Apologies for the late post this morning. I’ve been working on the mid-range forecast and the market was moving higher as expected. I wanted to get the next few weeks mapped out, as we should see some huge volatility and — with some help from our friends in D.C. — some juicy returns.
We’re getting the bounce we’ve been expecting after SPX finally caught up with the E-minis after a tag on the yellow .786 Fib line.
We had been aiming for a reversal at ES 1646/SPX 1649, so the markets overshot that just a little — but not so much that it derails any of the patterns we’ve been watching.
Both have reached our initial target area — a back test of the purple channel and tag of the top of their respective falling white channels. I would short here at ES 1672.50, with the understanding that it could just as easily be a small pullback on the way to 1683 (.500 retrace) or even 1693 (.618.)
I show the actual purple channel bottom at 1675.50 or so, and the yellow .500 is at 1675.75. So, don’t get nervous if it leaks a little higher.
Recall that when we adjusted our initial downside target to 1646.58 on Oct 3 [CIW: Oct 3] we didn’t specify a price level for the subsequent bounce.
Just dropped through ES 1666.75. Next stop is the .618 at 1663.71 — though there’s no real good channel support there. There are lots of other potential turning points, including my favorite from the 30th at 1657 and my new favorite of the yellow .786 at 1646.58.
Having the purple channel break down was obviously key to the the downside of the past several days. We almost always get a backtest of broken channels, so we’ve satisfied that requirement. And, the falling white channel was due for another tag on its upper bound. So, the intersection of the two was the logical spot for this rebound.
But, it isn’t a great spot from a harmonic standpoint.
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