SPX overbought on the daily... Overbought usually forces a day/few days correction, but before a BIG drop, momentum usually wanes (it doesn’t always have to work that way), a phenomena Cobra likens to your foot off/on the accellerator.
Al Brooks described it this weekend, paraphrased: The bears have to stop the rally from continuing up before they can make it reverse down. That is a process that takes time. At a minimum, the bears typically need a double top, which takes a few days/week to develop. But even that is usually not enough to reverse a strong bull trend. The bulls will buy the 1st reversal down, even if it is surprisingly strong. Consequently, the downside risk over the next few weeks is small.
Note the red arrows: the August and Sepember drops were preceeded by waning momentum, which the bears are now watching/waiting for....
Caveat: the chart is Heikin which can cause slight distortions.
Pretzel: “The telltale sign of a b-wave high... is its three-wave structure. A completed impulse wave, which is needed for a clean top or bottom, will always be five waves instead of three. When you see three waves into a new high ..., then expect that
the ensuing reversal is only temporary, and the market will retest/exceed the b-wave high. “