ES has another wave down to go before we can consider the red channel fleshed out.  It reached our  target zone, but a little faster than expected.

And, it looks further along in doing so than SPX.

The point in arresting SPX above the 1.618 fib level at 1759.97 (of the drop from 1709 on Aug 2) is so the drop can be characterized as a small backtest rather than an important top of any kind.

Yet, the rising red channel continues to show plenty of downside potential if TPTB should decide to allow it.

Remember, chart patterns occupy space and time; this one looks like it has unfinished business.

Key price levels are 1752.50 for SPX and 1749.33 for ES. If those don’t hold, there’s potential for more downside — an intra-day overshoot of the channel bottom or a new channel as discussed yesterday afternoon.

I’m going to take a few minutes and update the bond outlook, as there are some interesting developments taking place there.