S&P 500 Levels and Analysis 5/27/10

The downtrend line from mid-May held the SPY back on Wednesday and then the budding recovery completely fell apart.  We will look to the Tuesday afternoon highs near 116.50 as support on further weakness and there should be resistance found near 108.50, followed by 109.80 and the 200 day MA near 110.50  The market is searching for stability and there is still great uncertainty about which direction the next 5% move may come from.  One possibility is that the market is now creating the right shoulder of an inverse head and shoulders pattern, but it will have to  hold up and then break the neckline for any bullish implications.