Around the beginning of May, we discussed the importance of a trend-line that extends up from the lows of March 14 and April 12. The S&P 500 tested this trend-line support on May 1, and then dropped through it on May 10. The chart below shows how this former source of support has now become resistance. We can see this trend-line serves as resistance on May 11, 14, and 15. In fact, this line extended up to 1514.54 on Wednesday. This was also the area of resistance between 1513 and 1515 that I have discussed previously.
There is no real reason to alter my anticipation of a further decline on the S&P 500. As I have stated previously, my primary expectation is for a decline to the 1475 area. This would represent the final wave within a larger three-wave corrective formation. If and when we do rally to higher levels on the S&P 500, I would anticipate that the March 14 to April 12 trend-line would serve as upside resistance to the ensuing rally.
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