In last week’s note, I discussed the crossroads that the Standard & Poor’ 500 index (SPX) faced after rallying into a resistance band that coincided with prior week’s highs at 2954, the widely watched 62% retracement (2934) of the 1Q decline and the declining 200-dma at 3002. Early this week the S&P broke below a key short-term uptrend level defined by its 15-dma (2828) and has been below that level for a good part of the past three days.

This suggests that a short-term correction is underway, one that many bearish pundits conclude was the end of a bear market rally. While that bearish view is understandable and can’t be disregarded, I continue to urge investors to keep an open mind.

After a 34% rebound a pullback from heavy resistance, bearish concerns should not be a surprise, but considerable support bands that remain intact. As I noted last week, first trading support is at the prior week’s lows at 2797, which coincides the 50-% retracement of the Q1 sell-off at 2792. The S&P did temporarily break below that level on Thursday morning, but it had pulled itself back above that key support by the close and remains above that level at 2864.

I believe that it’s too early to conclude the pullback is over, but so far the equity market is respecting ...

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