Charts I’m Watching: Jun 3, 2013

Friday’s close was uglier than we’ve seen in quite some time.  After completing several H&S Patterns, SPX should continue lower.  The question is whether or not it will first backtest any of the necklines — not necessary, but to be expected.  I’ll be looking for the right entry point.

SPX didn’t stop or bounce at any key Fib levels on its way south Friday.  It stopped going down simply because the market closed. So, any push lower will be cause to play the downside — regardless of the extent of the opening bounce.

Once SPX breaks lower, I’ll be looking for opportunities to play the inevitable bounces.  There will probably be several of them; so, swing traders and buy and hold types should stay focused on our ultimate downside target.

UPDATE:  9:40 AM

The index just moved into negative territory.  We’ll short here at 1631.60.  Charts in a moment, but the next potential Fib support is at 1626.54 – 1626.73.

UPDATE:  9:46 AM

Updated 60-min chart…showing the most likely operative falling channel in white.  This morning’s bounce on the opening backtested it, but it was less than convincing.  We’ll set stops at the midline (around 1633.50) just in case.

UPDATE:  9:54 AM

ISM survey and construction spending data is coming out at 10AM.  We’ll see if the market can push through the white midline on the news.  If so, the purple midline and yellow neckline are up around 1644-1645.

UPDATE:  10:02 AM

The data shows continued weakening, which should squelch the Fed tapering talk somewhat.

On the heels of the data, SPX just tagged our Fib target levels, so we’ll play the bounce here at 1627. Tight trailing stops starting at 1627.

Again, the key to sustaining any bounce will be a move back up through the white midline — now at 1633.  We’ll set our objective at 1644 — the purple channel (from 1343, Nov 2012) midline and the broken neckline of the largest H&S Pattern (in yellow.) It would also represent a 50% retracement of the move down from 1661.91 on May 30.

The ISM PMI Index came in at 49.0 versus expectations of 50.9 and last month’s 50.7.  The picture is fairly negative across the board, with employment clinging to a barely positive 50.1 reading.  In short, not the sort of report that would support the bullish economic forecasts being tossed about by the MSM lately — but, exactly the kind of report QE fans were hoping for.

UPDATE:  10:27 AM

The bounce reached as 1637.28 so far.  We just got a sharp downturn back to the white midline — likely just a backtest, a B wave in an A-B-C corrective wave to 1644ish.  But, any sustained push below 1633 and I’ll likely put a short position back on.

No sooner typed that than the index moved through the midline.  I’ll add an interim short position for a little deeper retracement to probably around 1628.07 – 1629.11 (.886 and .786 respectively.)  A move below 1626.89 and I’ll abandon the long position.

UPDATE:  10:36 AM

Just tagged the .786 at 1629.11, might still reach 1628.07.  I’ll set stops here on the short position just in case this is the full extent of the move.

UPDATE:  10:41 AM

Just took out the previous low, so full short at 1626.88.  We should get a bounce at the purple .25 at 1625, also the scene of the red 1.618 at 1626.54.  We came up just short of it earlier.

UPDATE:  10:47 AM

Taking another stab at a bounce here at 1626.   I’ll play the stops a little tighter this time.

Any move through 1625 is cause to resume full short, but I’ll likely pull the trigger a little quicker this time.  I’m disappointed to have missed the top with the last bounce — which didn’t even retrace .382 of the drop from 1661.91. This latest dip, which as mentioned actually tagged the red 1.618, also tagged the purple 1.272 and the purple .25 line.  So, if it can hold 1625, it could be a more substantial bounce.

But, it’s hard to justify from the standpoint of the falling white channel, which already backtested its midline.  So, either it won’t bounce much or the white channel is off a bit.  We’ll find out shortly.

UPDATE:  11:24 AM

Not much of a bounce at all.  Resuming full short here at 1625. Charts in a moment, including where I expect this downturn to finally reverse.

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