We’re set to get a nice bounce here at the bottom of the purple channel — as revised in last night’s last post.
The EURUSD has rebounded nicely as we anticipated, but has reached a point of resistance at the midline of the rising channel at a price level that’s proven difficult to exceed since early March.
The daily chart shows a bounce off the bottom of the purple channel as expected, but plenty of overhead resistance in the 1.33-1.34 range if it’s able to break through 1.316 or so. The .618 is up at 1.3341.
Remember, this decline is a backtest of the broken red .25 channel line. If the decline continues on track, we could reach that channel line (at about the .red .382) in very short order. It’s currently at about 81.74.
But, there’s no reason DX must retrace all the way to that line. It has already back tested the purple .618 — a reasonable pullback after the Bat Pattern that completed at our 83.616 target back on Apr 4.
The yellow midline on the RSI chart represents that dashed white channel midline cutting across the middle of the price chart above. A thrust up through it should accompany the next big equities dump. And, to my eyes, that’s the next major move.
Though SPX is safely back in the purple channel, it can’t go on forever — right? Even if our most bullish scenario plays out, there would need to be pauses of more consequence than the past two sessions.
In that pullback, SPX reached the .786 of the 1539 – 1597 rally between Apr 5-11 (1552.36 vs 1551.88.) The bullish case will consider that reversal as the full extent of the pause — a proper corrective wave that reversed at the bottom of a very well-defined channel dating back 5 months and 230 points.
If so, SPX should head up and push through the trend line extending from the 2000 and 2007 tops — currently around 1593.50 — on the way to its 1823 target.
The bearish case suggests we slap a Point B on that reversal and call it a Butterfly Pattern that targets 1523 or 1503.
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