Here We Go, Again

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ORIGINAL POST:  9:15 AM

Everything is going according to plan this morning, with each currency pair approaching their targets from last week.

The dollar is back to the white channel midline where exciting things happen.  The last squirt higher led to 84.595 on May 23, the day after SPX topped out at 1687.

This time, however, there’s a falling purple channel and the .786 Fib line to consider.

A close up reveals DX is also pushing up through the red channel .382 line.

While the EURUSD is approaching the .786 retracement of its rally from the 1.2795 low, the red channel midline and the bottom of the light blue channel.

A close up…

The USDJPY is closing in on our 101.59 target at the .786 Fib.

The e-minis, which back-tested the bottom of their purple channel at the white .500 Fib yesterday, took another run overnight but fell short — reaching only the top of the falling red channel .

We’ll see if SPX has enough juice left to take its own shot.  The key this morning will be pushing through the top of the red channel — at least intra-day — at about 1621.50.

UPDATE:  9:52 AM

SPX reached the red channel and is debating whether to push through or take a breather.

Recall, the cluster of targets we discussed last week includes:

  • the gap fill at 1629.22
  • the IH&S target at 1631.67
  • the red .786 Fib at 1634.10
  • the grey .618 at 1638.72

SPX came within 3 points of filling the gap yesterday, but ran into the same channel top and fell back to close at the bottom of the grey channel in the 5th such stop-clearing exercise in a week and the 9th close at or near the daily low in a fortnight.

It also tagged the .500 grey Fib (of 1687-1560) yesterday, where it (so far) reacted less than it did at the red .618.

So, the red pattern is assumed to be the one in charge, with a Gartley Pattern completion at the red .786 (1634.10) the next major Fib target on the radar.

UPDATE:  10:15 AM

A close up shows two smaller patterns also pointing to the 1631-1635 range if SPX can poke through the red channel top.  Note also the presence of the pink .618 here — contributing to the pause.

We’ve had a few pieces of economic news this morning.  First, the Fed is set to vote on Basel III this morning.  While significantly watered down, it could still be construed as a speed bump on the road to global financial domination.

Also, Census released the factory orders survey for May. The managed (a.k.a. seasonally adjusted) version came in slightly higher than expected, at +2.1% versus 2.0% consensus and 1.3% for April.

There is bound to be some concern that the slight beat undermines support for QE (does anything else matter?)

This explains why the less-managed, de-emphasized, and not seasonally adjusted number, at +5.4% month-over-month, is the better number for a change.  Remember the good old days when they lied to make things look better?

UPDATE:  11:25 AM

SPX pushed higher to the pink .786 and is now back-testing the top of the red channel at the .618.  This is where we find out if the upside case is still intact (and how accurately I drew the red channel.)  Since the .618 reaction was so tiny, we should expect more of a pullback — meaning a second/bigger backtest — at the .786 at 1624.

UPDATE:  12:15 PM

SPX is re-testing the red channel top after a more robust reaction at the pink .786.  Note that it has almost retraced to the purple 1.00 at 1620.07 — a nice level from which to base for the push higher today or tomorrow.

UPDATE:  1:15 PM

SPX is slipping toward the red .618 at 1618.34 — also the bottom of the red channel and significant lines on the smaller scale Fibs.  If it doesn’t find support here, the next lower level is a the white .75 channel line at 1616.  The RSI charts show support in this area.

We can expect a couple more shake out attempts before the next push up.  Keep an eye on the RSI channels for context on any move below 1616.

UPDATE:  1:40 PM

SPX slipping below 1616, so nervous types might consider a protective short position here.

The 15 min RSI chart, however, indicates there is support here.

UPDATE:  2:09 PM

It appears as though we’re going to retest the red channel line at the white .786 or 1610 or even the .886 at 1608.  I’m opening a protective short position here at 1615.


UPDATE:  2:29 PM

SPX getting a bounce at the .886, but it’s unclear whether the larger or smaller pattern is in control just yet.  The larger one from 1606 makes for a better fit from a Harmonic standpoint.

Its reversal at the purple .618 (and grey channel bottom) makes for a nice looking Bat Pattern to 1603.97.  But, the red .500 at 1607.26 is two rungs down from the .707 high yesterday at 1626.  I’ll take a stab at a long position here at 1607.23.  Stops at 1606ish.

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