We’ll be watching to see what, if any, fallout there is from the Hilsenrath article on Friday after the close.
The eminis are looking weak this morning. Recall that they reached the combination 1.618 and 2.24 extension Thursday, and are still down from that level.
Back test or breakout? Until we actually see a thrust back into the white channel, I’m assuming back test followed by a decline.
We’ll go short on the opening, but be ready for a breakout if/when.
The dollar fell out of the steep, narrow channel – but has yet to react much as it exceeded the previous Apr 24 high. Not much rationale from a harmonic standpoint to reverse after doing that.
It was the tag of that white channel midline that had me thinking Friday that we’d see a pullback when it reopened, but so far it’s not much of one.
The EURUSD is still showing weakness post the purple channel breakdown, but has still only retraced .618 of its rise from the Apr 4 bottom.
In the absence of a reversal — a distinct possibility given the latest falling wedge — we can expect at least .786 on the red grid (1.2850.) But, that might be all the weakness we see if the rising white channel holds.
The USDJPY hit both our IH&S and Crab Pattern targets on Friday, but still not much of a reaction.
SPX has put together a really messy topping pattern these past several days since its Mar 9 high a few days prior to our target date of today. And, it never quite tagged our targets of the yellow 1.618 at 1635.25 and the white 2.24 at 1637.15, let along the IH&S target of 1641.
It closed just below the .886 at 1633.65 on Friday, leading me to think there was a Crab Pattern extension in its future (a Bat Pattern would have required a Point B < .618.) All we’d need is a reasonable Point C, which I think we just got courtesy of this morning’s little sell-off.
The opening price just fell, so I’m going to try a long position this morning and see if it can rally. Going to take a stab here at 1630.
The key to the upside is breaking 1633.65 and then 1635.01. Key support on the downside is 1626.74 and then 1623.09.
UPDATE: 1:55 PM
SPX broke the 1535.01 high, and then backed off some. An .886 retrace of the last leg up would be around 1627.80 — not a bad neighborhood for a stop as it intersects with the red .25 channel line in the next hour.
For reference purposes, the bottom of the red channel is currently about 1617, and it intersects there with the next lower purple channel line (the .75) in the next hour or so.
SPX reached the yellow 1.618, so the Crab Pattern can be considered complete. Recall that 1635.25 has been on our radar screen since Apr 23 [see: CIW Apr 23] when it first appeared SPX might be setting up a Crab Pattern.
It was confirmed on May 3, when the 1597 high was topped. The reasons for a downturn then are just as valid today.
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