Bulls will understandably be desperate to break the April peak of 1422. The daily charts would suggest that a break under 1325 would rule that out, and would open the door to an attempted break below the 1266 low.
Its time for an update on the scenario chart...
Sp, monthly 6yr
Summary
Best guess remains B. However, that is dependent upon a few things
1. Bernanke does QE3 before this year ends, at least 500/600bn, preferably 750/1000bn
2. No EU/Euro implosion
3. The US economy does not quickly slip into a GDP -2.0% recession in Q4. I could still envision the market rallying from any Autumn low, so long as the economy is largely holding itself together.
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As the last few months have ticked by, I'm increasingly more open to scenario C though, especially if the Fed's next QE fails to inspire all asset classes to ramp up into the end of this year. If the Fed does QE3, they better make sure its big enough to convince the mainstream that its significant enough to do 'something'. After all, perception is what its mostly about anyway.
So..lets see what the Fed does tomorrow. I personally don't expect QE3 tomorrow, but they may well overtly hint at it, and a brief post statement ramp could ensue for a few hours.
I still believe there is a very high likelihood we fall to at least 1225/00 in August, with VIX back in the mid 30s.
Goodnight from London