The key for bears today was to have a follow through day unlike early in the month when heavy selling was immediately met with a rush of buyers. They are getting that. Hence it does appear an intermediate term top has arrived. If so the inverse head and shoulders pattern that measured from the mid November low to mid 1510s-1520s (depending on where you put the neckline) triggered almost perfectly.
So now you have the question of retracement levels. For those who use Fibonacci levels, the first major is 38.2% of the 3 month rally. As you can see below that is still a long ways away and not likely to be reached in a straight shot. Before that happens breaking through that 1495 level on the S&P 500 which provided some support early in the month will need to happen. As discussed quite a few times over the past month there are now gaps all over the indexes that need to be filled due to so many gap ups during the recent euphoria. While the mid November and Jan 2 instances are obvious (and a long ways away) there have been many other small ones, with a few already filled in the past 1.5 days. Unless things turn dramatically in the next few hours this will be the second major distribution day in a row – after only having that many in 6 weeks prior to yesterday's session.
Also note the 50 day moving average is now 1474. Why does that # matter? It is also the September 2012 high from which that breakout in mid January breached. So that is yet another obvious support…
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