The S&P500 fell sharply last week from 1597, finding support around 1536 from where we have seen 20 point rally on Friday. Notice that market reversed from swing lows made in early April that caused a recovery towards the 1565/1575 Fibonacci resistance area. We believe that this pull-back represents a wave 2/B, as we labeled a decline from 1597 as a leading diagonal in wave 1/A.

Traders need to be aware of a new sell-off on this market into wave 3/C through 1530 area. A broken trend-line connected from December 31 can also become a nice resistance in wave 2/B around 1565. We also expect to see a top formation of a right shoulder of a bearish H&S pattern at the same zone. Meanwhile, invalidation level remains at 1597, so as long this level holds we will look lower.

Analysis by: http://www.Forexpros.com - Written by Gregor Horvat Forexpros

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