers pushing market higher.
Interestingly, there is no RSI divergence which some bulls might pin there hopes on. However, we can still see a top and reversal without RSI divergence.
Today, US stock markets are indicated to open lower after Asian and European markets have all been hard hit. Sell in May and go away seems to come early this year!
Whether or not this will be a larger correction is still too early to call but a drop over the next few weeks to around the 200-day simple moving average is not impossible. However, there will be some support at around the 2,800 level which is also the 0.618 retracement of the wedge.
For the market to show more of a correction and turn bearish again, a close below March low at around 2,722 is needed.