The S&P 500 looks as if it has already turned the corner to the downside. The red trend line, which follows the March 6 rally, acted as support on 5 separate days before finally being breached on May 13. Five days later, it acted as resistance and on that day, price formed an bearish inverted hammer (pin bar). Conformation of the downside move will be seen as the index declines and closes below 875, which is just below recent support.
The big question now is how falling equity markets will affect Treasuries and the dollar. Under normal circumstances, the dollar trends higher against the better-yielding currencies while bond prices gain, but if there truly is a crisis of confidence in the credit rating of the U.S. we could see the opposite occur.
