Last  week, I suggested that SPX may be forming a fractal, with the first pattern about to be duplicated by a second, similar one. With the second pattern topping at 2353 and dropping down to 2406 last week, this seems to have been a valid suggestion, but whether the decline is complete or not remains to be seen.  We did see a good (even strong) bounce after the index found support just above the 2400 peak of early March 2017.  

The decline retraced slightly less than .382 of the distance from the low of the pull-back from the 2400 top (2322, 3/27) and the 2453 top, which could be one of the reasons we had such a good bounce. But we could still retrace a little lower to 2388 (50%) or 2373 (.618) before the correction is over, and if this is all the weakness we get, we could still make another high between 2480 and 2500, which would form the third pattern of the fractal – actually, the 5th wave of an ending diagonal.  

In strong markets, reaching a top seems to take forever and this is the reason some traders go short early and live to regret it.  In this case, another slightly higher high would be logical since both the projection from 2330 and the structure are calling for it.

Analysis: (These Charts and subsequent ones courtesy of QCharts.com)

Daily chart

SPX’s uptrend which started from 1810 in early 2016 has evolved into a broad channel. Since January 2017 the index has, with one exception, traded between the mid-channel line and the bottom of the first quartile of that channel. The last two minor moves have respected both lines with last week’s low finding support on the mid-channel line once again before bouncing. This time, it was reinforced by support at the 2400 high of January, and the 55-DMA, in addition to the .382 retracement mentioned above. There is a pretty good chance that we will retest that low and perhaps even break it. Should we do so, there are two lower levels of support that have been marked on the chart and either one could be the low of the correction if we do not stop at Thursday’s level.  Of course, if we keep on going past 2372, we would have to assume that we are already in an intermediate correction.