SPX continued to push lower today, approaching the lows from yesterday. For now, those lows have held but SPX did close at the lows of the session and so far it seems like we could be opening even lower tomorrow.

The theory was that if the 7320-7340 area broke, then there was a chance SPX pushed towards 7250. The low today was 7265, moving one step closer to that 7250 level. There is a possibility SPX could gap down to this level, or even lower, tomorrow morning.

The daily chart is beginning to look increasingly bearish with each candle. The wick yesterday left a target for SPX to work towards if price headed back down, and it seems like that is what we got today. If that wick is broken, then the lower end of the expected move around 7180 becomes the next target.

We have 4 red candles in a row now, each with some incredibly ranged. SPX ranged over 130 points again today and was unable to sustain any rally. Yesterday we saw higher prices get rejected and today we saw the same. While the candle from yesterday also has a large wick to the downside, the wick to the upside cannot be ignored. Today’s candle only has a large wick to the upside.

Is buy the dip in danger? I would say maybe. I think in the short term, there could be a further dip. We have not seen any bottoming price action just yet.

The price action was a lot more choppy today, which leads me to believe that we haven’t bottomed out yet. Generally, we see markets reverse back to the upside in a sharp V. Today we had no indication of that and it was mostly choppy, with a slow grind lower.

The blue lines above show how the down move on Friday, and then yesterday, had more velocity and momentum when compared to today. The grey box shows the choppy grind lower we had today, similar to Monday in fact.

We pushed lower but there wasn’t any momentum. Ideally, we see another flush lower, with similar velocity to the blue channels, before we bottom out.

Obviously the market can reverse at any time, but right now there doesn’t seem to be any indication of that happening. The current lows around 7237 could end up being a magnet.

Until SPX flies through 7400 with momentum, I think the near term trend is sideways if not lower. We might need to squeeze out another low before we see a major reversal.

At the end of the day, we are in a traders market. Volatility is back and we are seeing 100+ point swings in SPX. There is money to be made on both sides.

Buy the dip cautiously, because this will eventually turn around. Right now, the ideal scenario to watch for is a sharp drop followed by an equally sharp recovery that can sustain upside momentum. If we get that, then I think we could be headed back for the highs.

Good luck!