Time to Break Below SPX 2040 Finally?

OK. Now that SPX has rallied for 2-4 days as expected (might need one more small push), what should we expect next?

Well, to me the current technical setup is very similar to the one seen on January 23rd/26th 2015 particularly when you consider both the Dow and SPX. Why?
1. Closing price sat near the 20SMA and 50SMA
2. The previous SPX short downtrend had closed at least 4 times below the 50SMA for the first time in months
3. The rally into the key SMAs managed to pierce them briefly by less than 1%
4. MACD was flirting with a back-test of 0 after previously having fallen below it
5. RSI was flirting with the 50 level after previously having fallen below it
6. The 200SMA, lower BB and previous low sat not far below

Of course, that similar situation led to a near-5% correction which today would equate to 2020-2040 (2115ish minus 80 to 100pts). Not counting the back-to-back SPX 4-day close below the 50SMA as a result of that situation, the other similar SPX situation in the last year including 50SMA setup was in early October 2014 leading to another 150pt leg down.

There are differences between January and now, but I actually think most of the differences are more negative. Transports have broken down to lower lows although I see a potential 7-month ABC concluding with an EDT C-wave with one more leg lower. Dow has broken below its previous cycle low in a short period of time. VIX technicals (RSI/MACD/pattern/SMA convergence) are more negative with a lower spring-loaded price. SPX/Dow divergences have built up. The previous Dow/SPX low, BB and 200SMA are all closer below now which one could argue might mean quicker support but after a lot of consolidation just above I'd argue it merely allows any down move to break through before it reaches selling exhaustion. SPX/Dow have possibly formed the right shoulder of a H&S formation with measured target of ~2005. The Fed has now basically told the world it will be raising rates sooner than later and employment and inflation data now reinforce them in recent months. The previous 2 similar situations I mentioned hung around the 20SMA/50SMA for an extra 2 days before really falling and then they fell 55pts in 2 days (then another 20 in 4 days) and 150pts in 5 days. Both down trends had at least 3 down days of 1.5% each.Current Greek negotiations are expected to conclude Friday for better or worse.

So what can we conclude from this information? Perhaps Greece news can stick-save the market yet again, but it's a double-edged sword and the next 6 trading days have the potential to be very volatile with Greek news, the Wednesday June 17th announcement and Friday June 19th OPEX. I must conclude SPX has high odds to break 2040 in the next week or two with my original 1960-2000 target not out of the question. A huge rally would likely follow retesting the old highs. I'll stick my neck out even further and guess 1 of 2 likely scenarios in the next week. 1) SPX falls hard (3%+) starting Friday/Monday into or just beyond the Wednesday FOMC announcement and then rallies back up near OPEX max pain which will have fallen to 2080-2100. OR 2) SPX fluctuates around 2090-2120 for another few days into the Fed meeting and then collapses hard into or just beyond next Friday OPEX. I think the Greece news should be out during SPX trading tomorrow one way or the other even if they merely extend (which the market would probably not like due to its uncertainty), so we should get a strong hint whether SPX plans to follow the January (and somewhat October) script or defy the bears once again. Even if SPX falls hard, I think the Transports EDT pattern, SPX/Dow rounding top, price-volume around 2100, negative sentiment and perhaps further Fed stalling should allow more all-time highs or at least a large retracement of them. Good fortune.