This is an update of my May 8th post.

Here’s the weekly bars chart of the S&P 500 through May 21st.  We see that after the dramatic support at the “flash crash”, price bounced up, turned over, and headed down to the S2 support curve.  This chart here shows what looks like a small break to the curve.  However, it was only below S2 for about 15 minutes at the beginning of the day on Friday the 21st, and on no other day.  After that short break, it zoomed above S2, and closed the day and the week far above S2.  I think that such a brief and relatively minor move is not worth identifying as a break of S2, so I’m saying that the market is till holding above S2, unless and until there is more significant and persistent dwelling below.

Before the open on Friday morning, I got an email from a very astute and colorful trader friend, who opined that the day was going to be an up day.   But, referring to the possibility of a significant break below S2, he said, “If we do tank the market then run for the hills with your pants on fire”.  That’s good advice which holds equally well going into this coming week.  Having been tested so dramatically, and held, S2 is now a very strong support level, so a real break below it could only happen if there is enormous force behind, meaning that the market would be likely to go much lower.

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