On February 9th, the first decline from 2873 was arrested two weeks later at 2533, slightly below the combined intermediate trend line from 1810 and the 200-DMA — a formidable support level. The trampoline effect sent the index rebounding to 2802 where gravity took over, and support was again tested on 3/23, with another decline to 2586. Another rebound could only reach 2575 before reversing. A third decline on Wednesday of last week was once more met with buying at 2593 on the rising support level, although this time, the index was a little slower to bounce, finally doing so on Thursday with a 50-point move to 2657.10 where it was stopped by the declining 55-DMA and reversed once more in the last hour of trading.  

Observing the market’s behavior over the past six plus weeks suggests that cyclical pressure continues to prevent a bullish reversal which could lead to new highs. Thursday’s action was particularly revealing, because not only did the index make a lower high, but in the way it was done. You’d think that a 50-point move denoted strength which should be followed by a consolidation period and more on the upside, but the market’s action suggests otherwise. When 2657 was reached, there was an immediate reversal of 16 points to 2641 followed by an 11-point retest of the high, and a close at 2642. And selling continued after the close, with the index dropping to 2632.50 and closing at 2634.9.

Perhaps this was simply cautious selling before an extended weekend, but most likely it suggests that over the next 10 days, the support level will be broken and the former low of 2533 will be retested. The driving force should be the same bottoming cycle which was responsible for the February 9th low. Of course, there is no guarantee that this will take place, but this is also substantiated by a P&F projection, thereby increasing the odds for this occurrence. We should have confirmation or denial by the market itself, next week.