This week we saw a key psychological level in both the S+P 500 (1,800) and the Dow (16,000) get tested for the first time. So far it has proved to be short term resistance. The 60 minute chart above shows the recent price action.
After reaching 1775 we created a short term trading range of 29 points that formed an inverted head and shoulders pattern. This week we narrowly missed the upside target of that pattern at 1804 with a high of 1802.33. Downside support now stands between 1775 and 1773 as previous swing high and low pivots that would match the size of the biggest sell off since the lows of 1646 were formed last month.
Any continued weakness below support would break the rhythm of the market and possibly signal a change in trend. Given the technical structure of this current market and the potential of it being overextended I believe any such weakness should be taken seriously at this stage of the game.