Last week we identified the SPX 2007 high as the key level to keep an eye on, and as a litmus test of whether Bernanke's words are doing more harm than good.
As soon as the SPX dropped below that level, the FED started backpedalling and dragging out FED heads to soothe the markets. Although a similar strategy can be successful for only so long, desperate times call for desperate measures.
From a cyclical point of view, there is a clear historical precedent for what may happen if the stampede for the exit gets out of control:
The mid-week rally fizzled within the May 3rd gap zone, better visible on an intraday SPY chart:
Moving back to the daily SPX, this creates very clear pivot levels for the days ahead: bullish above 1620, neutral between 1576 and 1620, and bearish below 1576.