The intermediate-term trading channel broke down last week and the next level of support may be the 200-day EMA, which is about 2% below where the S&P 500 closed yesterday.
                        
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Taking a longer-term look at the weekly chart and it appears we could be seeing a topping formation, but you may notice that the long-term bullish trading channel is still intact.  That means that we could just be in a correction within the longer-term bull market. 
                        
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

It appears that the 200-day EMA (on the daily chart) and the rising support line in the weekly chart, cross near the 1260 area, so that will be a very important level to keep an eye on as it could determine if this is a correction, or the end of the bull market.

The daily put / call ratios show that the dumb money is hitting a bearish level that we see near market bottoms, or at least prior to a relief rally.
       
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The smart money had been bearish for weeks, if not months, but the current 1.53 daily reading is well off of the 3.0 levels we saw from them several times earlier this year.

While we could see a short-term relief rally, the recent action does paint an ominous picture going forward.  This data goes back to 1900 and it shows that when the Dow Jones is down for 5 consecutive weeks, after hitting a new new 52-week high (May 1), 13 of the 15 times a new high was not made for 17 weeks or longer.  Only twice was a new high made within a 3 week period.
                              
                      Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk

The dashes indicate instances where it took more than a year to make a new high.

You can see that there were some very steep losses in several of those instances, with a third of them flirting with 20% declines. 

As I have been saying, the market is due for a relief rally, but how do we know if we should sell the rallies, or whether to hold on because we could be near a bottom? 

The 2 things I will be looking for is whether the 200-day EMA holds, and if a relief rally is able to recapture the 50-day EMA.  If either of these two fail, I will become a seller of rallies.

Thanks for reading!  We'll see you back here tomorrow.