The dollar continues to settle, and is currently below the purple channel bound. DX tagged the .786 of its rally from Apr 16, so should reverse from there or, alternatively, the .886 at 81.956.
The USDJPY, which fell through the purple midline last week, reached the .618 of its last leg up and is likely to rebound to backtest the purple midline before correcting any further.
SPX needs to reach about 1596 to complete the latest IH&S in the works.
UPDATE: 9:35 AM
The opening surge took SPX above the red .618 of the move down from the latest tag of the TL from the 2000 and 2007 highs (red, dashed below.)
If SPX can maintain any downside momentum, that could suffice as a corrective wave. But, there’s no operative falling channel at the moment, so not much evidence to support that idea.
Remember, SPX bulled its way back into the broken purple channel on the 23rd — an unusual occurrence with bullish overtones. It damaged, and probably destroyed, the traditional H&S pattern (in red, above) that was setting up.
I’ll continue to believe in the ability of the TL from the 2000 and 2007 highs to limit the upside until proven wrong. But, the inability of the bears to seal the deal with that H&S is disturbing to the downside case.
Looking at the white harmonic grid above, the upside goal is obvious. But, it means breaking through that TL in what appears to be an already overextended market. The bulls shot themselves in the foot with the push above 1573. The yellow IH&S would have been much more believable if we’d seen a reversal to the bottom of the purple channel there.
Now, we’re looking at an insanely steep neckline that doesn’t exactly inspire confidence. Given the mixed signals, we don’t have much choice but to continue playing the swings — at least until there’s some sort of breakout or breakdown.
The next one is coming up at 1590.92 — the .886 of the drop from 1592.64 and roughly a tag of the purple .25 channel line.
SPX just tagged the TL (red, dashed) connecting the 2000 and 2007 highs. From a harmonic standpoint, this is bullish. But, this TL — which was only broken intra-day on the 11th — is technically very important. A sustained push through 1593.50 and I’d say we’re heading up to at least 1596-1601. But, I wouldn’t abandon my shorts until that point.
UPDATE: 12:25 PM
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