Important S&P 500 Levels To Watch
The S&P 500 is three trading days from reaching "trend exhaustion."
The foundation of the ongoing rally is very suspect.
If the market closes below these key levels in the next three days, a top in the S&P 500 would be confirmed should the S&P 500 finish below 1,926.82 on Tuesday, or close less than 1,917 on Wednesday or Thursday, then the decline is going to be very sharp. THE S&P CLOSED AT 1921 ON TUESDAY.
If any of those S&P 500 triggers occur, the benchmark index will decline at least 8.2 percent from Monday's close to 1,786, a level last seen in February 2014. Should the market top correspond with "bad news," the S&P 500 could see deeper selling down to 1,736, an 11 percent decline. The ongoing market rally is simply a temporary relief rally as investors exit short positions.
We've seen some pretty vicious short-covering come in, which has caused the market to move up. When that happens, it really plays havoc with the market once the next downside move begins.
The foundation of the ongoing rally is suspect. The temporary buying produces a price vacuum beneath the market and accelerates the subsequent decline. The next decline is going to be sharp.