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S&P 500 Technical Update: What Happened?

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The best way to answer that question is by focusing on the charts and analyzing the technicals.

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The past few days have been a good reminder of why we define our risk when actively investing. Lots of folks are asking what happened today. Well, the best way to answer that question is by focusing on the charts and analyzing the technicals.

What many people don't realize is that emotion/sentiment shows up everyday in charts. In fact, price movement is one of the best indicators/reflections of psychology. So what happened?

After breaking down in April, the S&P 500 (SPY) formed a double bottom at 1358 and accelerated higher into the month's end. This bounce was stealthly and bullish sentiment quickly returned, perhaps too quickly. The goodness flowed into Tuesday, mind you, "Turnaround Tuesday." The reversal that day was a strong warning. It occurred at 1415, right underneath the broken uptrend line. Yep, another failed backtest. In fact, this was the third failed backtest. This has led to another waterfall of selling down to the crucial 1370 support line (2011 highs and March breakout area).

With uncertainty over French and Greek elections, the market is likely to remain volatile. The ball is in the bears' court now. It's their game to lose near term.



Editor's Note: Andrew Nyquist is an independent investor based in the Minneapolis area. This article originally appeared on his investing and economics site, See It Market.

Twitter: @andrewnyquist
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No positions in stocks mentioned.

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