Since reversing off the year lows of 1732 and through December's high to squeeze shorts, the SP coiled in a sideways range in attempt to find new buyers following that V shaped short squeeze. The first peak high was made at 188750 in March on Non Farm Payroll numbers. This was followed by a reversal down to 182350 mid March, before climbing back up to 1877 as the pullback was bought and the 6 month pivots turned into support. Breakout attempt was seen early April, having to take the FRB chair to say stimulus is still needed to in order to trigger new buying to run the market into new highs setting up a jump ball on the NFP numbers that were released early April. New all time high were made by 5 points up to 189250, again on Non Farm Payroll numbers and was followed by profit taking and sellers pressing the market post NFP release. Both peak highs being made going into the jobs numbers that were both followed by immediate profit taking. The last high is more troublesome as new highs were made only to fail to continue higher, seeing a reversal back down to press and retest the March lows of 182350. First test of this led to a bounce this week on the FOMC release the 6.5% unemployment target for the fed funds rate would be removed. The initial reaction was an embracement by the market, seeing a bounce up to 1867 before running out of gas and reversing back down to close below the recent low of 183075 prior to that FOMC release. Once again the market brushing off stimulus promises and a pull of the 6.5% unemployment rate that suggests rates can remain low longer.
Going forward, pressure is being put now against the prior low of 182350 made in March to shake out longs and confirm a short term double top. A weekly close below 1850 is bearish and creates a new range of resistance within 1850-189250. Looking at the action made in 2014, with the early sell followed by the V shaped recovery that was fueled by shorts being squeezed, the market traded above those prior highs for 2 months in attempt to build a base and attract new buyers following the short squeeze. Failure to build the base and hold above the 2013 highs, suggests enough new buyers are not coming in to sustain the V reversal to expand higher. If new buyers are not coming in, then the bus may be too full and this gives room to expand lower to target the year lows and confirm a failed breakout with major support at 1700 based off the October low. Failure to hold the 2014 low of 1732, breaks the series of higher lows the market has enjoyed since the last major low of 1553 in 2013 when investors feared tapering before being squeezed up 300 points. By taking out the last major low at 1732, this breaks the upward momentum, and gives room to move down into testing levels from 2013 and attempting a gap fill down to 1420. Support off the year lows is seen down to 1750 for buyers to defend.