It is possible that SPX made an intermediate top at 2665 on 12/04 and that the current short-term uptrend from 2625 is a retest of the high, after which the intermediate correction will start in earnest. The rally from 2625 reached 2651 on Friday, and has the potential to go to 2660, and perhaps even 2675 before coming to an end. If only a retest, it would create a double top, after which the index would have to break below 2525 for an initial confirmation that the larger correction has started.  A subsequent drop below 2605 would leave little doubt that the bearish clan has finally been able to take control.  

The final push to 2665 had all the characteristics of a mini-climax, including the forty-point drop which immediately followed. The current sluggish rally which is at least a test of the highs is also consistent with an important top formation. Not to mention the negative divergence which is now appearing at the weekly and daily time frame. In other words, if you are bullish on the market, it’s time to pay attention to the overwhelming evidence that an important top is being created. Nevertheless, the warning of a top will have to be followed by confirmation that an intermediate decline has begun.

Chart Analysis  (These charts and subsequent ones courtesy of QCharts)

SPX daily chart:

Even with a casual look at this chart, you would have to conclude that the odds favored that a correction of some sort was imminent. With last Monday’s move to 2665, SPX reached the top channel of four distinct price channels of different degrees, which was bound to create some resistance. And if you did not have any more clues, you would have been wise to wait until the price retraced to the bottom of each channel line to see if it held and kept the index in an uptrend, or if it broke and the price moved lower.  And you would have had to repeat that verification process as each channel line was reached.  

Fortunately, we can do better than that since we have several other technical tools with proven reliability. The simplest ones are the oscillators at the bottom of the chart. As mentioned above, the weekly and daily ones tracking both momentum and breadth are showing negative divergence. This tells us that the correction (when it comes) is likely to last more than a few days — more like several weeks. In that case, all the above bottom channel lines will fall as the market corrects. In my opinion, even the main channel line from 1810 is likely to be breached.