This week's price action ha dramatically changed the outlook for the S&P. The chart above is a 10 point box, one box reversal, point and figure chart showing this year's action in the cash S&P 500.
Contrary to my expectation the drop below 1240 was not quickly reversed. Instead the market dropped to 1110 (and to 1077 overnight in the futures) before stabilizing. The count across the top area projects a low around 1000 or a little lower. Recall that the July 2010 low in the S&P was 1010.
In the meantime another trading area has formed on this chart and projects a potential rally to 1240 or so. This would be a rally back to the lower edge of the top formation which is now strong resistance. The midpoint of the drop from 1370 to 1110 is 1240 also (red dash line which is drawn 20 points too low for visibility on the chart).
So I think the market is on its way to 1240 or perhaps a bit shy of that level. This rally should then be followed by a drop to 1000 or a little lower. If the market drops from 1240 by the amount of the first drop from 1370 to 1110 it would make its low near 980.