The rising wedge we’ve been following will have pretty convincingly widened to a channel if it’s able to close at these levels. We just reached the .886 of the latest dip, meaning we’re likely near the bottom of this latest move.
Note how the smaller purple channel is parallel to the larger one in which it resides. The only thing that troubles me is the price action around June 4. I don’t like leaving a few days out of the channel pattern; it feels like a bit of a cheat.
So, I think we have to at least be open to the idea of a drop to the larger channel line — in line with the June 4 low. Such a drop would be to around 1316.
Note that I’ve moved the red channel line down a smidge, lining it up with the Oct 27 high. It gives us a bit more room on the downside, today.
There’s also an apparent H&S pattern that’s been set up with the (now failure of the) latest move higher. In studying the pattern, though, the left shoulder and head are almost exactly the same height — 57 points. In a proper pattern, the head would be higher than either shoulder. But, sometimes these things bend the rules a bit, and that could happen here.
The key will be whether we can maintain the 1325.41 low from July 12. If so, we have a series of higher highs and higher lows – no matter how bearish things feel. If not, there are plenty of downside targets from which to choose — including the aforementioned 1316.
If you weren’t stopped out this morning, 1324 might make a good choice to place a stop, with 1316 the next stop.
UPDATE: 3:45 PM
SPX has formed a pretty clean-looking falling wedge on the 30-min chart. It’s not definitive, however, as it has the potential for widening/lower prices.
Likewise, VIX has nearly reached an important intersection of several channel lines and has, as yet, failed to retake a higher high than the presumed H&S right shoulder.