When we reviewed the big picture back on Apr 27, we finished it on a bearish note. With the S&P 500 at 2098.75, I wrote:
…this would be a great place to short. I still believe the yellow .786 at 2065 is in play, though it might be delayed until early next week as the red channel .236 line comes into view.
I don’t often hold short positions overnight. TPTB are experts at eviscerating bears with after-hours ramp jobs, no matter how bearish things appeared at the close. But, SPX had just failed to retake a a key Fibonacci level. Furthermore, it had just failed to break out of a bearish channel. It seemed like a safe bet.
The high that day was 2099.89, and SPX has since tumbled 2.5% — a very mild decline by traditional standards. But, it’s the biggest and longest lasting decline since February. So, it matters somewhat. The question, now, is whether it will reverse at the support we identified earlier this week, or turn into a decline that really matters.
I believe the answer to that question lies in how the 2.5% decline has unfolded.
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