Charts I’m Watching: March 15, 2012

UPDATE:  12:35 PM

And, that’s a tag.  We might get a little throwover, but any meaningful rise from here is going to take some serious doing and should require a pullback first.

It’s coinciding with a Crab completion (and double top) on XLF – the financial ETF.

And a tag of the fan line off the May 2011 top and third test of the Crab completion amidst a back test for RUT.

And, a tag of the completed Crab target at tip of the completed Butterfly pattern for COMP.

And, even a Crab completion on AAPL.

I am closing my bullish positions and increasing my bearish positions across the board.

BTW, just saw a news blurb touting BAC, that it’s about to get a Golden Cross — where the SMA 50 crosses above the SMA 200.  Yes, it probably will.  But, it’s worth noting that the last time it did this was Feb 15, 2011 when BAC closed at 14.77.   Investors who bought on the news ignored the negative divergence and recently completed Crab pattern.

BAC got as high as 14.91 two days later, then promptly headed south — shedding 2/3 of its value over the next 10 months.

Today, as BAC tacks on another 3.7%, it’s worth noting that it just completed a Crab pattern on negative divergence.  As noted above, XLF also just completed a Crab pattern.

I have no way of knowing for sure, but I suspect BAC is at least ahead of itself, and quite possibly setting up another Golden Cross fake out. 

UPDATE:  12:20 PM

SPX closing in on our 1401.53 Crab pattern completion.  The RSI back test continues to hold, meaning we should get a decent reaction off those prices — though with tomorrow being OPEX it might be muted or delayed.

ORIGINAL POST:  1:20 AM

Haven’t looked at AUDUSD lately.  The small Crab has completed at the 1.618.  A .618 retrace would take us to about 1.069.

Looking at the big picture, this appears to me a completed wave 1, with a wave 2 to come.  The long term weekly shows a completed rising wedge with a completed back test.  I am predisposed to expect a breakdown of the equities market, and this scenario fits just fine.

The only potential hitch is that the price action since July 2008 looks like a big Crab, with the Point B at the .886 Fib in Nov 09. 

Bats extend to the 1.618 — not the 1.272.  So that would argue for a further price rise to 1.2234 — a higher high and break out rather than down from the completed rising wedge.  It would be analogous, IMO, to SPX completing that Butterfly to 1433.

Focusing in a bit on the pattern, there is some logic to it.  The large purple Crab pattern’s completion at the 1.2234 would correlate pretty well with the medium-sized Butterfly pattern (in red) that completes at 1.2125 (the 1.618) — although the 1.272 is another option at 1.1539.

So, I’m left with the option of believing the chart pattern or the harmonic pattern.  I suppose the prudent move is to play the upside for now, and watch for a break of the previous highs.  A move higher would no doubt mean the Butterfly is in play, and a test of the rising wedge’s trend lines and those 1.618 Fib levels is on the way.

It would mean a redrawing of the rising wedge, much like a rise to 1433 would entail for SPX.  Although it seems unlikely, given the USD’s strength, so did an SPX ramp from 1074 to 1400.  What was once widely assumed to be a wave 2 has turned out to be anything but.  Should be interesting to watch.

FOLLOW UP:

As curiousmind pointed out below, I was probably off base when I remarked that AUDUSD fulfilling the possible Butterfly/Crab to 1.2234 would be analogous to SPX fulfilling its Butterfly to 1433.  They’re in different time frames, though the price targets are potentially analogous.  I’ll explain more after the close.

Comments

Charts I’m Watching: March 15, 2012 — 5 Comments

  1. I haven't forgotten your question.  But, I've gone back to study the AUDUSD/SPX relationship and it's fairly involved.  For instance, there have been times when AUD was a safe haven currency when stocks melted down, and others when it moved with stocks.  I'll repost with the results over the weekend. 

  2. I see your point. However, from July 2011 to Oct 2011, spx dropped about 18+% but AUD only dropped 12+%, so that might affect the calculation a little. Anyhow it is just mind boggling for me to even believe AUD might one day print 1.2+, for such a small country that is heavily dependent on export to China. AUD at 1.2 will probably kill its economy..just my opinion

  3. Is this the best of the time or the worst of the time when things seem to be upside down?

    From zerohedge, "S&P; says that it is impossible that any economic improvement would bring back the AAA rating" and the stock market immediate response to that  is "jump up"

  4. PW, I have great respect for your TA. However, for AUDUSD to get to 1.2234, still 1500+ pips away, while the spx "only" rises to 1433 does not seem to make sense to me. It will take extraordinary exuberance to get the AUD there, if it does get there, I am guessing spx will be 1500+ at least. Hope you don't mind me being doubting Thomas…