Which Way Past The Gravestone

Yesterday the S&P failed to reclaim the 38% Fibonacci level. Not good.

It got above the previous day high on higher volume. Good.

And it formed a gravestone doji on the daily chart, which in candlestick charting is "found occasionally at market bottoms." Gravestone sounds like it could go either way.

I think the S&P may have completed an A and B leg of an A-B-C pattern up to the 1450 area. Then I could see it breaking 1430.53 in a test of lower lows. From a market profile perspective (a horizontal volume chart) I do not see any support until the 1405-1400 area.

Here is why I think this is a big problem. 1422.38 is the last major high. If the market closes below that spot, it will have made a false break topside. On a monthly chart, the S&P has already broken above and below a trend line drawn from the 2011 highs. Closing below what was this year's major high for most of the year would be a major sign of weakness.

Could the S&P test 1400 and then rally to new highs? Of course. And this is what I still expect. But it will also be telling me that times may be about to change. I would want to see the strength of that rally (if it should happen) compared to the strength of the decline (if it should happen) for further clues.

For now, the market doesn't feel right.