SPX continued to drift lower today, breaking both of the key levels to the downside that I highlighted earlier. The major takeaway is also that SPX managed to close below 7700, which for the time being can be seen as bearish confirmation.

The theme of the last few months has been bear traps, so take any bearish confirmation with a grain of salt. We will continue to follow the probabilities as they make sense.

The daily candle today is hard to see, but it sits right at the lower end of the expected move. Most of the move today came overnight and the intraday range was just about 25 points. It is one of the larger downside gaps we have seen in many weeks.

Needless to say, this is a pretty bearish pattern for the time being. If SPX continues to slip lower away from the lower end of the expected move, then the chances of a heavy downside gamma squeeze occurring rise with it. The set up for a swift and sharp down move is there, but so far we are just seeing a slow drift lower.

On the shorter timeframe, SPX gapped down below our box and straight to the lower end of the expected move. Most of the day was spent clinging onto this level before price ultimately slipped lower and closed the day basically at the lows of the session.

For the time being, SPX is outside of the expected move to the downside by about 10 points. This for now is interpreted as a bearish sign. It has been quite sometime since we saw a breach to the downside early in the week.

My takeaway is that the market still lacks momentum, especially for the current ‘trend’ which is lower. SPX has mostly just faded lower these past few days and there have been very few sharp selloffs during regular market hours. /ES has had some more aggressive red candles in overnight trade than we have seen on SPX during the day.

VIX is quietly rising, as it broke 16 today, but it is still pretty tame. The ideal scenario is that this quiet fade turn into a loud, sharp selloff where we see VIX spike and price really flush lower to some levels we haven’t seen in a while.

The market rarely gives us a perfect set up, but it would be nice to see one every now and then.

If SPX continues to break lower from here, then 7630 and 7600 are the next key levels to the downside. To the upside, we now have 7715 and 7780.

Good luck!