SPX had some downside follow through from the bearish candle on Friday. While the day did not end at the lows, SPX still closed lower on the day, right at the 7200 level almost on the dot.

At one point, SPX was down over 50 points and it looked like more downside was coming. Of course, dip buyers stepped in and SPX recovered nearly half the losses. Closing at/above 7200 is a win for the bulls, and we now have a key level around 7175.

This is also the first time this rally since a major key level was retested after being broken. When SPX broke 7000, it went to 7100 without a retest. When 7100 was broken, it went to 7200 without a retest. And now, when 7200 was broken, we finally had a retest even though we nearly hit 7300 last Friday.

From the highs now, SPX has fallen about 100 points. Some would consider that a fair pullback given the strength of this rally. I will let you decide if that is fair or not. As it currently stands, dip buyers stepped in at the 100 point “correction” level.

The last 2 daily candles are bullish. We had a shooting star on Friday, followed by a red candle with a bigger body than wicks. Generally, this is a bearish pattern and theoretically we should see further downside tomorrow – at the very least a retest of the 7175 level.

If that retest doesn’t happen and SPX slingshots right through 7230, then I think we are headed back to the highs.

So, for tomorrow, 7175 and 7230 are the key levels.

It seems there might be a slight downtrend beginning on SPX, at least that’s what the short term charts are pointing towards. You can see the clear walk lower from the highs, followed by a little acceleration early today. If 7175 breaks, then the 7150 area would be next. The lower end of the expected move is at 7120 and if we even get there this week, I expect it to hold barring any horrible news.

It’s hard to be bearish or even believe any bearish price action in this market. We could get dip buyers at any second, or a tweet, that sends us right back to the highs.

I would say cautiously bullish is still the way to interpret this market. There is some very slight downside bias in the very short term, but if anything that should open up some more opportunities to go long.

AMD has earnings tomorrow and it is now a major player and potential market mover. At the very least, it will move the semiconductors which in turn will move the Nasdaq. This week isn’t anywhere close to last week in terms of earnings, but there are still a few big names out there.

Keep an eye out on those key levels and watch the price action closely if we get there. SPX is poised for a breakout, and it’ll likely come in the direction of the first key level break.

Good luck!