

The key question - Is Thursday’s plunge the start of the next major downward swing (Chart 1 pink) or just a sharp retest of its recent breakout area (Chart 1 green and blue)? It’s difficult to assess the odds at the moment (see below), with odds moderately favor the bearish view for the near term.

The 2.86% “plunge” from the rebound high of 1363.46 to Thursday’s low of 1324.41 in SP500 exhibits interesting technical features.
The sell-off supports the bearish case, as it reverses a visual three-wave rebound (Chart 2), which is bearish.
However, there is a decent bullish case to be made.
[1] It retraced around the 0.382-Fib of the upswing from the June 4th low and around the 0.618-Feb of the advance since the June 13th low following a week-long consolidation.
[2] With Friday’s 0.72% rebound, it has so far successfully retested the upper end of this consolidation zone. This is especially the case if there’s follow-through buying next week.

From this perspective, the recent sell-off merely retested the prior 4th wave of a lesser degree - a typical feature of a correction. The recent sell-off is either [a]-down of wave 2 (deep) or the entire wave 2 (shallow).