S&P500 - 15 Min Chart - 4 Days
So the S&P made it down to the 992 support level, tested it twice, found support, and rebounded up into the Valley of Death (S&P 1007-1014). This afternoon it is challenging that old buggaboo at the north end of the Valley - the Fibonacci 38.2 Retracement at 1014. Remember, 1014 has served in the past as a very tough resistance level, and also as a support level. If the S&P can get through and close above this area it will be huge for the bulls going into the Labor Day weekend.
S&P500 Daily Chart - 2 Months
Here's a head-and-shoulders pattern that's been forming. The left shoulder is basically that area between 992 and 1014 the occupied the market for the first 1/2 of August. The head was the breakthough of the 1014 line that went up to 1039. Now, if the formation works out, we are already in the right shoulder - having already touched (twice!) the lower bound of the shoulder at 992. For the shoulder (and the pattern) to work however, the right shoulder needs to more or less stay within the upper bound limits of the left shoulder - our old friend 1014. A spike like on Aug 7 that briefly went above that line is ok - its where it is at the close and where it goes from there that counts.
So, for a few reasons this attempt at 1014 could be important - it will tell us if the market is going to continue to print a reversal pattern, or it will signal new hope for the bulls. It's not unusual for particular price points to be hit and retested two or three times - for that right shoulder to form, we would expect that the S&P would go above 1000 and challenge 1014 again, although we wouldn't expect it to go substantially past there. So keep an eye on that level this afternoon.
Later.