Note to members: I posted some good charts on VIX early this morning, so check those out if you get the chance.
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The futures are down about 5 points this morning, but might have found support at a channel line and .500 Fib after being turned back by a .618 Fib yesterday. If they bounce back, however, is it just a backtest of the purple channel from last November?
SPX, having squandered an excellent chance to complete an IH&S that would take it up to backtest its broken purple channel, is fleshing out the grey channel we theorized would take over. It just bounced on the .25 line – but after slipping through the key TL (red, dashed) from 1994/2002.
UPDATE: 9:55 AM
UPDATE: 10:00 AM
As we discussed in the members section yesterday afternoon, a flag gets us back to the .786 or .886 Fib just as easily as the two H&S patterns would have — a little more easily actually.
But, first, SPX will have to slog back up through the TL from 1994/2002, bust out of the falling red channel and deal with the bottom of the purple channel — meaning either a brute force assault (a.k.a. ramp job overnight) or a slow choppy slog higher until the channel bottom reaches the .786 — around mid-July.
If you’re a bull, you have to be a little concerned that yesterday’s moon shot came within 8-12 points of the purple channel but couldn’t close the deal. If you’re a bear, you’re positively giddy — but know how quickly that feeling can pass. Me? I’m a Gemini.
UPDATE: 10:44 AM
SPX has reached the red TL from 1994/2002 again. A little .786 pullback from 1610-1611 to the intersection of the grey channel bottom and red midline (1603ish) would make for a nicer looking flag pattern. A failure to retake it would be a sign that we’re falling back to 1586-1593 (always use stops!)
UPDATE: 11:15 AM
SPX poked up through the TL easily enough, and just tagged the grey midline at 1615.64 — very close to a .786 retrace of yesterday’s high.
If that sounds a little nebulous, it’s because we’re at another one of those lovely turning points. I’ll explain further in a moment.
Just want to point out there’s a potential little IH&S in the works that, if it plays out, points to 1631 (a shadow of the purple channel bottom.) Ideal right shoulder would be a backtest of the red TL around 1610.
This makes stops on the short position around 1616 a very good idea.
Okay, big picture stuff… the rise from 1560 to 1620 was roughly a .618 retracement of the drop from 1654 to 1560 — the red pattern below. When we get a significant reversal at a .618 point, it opens up the possibility of a Gartley completing at the .786 (1634 in this case), a Bat at the .886 (1643) or a Crab at the 1.618 (1712.)
Each of those possibilities carries very different implications for both price and time, so we’ll examine them in the context of what currencies and VIX are telling us.
continued for members…
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