Charts I’m Watching: Aug 28, 2013

ES lost all its overnight gains and is trending lower.  Note the reversal off the falling yellow channel midline.  Will the PPT come to equities’ rescue?

It appears likely to reach the combination small Crab Pattern completion at the 1.618 and larger purple .618 at 1611 — perhaps even on an intra-day basis — if it can’t hold current prices.

Though, as I showed last night, the eminis are currently sitting at the bottom of the purple channel.  So, any venture lower stands a decent chance of reversing.

I’m staying short on the opening, but watch out for the possibility of the channels to trump the harmonic influence.

UPDATE:  9:39 AM

We’re either bouncing or backtesting. I’m going long here at 1630 (ES 1628) with stops at 1627.46.

The dollar has probably bottomed and is well on its way to completing a IH&S we charted last week.  Before, it was moving in tandem with equities.  Now, it will be the beneficiary of rising fear and uncertainty.

The USDJPY reversed its foray back into the falling white channel and is heading higher — perhaps an IH&S in its future as well?

For its part, SPX is clinging to the equivalent channel lines.  A failure to hold the purple line could easily mean a tag of the red 1.618 or purple .618 at 1620 or 1617 respectively.  A failure to hold there could mean the AB=CD pattern we discussed a couple of weeks ago to the purple .886 at 1577.

One middle-of-the-road scenario (acceptable to PPT) would be a quick drop to 1617-1620 and recovery to the purple channel line by the end of the day so as not to disturb the daily chart — which isn’t nearly as scary as the short-term charts would indicate.

The new, slightly less ambitious purple channel:

As I mentioned last night, I’ll be in and out today.  Should be back in about 2 hours.

UPDATE:  12:50 PM

Back online…  SPX has backtested the 1.000 of the potential Crab Pattern.  If it can stay above 1640, it should set its sights on the red midline or even top. Crabs often rebound from the 1.272 up to the .886 or .786 (1642 or 1645) before continuing down to the 1.618.

But, given the bounce on the new purple channel bottom, it’s quite possible the downside will be limited to this morning’s lows.  For that scenario to play out, there should be no more missteps.

The nature of this Crab makes playing it very difficult.  If the market’s to recover, we should expect a small corrective wave 2 somewhere along the way — after a 14 pt reversal would be logical.  But, it wouldn’t be clear whether a 7-10 pt reversal right now is corrective or heading down to the 1.618.

UPDATE:  1:18 PM

I’ll play the short side here on any push through the 1.000, but it might be only a short-term trade.  Even a garden variety .618 retrace would mean a drop to 1632 — 14-16 points round trip.

UPDATE:  2:30 PM

I have to duck out for the rest of the session.  I expect the little decline we’re getting now (thank you, Mr Market) to bottom out around 3-3:30 at the .500 at 1634 or .618 at 1632, then go on to new highs on the day — possible as high as 1650 at the red midline.

To be sure, the 1.618 is still very much on the table.   It just seems as though the urgency is out of the decline.  A reversal, or the calm before the storm?  I don’t know.  But, I like the looks of the daily RSI chart:



Charts I’m Watching: Aug 28, 2013 — 3 Comments

  1. Would the ~1.272 level area be considered the B point of the crab pattern in this case? (It doesn’t appear to have much in the way of other options for B in this instance, or am I missing something?)

    • A Crab Pattern Point B by definition is < .886, so we'd have to count the 5 pt bounce at 1656 on Monday. Not much, but this is a small pattern. The only reason I even chart it is to see if there's some confirmation for the larger pattern target — the .618.