The buyers put up horizontal support at ST-S2 which has a pretty well defined horizontal counterpart (ST-R2). On ST-R2 is a bottom and three tops which to me makes it significant on a short-term basis. ST-S2 and ST-R2 form a small horizontal channel of which the SPX has now broken out. This breakout implies a move up of the channel width to SPX 835 which would fill yesterday's opening gap at which point there should be quite a bit of selling.
An SPX move to 835 also takes out ST-R1.
I've redrawn ST-S1 as the old line became ragged and noisy. Again, this is very common on intraday charts and doesn't bother me much.
So if we assume ST-R1 will fail,
and that it's still the upper boundary of a valid channel, the break would imply a move to 845 which is the 4/2/09 top.
I think this scenario is likely,
and I think some symmetry will come into play with the SPX producing a mirror image of what's to the left of the 'R' and '2' in ST-R2 in the above chart. Symmetry implies the SPX will move to 835 and fill one gap. Then the SPX should correct back down to retest ST-R1. Then move higher, to fill the 4/6/09 opening gap. If we can get those moves to occur an Head-and-shoulders bottom would then be confirmed (with neckline NL?) implying a further move to 860 which takes the SPX up to the primary resistance R1 (in charts below).
Whether this scenario is tradeable on an end-of-day basis for me,
depends on how closely my scenario plays out and where in that sequence the close occurs. I won't chase the SPX today based on an ST-R1 break. However, if the SPX were to close yesterday's gap, then drop back to retest ST-R1 and still be near that test at the close, I will take take that trade hoping to get some of an 825-860 move which is around 6.4% in Rydex Nova. It's unlikely that buy setup would occur today but not impossible. I also remain a buyer on a test of ST-S3 especially if we gap down to it, bounce off a bit and close reasonable close to (but above) ST-S3.
