We’ve looked at the action in the S&P 500 every day this week. We might as well do it again today.

The stock market started out in favor of the bulls yesterday. The S&P 500 rallied 16 points on the opening. And it climbed well above the 2750 level – which it had to do in order to keep the bullish argument alive.

But like so many opening moves over the past two weeks, the rally was a “head fake.” Sellers stepped up and the S&P dropped to a lower low after the first hour of trading. That sort of action often leads to more weakness later in the session.

That’s exactly what we got.

Buyers disappeared in the final hour. Computer sell programs kicked into gear. The stock market closed at the low of the day. And the short-term momentum shifted back to the bearish camp.

Here’s an updated look at the 15-minute chart of the S&P 500 I’ve been showing you all week…

The index has clearly broken below the 2750 support level. It’s below the 2730 level at which I suggested aggressive traders could take a short position. And it’s approaching the support of last week’s low near 2700.

At the moment, there’s nothing really wrong here. The S&P has simply fallen back into a rather large trading range between 2700 and 2750. Since we’re in the lower part of that range, the bears have the momentum. But as long as the 2700 level holds as support, the bulls can still make an argument for higher prices.

If the S&P closes below 2700, though, that negates any bullish argument. The index will be headed lower – with an immediate target at about 2660, and a potential target of the closing low of the correction at 2581.

Best regards and good trading,

Jeff Clark

Reader Mailbag

Today, a reader writes in with a trade idea…

I read your Market Minute every morning. We often seem to reach similar conclusions.

Have a look at QQQ. Highly recommended by Morningstar, et.al, full of high-priced FAANGs. The bulls are riding it to the moon, right? But it appears to be painting a classic double top with a neckline at 150 – complete with diverging RSI and PPO on the weekly, daily, and hourly charts.

I bought puts on Feb 16. Too early. Gritted my teeth and held my position as the S&P struggled through 2754 yesterday. Did it roll over today (2/27/18)? Looks like a fine outside day reversal.

Cheers!

– Bill

As always, send in your feedback, trading stories, and questions right here.