It had to happen – a price breakout down or a price breakout to the upside. Let’s take a quick look at the intermediate-term price triangle that formed in the S&P 500 – as I highlighted in last night’s report – and key in to levels to watch on the downside.

Click on image to enlarge!

Traders have been calling this push-up off the July lows as a Bearish Rising Wedge or – in Elliott Wave terms – an Ending Diagonal. Keeping it simple, you can view it as an ascending triangle or a price compression pattern. The implication is that price CANNOT remain trapped between the trendlines forever, as they are clearly converging.

The range narrowed to the 1,110 to 1,130 level – and this morning we had the highly expected downside break. Simple from a chart perspective.

Now what?

In the short-term, look for a potential support bounce off the key target of 1,090 – where we are right now – and beneath that, the 38.2% short-term Fibonacci retracement is 1,083… but that really doesn’t form a confluence with mugh.

Under that is the 50% retracement at 1,070 – again no major confluence. The 61.8% level does converge with the mid-July low and key 1,060 level – so it could be that sellers pull price to that target over time.

Keep focused on your intraday charts for new developments and I’ll keep you updated of any big change in structure.

For more daily updates from Corey, visit his blog at Afraid to Trade.com