Well I was saying yesterday morning that the bears needed to reverse Wednesday's break up quickly yesterday and so they did. It's been a while since I saw a decent bull setup like that trashed as thoroughly and quickly as that was, and that is certainly food for thought.
After the break back under the daily middle band we returned to the original schedule that I outlined on Tuesday morning, which was that the move into Wednesday's close was a rally, to be followed by a new wave down resulting in a lower low, and so here we are this morning.
We now have a pattern for this move down from 1897 SPX, and it is a falling wedge. I posted it last night on twitter and here it is on the SPX 60min chart below. You can see that falling wedge support is currently intersecting the theoretical alternate rising channel support that I showed on Wednesday morning, and if this is just another pullback, then the obvious low would be at that intersection in the 1825-7 SPX area today. We could see SPX go lower, as falling wedges sometimes underthrow before breaking up, but the low would need to be a few points lower at most.
Falling wedges are 70% bullish of course, so classically the odds of a break up targeting a retest of the 1897 SPX high are 70%, and the odds of a break down targeting (in effect) the 1737 SPX low are 30%. Considering the overall background I'd be inclined to put that closer to 50/50 in this case. SPX 60min chart:
The close today is very important on the weekly chart as it is of course the weekly close. The weekly middle band is at 1830 SPX and bears want a conviction break below it today. Ideally 1820 SPX and lower but at least under 1825 SPX. SPX weekly chart: