[Update 5:10PM: IYR:
I'm not going to bore you with all the bearish technicals that have been violated the last few days as there are a myriad of mainstream press stories already covering that angle. I seen three on Marketwatch today alone. For instance this is a good synopsis here http://www.marketwatch.com/story/markets-drop-was-straw-that-broke-bulls-back-2011-08-03?dist=afterbell of the overall bearish picture.
Also, the neckline of the H&S was broke, yada, yada.
All that stuff certainly matters but its wave counts we are interested in. And the best thing we can look for at the moment is the wave pattern from the 1356 high.
We have 3 waves down from the 1356 high. 1295SPX is where we have wave (i) marked. This cannot be breached if we get what looks like a wave (iv). Wave (iii) has extended about 1.90 times wave (i) so its a nice extension however we don't know if wave (iii) is even over yet. But it may be since we had quite a push off the low today.
Very tight acceleration down channel and the whole move smacks of "truncation" and an exhausted price collapse seems to give a lot of credence to that. Only time will tell but for now I'm interested in wave patterns and squiggles.
So we are looking at a few simple things here: 1) a break out of the acceleration down channel will help us determine if wave (iii) is over. 2) A bounce, and acting as resistance, the underside of the base channel which often marks wave (iv) price. 3) 1295 SPX - where we have (i) marked 4) market internals both up and down to determine if any bounces are of the dead cat variety or something else.