SPX and COMPQ: Call It a Hit

In Friday's update, I wrote:

SPX is starting to get that "bear diagonal or bull nest" look to it, so it may be getting ready to move more decisively quite soon.

And I think we'll be able to call that a hit after today's open (assuming the drop in futures holds, which it should).  

For the past few weeks, we've discussed the possibility of a large expanded flat, that (were it to arrive) would likely take SPX back toward the low 5700s.  Today will be the first real test of that, with futures down significantly in the pre-market.  

COMPQ continues to illustrate the rough expectation of the expanded flat for both COMPQ and SPX, and the next test for COMPQ will be the red line.  I've drawn the blue path with a big bounce from red, but that's not required.  A small bounce or no bounce is an option, too, unless COMPQ is following the black path instead of the blue path (then it's an even bigger bounce!).  A sustained breakdown at red would tend to suggest blue, while a breakdown of the January low would all but confirm it (though of course, the flat could always get MORE complex and bounce again near the retest of that low temporarily, so be aware of that).

On SPX, the blue line is the next real test.

In conclusion, the market looks set to gap down significantly.  How it responds to the support lines on COMPQ and SPX will likely set the tone for the coming week.  Trade safe.