On April 10th S&P500 made a low of 1357.38 and then tested it again on April 23rd by making a low of 1358.79. Later in early May, the index broke this support level. After making a low of 1266.74 on June 4th, the index bounced back and by Tuesday, June 19th, it was trying to go above that support level. However, the prior support levels have a tendency of becoming resistance and that is what it did. After briefly breaching the resistance level, the index is sharply down today.

On the other hand, the prior resistances make a weak support levels – not, just saying in jest. It is just so that when the market is in a strongly corrective mode – like now – then the downward momentum usually trips weaker support level, which is what happened to the prior resistance formed by the two short term highs of 1334.93 on May 29th and 1335.52 on June 11th.

These two tops, along with the intermediate low made on June 4th, took the shape of an irregular inverse-head-&-shoulder pattern. When the pattern was completed on June 15th, the targeted measured up-move of the pattern was around 1400. But, today’s strong down move has negated this pattern.

Now the next support level is 1306.62, which was a short – six days – consolidation. If that is broken then the next level will be 1266.74 – the low made on June 4th.