S&P 500 (US500) in recovery mode toward 4297

Although the index traded to the lowest level in 22 weeks, the selloff has stalled close to the projected support barrier of 4,109. This is the AB leg in a large Crab formation. We are currently trading within the limited BC leg higher.

The minimum requirement for this correction is a 38.2% retracement of the last decline. This level is located at 4,297.

The intraday chart highlights a bullish reverse Head and Shoulders is forming. On a break of 4,180, the measured move target is 4,259. Trend line support is located at 4,124. We have a 261.8% extension level located at 4,302 (from the 4104 to 4180 move). This is just below the daily 38.2% retracement level of 4,297.

Conclusion: although the long-term bias is bearish, I am looking for a correction to the upside. The prime support level is the right shoulder of the bullish reverse Head and Shoulders pattern. This is located at 4,124. Target levels would be 4,259 and 4,297.

Resistance: 4180 (neckline), 4259 (measured move), 4297 (38.2%)

Support: 4124 (right shoulder), 4104 (swing low), 2797 (Crab)