H&S Breakdown

The SPX gapped down nicely on Wednesday confirming the head and shoulders pattern I touched on yesterday and have highlighted in the chart to the left. The market looks to have topped out at least in the short term at that 930 SPX level that I predicted over a month ago.

Today we came back to the 20 day ema which was at 881. I have drawn in a fibonacci retracement from our swing lows down at 823 to the highs near 930 on the ES futures chart and a 50% retrace brings us back to 875; which coincidently was the crucial resistance we broke out of recently. I would expect some decent support at this 875 level in the coming days and if we lose it then we most likely should get to the 61.8% retrace level which sits at 863, as shown in the chart. Below that and 850 is a sure bet but lets just see how the market reacts to 875 for now.

Thursday the pivot is 887 on the ES futures and that should pose as tough resistance intraday. I fully expect the market to test that 875 mark below us especially since there appears to be a gap from a few week's back at that area. So with that said the bias for the end of the week is down but don't be surprised to see the levels just below hold strongly.