The false upside breakout that was feared has now materialized, which could pose a significant problem for the market. In January, $SPX broke out above 4100, suggesting a return of the bull market, but the breakout only reached 4200 before prices started declining again. $SPX has now fallen below short-term support at 4060-4070, completing the false upside breakout scenario in my opinion. However, there is a small bullish possibility based on old-time technical analysis, which suggests that the resulting pullback may find support at the apex of the symmetrical triangle on the chart, which is around 3980. Nevertheless, the recent economic data has caused the market to drop below the apex, making this theory less reliable.

Resistance lies overhead from 4100 to 4200 and then 4300. On the downside, support exists at 3900, followed by the 3760-3850 area where $SPX traded for the last half of December. A breach of 3760 would signal the return of a full-fledged bear market. The equity-only put-call ratios are on or near sell signals, with the weighted ratio generating a confirmed sell signal due to its low level on the chart, which has led to significant market selloffs in the past. The volatility complex is weakening, with $VIX returning to spiking mode, indicating an oversold condition. Although this does not provide a buy signal, it may eventually lead to a new spike peak buy signal. The intermediate-term trend of $VIX buy signal remains in effect, which began in the middle of November last year.

In light of these developments, a core bearish position has been re-established, and while some may view the recent decline as normal February weakness, I believe that breaking key support levels and creating a false upside breakout suggests that it is more than just normal weakness.