S&P500 short-term: Interesting day ahead!

Ok folks, yesterday was interesting. All sorts of news driven volatility, or so it seemed! As you know by now, i've been reluctant to join the 'rapid drop to spx 1000' camp for a while, and the market has proved it's got some steam left. The main reasons i hesitated:

1. Shanghai Connection
2. Too oversold daily/weekly RSIs for a wave3 to be beginning
3. Rapid drop in bullish sentiment

I guess in this game, its important to ignore the news, keep an open mind and listen to the charts.

So what's ahead? Here's a daily chart of S&P500:



Quite self explanatory. Two things i'd like to point out: RSI +ve divergence & slight drop in volume during the descent.

Here's the 5-min chart:



Amid all the volatility, we seem to have managed an A-B-C within a nice channel. In my order of preference, these are the possibilities.

1. A breakout of the smaller downtrending channel, would mean a test of the previous highs.
2. A break of the lower line of the uptrending channel from Friday, means we're headed down in w3 to new lows.
3. A break of the upper BIG channel line from Jan, would mean that we're possibly looking at a longer corrective period, similar to Shanghai. I see this upper channel line as strong overhead resistance with the 38% retrace of the whole decline at 1084

Overall, i dont see a major breakout upwards (scenario 3) happening today. Gonna be a very interesting trading day. All the best amigos!