Looks like I jumped the gun Friday, getting back in too early after scoring 15 points on the downside.  We have a substantial cushion, being up 626 points/45% since inception on March 22, but I really hate giving any of it back on a off-hours dump like this.

As I posted Friday:

If you didn’t get short ahead of time, the likely downside of this push is the small channel bound at around 1364.  I don’t think it would be worth jumping in at this point.  Of course, if we break 1360, it’s a different story.

Having a stop at 1360 doesn’t help much when the market gaps open down 20 points.  So, we’ll focus on where we’re likely to end up today.

While the upper bound of our rising wedge has been pretty clear, the bottom has so far refused to present a crystal clear picture.  Whether or not to include which tails has left the exact slope muddled, which means it’s difficult to anticipate the probable low this morning.

There is a trend line (yellow, dashed) in the daily RSI that indicates a bottom is already in, but it’s not a TL or channel line I’ve been following, so it warrants further study.

It caught the tumbles on Apr 10 (-28.25), June 11 (-42.25), June 25 (-24), July 12 (-19.75) and is thus skilled at putting a stop to big drops.  It has just been tagged this morning.

UPDATE:  9:50 AM

SPX just tagged one of the major channel lines we’ve had charted for many months.  So far it’s holding.

As we talked about Friday, 1360 was one of those key areas.  Losing the little channel we were following will require some rethinking.  At the very least, it’s likely to require a redraw of the rising wedge.  The most negative redraw I can muster is the dashed, yellow TL below.

It starts from the June 4 real body at 1278 (rather than the daily low of 1266) and connects with the June 12 low of 1325.  Any lower slope on the rising wedge bound would have only two points on it: the initial June 4 point and whatever today’s low/close comes in at.

If we redraw the RW lower bound as the yellow dashed line, there is a potential matching TL up above to create a less-than-perfect channel.  Either way you cut it, we’re at a very dangerous stage of the market, where the downside risk is considerable.  At times like this, I get very nervous about holding anything overnight.

Yet, as the RSI line above indicates, this could also be a sterling buying opportunity.  Here it is on SPX (marked as 4b) with the previous downside stops highlighted.

BTW, I’m removing the small white harmonic grid.  This morning’s plunge officially did it in when we established a lower price than the presumed Point C at 1345 on Jul 17.  This lower price would have to be the new Point C, which means that our presumed Point B was also no good.  We would have to move it to July 19’s 1380, which would be higher than Point X — a definite no-no.

So, instead of a pattern that reinforced the other harmonic patterns, this pattern is no more.  It doesn’t harm our other patterns, but it no longer helps.

I’ll move Point X to our new interim high of 1380.39 and Point A to this morning’s low of 1337.56 — a very speculative stab at it.  But, it’s a worthwhile exercise because it shows that the new 1.618 (1406) is adjacent to the big purple pattern’s .886 at 1404.

UPDATE:  2:00

The red channel line we discussed this morning has held nicely so far, and in fact provided the low of the day.  Since then, the market has rebounded 10 points and seems to want to inch higher.

Interestingly, RSI retreated from its tag of trend line 4b.  In fact, if the rebound continues just a bit more, we’ll have an RSI close back within the upward channel it’s been in since May 18 (solid purple).  This would be extremely positive for stocks, as the last cross-channel trip in its RSI was good for 65 points to the upside for SPX.

Besides putting in a bullish bottoming candle, a close above 1353.50 would leave our rising wedge lower bound intact — with no need to redraw it.  Even 1349 or 1350 results in very little revision.

More after the close.

UPDATE:  8:50 PM

DX came very close to completing several harmonic patterns today.  The relevant patterns in play can be seen below.

It’s approaching the .707 of the largest (yellow) pattern, tagged the 1.272 of the next largest (purple) pattern, tagged the 1.618 of the red pattern, nearing the 1.618 of the pale blue pattern and the 1.272 of the smallest Butterfly pattern, seen in the chart below.

DX is also approaching the price level of the last rising wedge apex — which is the next best thing to an actual back test to the RW itself.  No guarantees — because the dollar is suddenly the asset everyone wants to own — even if it costs them money to do so.

I often look to NYA to confirm (or not) what’s happening with SPX.  Today, NYA pretty clearly switched horses from a rising wedge to a channel — a very positive development, should it hold.

The RSI picture is also pretty positive, with the channel off the May 18 low and another TL (red, dashed) providing support.