The trendline from the March lows was broken this week, but trendline breaks do not assure a reversal, they indicate a slowing of the trend. The SPY is still showing a weekly pattern of higher highs and higher lows. A break below the October low of 101.64 would create a lower low, but that would not be the ideal short entry as the market has already expended quite a bit of energy getting to these levels. A lower low followed by a rally which falls short of the 110 area would be of more concern, especially if the volume were to trail off significantly on such a rally.
The majority of earnings reports for the third quarter are now behind us and it appears to be a case of “sell the news”. This past week a lot of participants were reminded of the importance of a strong defense as the market started to acknowledge risks after what has been a great rally.