SPX Daily Chart H&S Gap

The red circle shows the critical gap that occurred as markets launched in February to move into the three month rolling top.  Price finally came down to fill that gap (red line) so this would be a logical place for a relief bounce.  The black line is strong support at 1310-ish so price can easily move lower to there as well, and since tech is leading the downside today, that may be on tap.  However, the TRIN is printing uber low numbers and NYAD printed -1900 today so these bolster the bullish bounce case. The CPC put/call at 1.2+ over the last few days also is agreeable to see a market bounce.

The H&S neckline at 1340 gave way earlier this week; this breakdown places the downside H&S target of 1260-ish in play (head at 1420, neck at 1340; target 1260).  A back kiss of the 1340 has not occurred yet. Thus, a possible outcome is a bounce now, or from 1310-ish (black line), to move back up for the neck line back kiss and then price would roll over once again. Note the indicators are all weak and bleak (red lines) wanting to see lower lows in the future. MACD histogram is the lone exception that would be agreeable to see a dead cat bounce right now. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 5/17/12 at 12:25 PM: SPX sneaks down to touch 1311, now bouncing back above 1315.

Note Added 5/17/12 at 4:10 PM: SPX closes at 1305. Next firm support is 1298. Perhaps FB will change the sour market mood tomorrow?  Watch the Spanish and Greek banks.