SPX 2-Hour Chart

The brown lines show key S/R at 1956, 1951, 1949, 1940-1942, 1929, 1923-1924, 1910-1912, 1902, 1897, 1891 and 1884. Reference the SPX S/R missive from the weekend. A sideways channel is in play through 1929-1956 and 1923-1956. Price tagged the lower pink standard deviation line so a move back to the center band at 1942.39 is a reasonable expectation. This jives with the very strong resistance levels at 1940 and 1942 and would represent an area where price would either bounce, or die.

A potential bear flag pattern may develop if this sideways with upward bias consolidation continues. The first leg was from 1956 to 1929 so if the second leg starts at the 1942, receiving a spank down from strong overhead resistance, the target is the 1910-1915 level representing the congestion zone from late May. Note that the market top occurs with the RSI and stochatics remaining long and strong, hence, price likely has to come up for one more look at the highs again. Interestingly, on the down side, price bounced but the MACD line and money flow remains weak and bleak wanting to see another price low. So bulls need to see a matching or higher price at 1956 and bears need to see a matching or lower price at 1929. As Rodney King said, "can't we all just get along?"

The question would be which occurs first, the run higher or run lower? As long as price does not move above the strong 1942 R, the bears should remain in control and send equities lower. If the bulls punch up through 1942, they should take price higher for one last look at the 1951-1956 area and likely top out and roll over for extended downside. If price continues lower, a break of the strong 1923-1924 level is a game-changer that ushers in stronger selling. Since the upside desire of the RSI and MACD would still be on the table should this occur, a logical bounce point would be the 1910-ish area where price would then recover back towards the all-time highs to set up the top and roll over. Watch the RSI 50% level to see which side is winning in real-time.

What does all this mumbo jumbo mean? In a nutshell, as long as price stays under 1940-1942, tests of the support levels are on tap each providing a bounce or die decision at 1929, 1923-1924 and 1910-1915. Price should bounce from one of these levels and move towards the all-time highs again, at least back up to the 1940-1942 R level again if not the 1951-1956 highs, then stocks should top out again and develop a more sustainable and extended downside path. The expectation is for lower equities ahead but the bulls can muster up some additional short-term gusto (a few days) if they regain 1940-1942. 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 10:18 AM: It did not take long for the bulls to start running higher. The mergers and positive economic data create a happier mood than overnight. The SPX is at the strong 1940-1942 resistance area now. Time to bounce or die from here. What say you bulls and bears? The 30-minute chart remains with long and strong indicators show the SPX should tag 1942 R directly over the next hour or two where the bounce or die pivot decision will be made. A bounce move above 1942 leads to a test of the very strong 1949 R. A die move under 1940 leads to 1929 support.