Sep 5 is another of those days we pegged a while back as potentially “big.” You wouldn’t know it from the markets’ overnight action.
The USDJPY is still lurking at a key breakout or breakdown level. Though it did finally tag the white .707 exactly — not to mention the purple .618 Fib and the rising purple channel’s midline.
The EURUSD is still settling back after falling below the rising light blue channel .236 line and the falling white channel’s .786 line. Draghi isn’t doing much to help the QE bandwagon with his fiscally conservative comments this morning (no more money for Greece? Really, Mario?)
We took a core short position yesterday afternoon, thinking it might play out overnight. It didn’t, so odds are SPX will go up and tag the .786 at 1660.51 to complete a Gartley Pattern this morning (or at least close the gap at 1656.02.)
If it gathers steam, the pair of .382’s is at 1658-1659, the grey 1.618 is at 1662.44, and the purple .886 is at 1664.72 — which is also where I show the intersection of several channels.
SPX just closed the gap and tagged the purple .707 and the potential neckline (red, dashed.) I’ll hazard a short position here at 1657 if it doesn’t punch through.
Now that SPX has pushed above the neckline of the potential IH&S Pattern, it needs to close above it in order for the pattern to be valid.
It’s tough when SPX opens to know exactly which of multiple, tightly packed turning points it might select. These are all close enough that, if I’m wrong, the damage will be minimal — even if we didn’t use stops (banish the thought!)
But, we can look to other issues for confirmation. The e-mini, for instance, just tagged its .786 for a well-formed Gartley Pattern at the top of a small but decent-looking channel while also tagging the .786 of a larger falling channel.
Unlike SPX, it has definitely not completed an IH&S. It could go on and complete the purple Bat Pattern up to 1662.63 and, thus, tag the top of the white channel before the next significant downturn. But, that’s only 4 points away and could easily come after a test of the white midline down around 1640.
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