SPX continued the push lower today, as expected based on what I covered during the weekend video. We slightly broke below last Thursday’s low, only by a point, but a new low is a new low. Price was pretty choppy after the initial morning drop, which indicates potential bearish price action in the future.

The key take away is that after matching the low from Thursday, we did not see an immediate V shaped recovery where price snapped back. We are continuing to hover towards the lows of the most recent downtrend.

The daily chart only confirms the shorter term price action as it continues to look like it is building bearish momentum. While the move today was relatively small, breaching to a new low on the daily chart for the current trend is an important factor. The current expectation is that the daily chart continues to push lower, even if it is not on every candle.

If the push lower continues tomorrow, then 7600 becomes the next likely target if/when 7630 is broken.

The downward channel we were tracking last week continues to prove that it is the current trend. We are still riding the upper band, which is the only thing about the charts that has me skeptical about further downside. While overall I do think more downside is the higher probability, the fact that price is sticky to the upper bound of the channel could mean there is some underlying bullishness in the market still.

As the old saying goes, if you knock on a door enough times, eventually it will open. I feel like the same logic can apply here. If we keep tapping that upper trendline, eventually it will break open and price would escape to the upside.

Obviously is that happens, then this channel is invalidated but for the time being it has been working pretty well. If you are short, then the best stop loss is right above the channel.

The upper key level is 7675 if the channel does break.

The lower bound of the channel and the lower end of the expected move align somewhere around Tuesday’s close and Wednesday’s open. If this pattern is truly to play out, then tomorrow we should really make a push towards the lower end.

VIX was up more than SPX was ‘down’ today. We had just a net 21 point down move on SPX, but VIX was up nearly 5%. If VIX continues to creep up, there is a chance for a nice flush to the downside.

Things are getting interesting which is the best thing we can ask for as traders.

Cautiously bearish is the signal.

Good luck!