ORIGINAL POST 9:25 AM
SPX seems intent on reaching the next Fib level — the .618 of the 1433-1343 plunge at 1398.99 — before embarking on a significant B wave lower.
But, the top of the new purple channel that’s been guiding us lower since mid-September is up above at 1401-1403, so there’s every chance in the world that SPX will stretch to reach it. Plus, 1400 is just too tempting a target. Reversals are attracted to round numbers like moths to a flame.
The neckline of the H&S that completed back on the 7th is up at 1406ish and would mean a break out of the channel, so I’ll make that a secondary target and would look for a quick retreat back into the channel. Since the market’s aim here is to give the “appearance” of setting up a Bat Pattern that targets the .886 at 1459.56, a reversal anywhere between the .larger pattern’s .382 at 1393 and .500 at 1408 would suffice.
SPX just smacked into a bunch of channel lines in this area, and we should see a strong reaction before moving much higher. But, as we discussed Monday, the general trend remains higher to our forecast target. Any shorting here would be a short-term trade in conjunction with a long core position.
DX is closing in on the highest of our proposed Point C’s posted on Monday — the .382 of the 78.725 to 81.515 run since the Sep 14 low. This is also a .618 of the more recent 79.72-81.515 spurt and a channel line, so a reversal should be imminent. Remember, the overall trend is higher into the end of the year.
We’re looking for either a B subwave higher in the C leg (or the main B leg higher itself) of an A-B-C move lower to find a Point C for the Bat Pattern completion up at 83.06 to 83.62. It could be significant, but it’s a counter-wave in a counter-wave, so don’t get too hung up on nailing it precisely.
The EURUSD is closing in on the .618 retracement of its recent drop from 1.3138 to 1.2660 — as well as an important channel line. Look for a reversal around 1.2956 to coincide with SPX’s channel tag discussed above.
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