The S&P 500 tumbled down through 1417 on Tuesday – just barely – but it’s not an encouraging sign for the bullish case, as that was the “easy” place for prices to bounce and it didn’t happen.

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Market Update
The S&P 500 tumbled down through 1417 on Tuesday – just barely – but it’s not an encouraging sign for the
bullish case, as that was the “easy” place for prices to bounce and it didn’t happen.
A potential target area is the full weekly retracement of the last uptrend, which is down in the SPX 1390 – 1396
zone.
There are a number of potentially important energy levels in this SPX 1390 – 1396 zone, so this should be a “hot
zone” now that the SPX is below 1420. It’s certainly conceivable that the SPX is only undergoing a full weekly
retracement after such a persistent and strong uptrend, but Tuesday’s drop does raise a potential red flag for the
pattern.
And if this 1417 area can be considered the first “line in the sand” for a downside warning, then 1390 can
considered the “red alert” level. To put it simply, in my opinion, a breakdown below 1390 is not part of a bullish
pattern over the intermediate term – out to early 2013 – so we need to be aware that such a breakdown below
1390 would be a major change of character for equity markets.

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