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Apparently jumped the gun a little yesterday by getting out at the .618. The last 5 minutes saw prices ramp up through our entry point and our 1562.50 stop, but the basic thesis is still intact. We should see a small reversal either here or around 1570.
I went long last Friday at 1539.86 [CIW: Apr 5 9:33] after riding a short position down from 1573, but got cold feet at holding a long position into the close — especially after bagging a 20-pt gain.
The market has gapped open more often than not over the past few weeks — typically on a change of direction. This time I outsmarted myself and left several profits on the table.
I’ll play along on the long side and look for a loss of momentum at the .786 (1566.35) or the .886 (1569.77.)
UPDATE: 9:35 AM
We got a nice sell-off from the .786 retracement (1566.51) but have yet to flesh out the rising channel I’ve charted. Since it features such a steep slope, the bottom is rising rapidly — now up to 1560 or so.
The 6-pt drop to 1561.38 might suffice for a right shoulder on the IH&S Pattern, but it’s rather skimpy compared to the 12-pt left shoulder. And, it’s not even one Fib level lower than the .786 turning point.
A more balanced right shoulder would take SPX down to 1555 or so. That would mean a broadening of the channel, of course. But, that’s to be expected with such a steep, narrow channel.
Keep an eye on the previous high. A break of 1566.51 means this isn’t the right shoulder at all; it opens up the .886 at 1569.77. But, a reversal shy of there (and especially 1566) means we’re more likely to tag 1560 or even 1555 before moving higher.
UPDATE: 12:30 PM
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