As 2021 neared its end, the animal spirit that had become the stock market for much of the previous year was broken. So in the 1st quarter, the market itself broke. The recent fall was deep, but hardly brutal.
It could be the shot across the bow. The rally, which began in late March, will be closely monitored as it may be the relief rally that turns out to be a “sucker rally”. If this is the case, a lower-altitude is likely to develop in Q2.
The price is not considered to exceed 4600 by much, if at all. A rally beyond that point can still fail as a double top. To get the characteristic topping sequence where you see a high, big fall, lower-high before the big bear market sale, the market typically retains no more than 60-70% of the fall from the record high.
S&P 500 weekly chart
It can also take some time before the turn turns into a direct fall. The more extensive it is, the bigger the sale is likely to be. It is better for the markets to get their fall over in a sharp, painful way, not extracted topping sequences that ultimately lead to quick sales.
This may actually be a new leg higher to a new record height, but it seems that just as much as any time in recent history, the background is there for a great peak to develop. If this turns out to be the case, then the whole year should be unstable and offer traders plenty of options.