FOMC minutes will be released at 2PM ET today.  Some see the minutes as an opportunity to get a behind-the-scenes look at the real Fed agenda.  I see them more as a tool the Fed uses to communicate what it wants the market to hear.

Bernanke has already stated, and reiterated, that some tapering will likely begin “later this year.”  From June 20:

“If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year…

…we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.”

SPX traded at 1654.19 on the 18th, and subsequently fell more than 100 points on fears of tapering.  Yesterday, it traded as high as 1654.18.

It is possible that the “random walk” of 500 stocks — reflecting the collective wisdom of both bullish and bearish investors, discounting the present value of future cash flows, etc. — just happened to come up one penny short of the previous high.

But, I think it’s more likely that TPTB have a very specific game plan in mind.  The trick, as always, is to figure out what it is and trade accordingly.  I’ve tried decrying the lack of orderly trading and transparency — it doesn’t help at all and is not very profitable.

Some of you might have noticed the following chart in our May results post.  It shows the effects of the gaps up and first hour of trading following ramp jobs in the overnight markets.

In May, for instance, the S&P 500’s net gain of 35 points (+2.2%) was dwarfed by the 100 points gained via ramp jobs.  Without them, the month would have shown a 65-pt, 4% loss.

Between Apr 18 and May 22, SPX traded in a very steep, very narrow channel (below, in red) that carried it from 1536 to 1687 in one month.

Looking at it closely, we can see that 120 of the 151 points came in the first hour of trading following ramp jobs.  The total rises to 164 points if we include the first two hours of trading.

Aside from punishing those who don’t trade the futures markets, this obvious bull market engineering should be a reminder to all that there is always an agenda.

*  *  *  *  *

Since SPX closed within the purple channel dating back to November 2012, we should expect some positive follow through.  But, the momentum was turning negative in yesterday’s closing minutes — and SPX likely would have closed back below the channel if someone hadn’t pumped it at the close.  Things aren’t always what they seem.

We laid out the different scenarios and targets in yesterday’s post.  Today will be about reading the tea leaves and following along — whatever the market has up its sleeves.

Since the market is all about fake-outs lately, I assume that the manner of yesterday’s close indicates declines ahead that the MM’s didn’t want the average Joe to see coming.

I’ll short any breakdown of the rising wedge and go long on any breakout — trying to stay nimble enough to change positions when the market changes its mind — especially around 2PM.

UPDATE:  10:18 AM

Getting a little breach here…  I’m tempted to take a short position at 1651, but this is probably the first of many fake out attempts.  We’ll know it’s something more if it back-tests the wedge and breaks through the purple channel bottom — currently at 1647.50.

Note that the bottom of the purple channel intersects with the .75 line of the rising red channel and the .75 of the falling white channel at around 1647.75 in about an hour.  This could be a significant time & price — just as the previous intersections were.

UPDATE:  10:46 AM

I’ve fine tuned the purple channel and like the possibility that this is a back test of the bottom.  I’ll try a long position here at 1649, with stops just below at 1647.50.

The red channel top is up at 1657 and the .786 is at 1660.03 — so decent decent risk:reward.

A break below would likely target 1638.72 — the .618 Fib retracement of the 1687 – 1560 drop.

From the You-Can’t-Make-This-Stuff-Up Department, Jack Lew is lecturing the Chinese on cyber-espionage:

Lew said that for economic relations between the two countries to succeed, U.S. firms had to be “preserved and protected from government-sponsored cyber intrusion.”

In a completely unrelated story, the manhunt continues for Edward Snowden — the former NSA contractor who alerted the world to the enormity of America’s cyber espionage program.

Also this morning, Zerohedge reports that the NSA has embedded its own code — known as Security Enhancements for Android — in the Google Android operating system.  Android shipments totaled 162.1 million units in Q1 2013 — 75% of all smartphones shipped.

Eventually all new phones, tablets, televisions, cars, and other devices that rely on Android will include NSA code, agency spokeswoman Vanee’ Vines said in an e-mailed statement.

Thank God for the NSA.  At least we won’t have to worry about those sneaky Chinese!

UPDATE:  1:55 PM

The market has essentially gone nowhere since this morning’s first posts.  SPX is sitting just below 1651.

My expectations: if 1655 is broken, look for 1660 or 1672.  Downside, a break of 1650 leads to 1638 or 1623.  FOMC minutes should be released in a few minutes.

UPDATE:  2:08 PM

The minutes are available HERE.

UPDATE:  2:15 PM

My initial take is that this represents no dramatic change from the latest statements by various Fed governors or the Bearded One himself. The biggest news is explicit discussion of support for an end to QE by the end of the year.

Half the voting members would support ending QE late this year, while “many” others said it would need to continue into 2014. Participants also described their views regarding the appropriate path of the Federal Reserve’s balance sheet.  Given their respective economic outlooks, all participants but one judged that it would be appropriate to continue purchasing both agency MBS and longer-term Treasury securities. About half of these participants indicated that it likely would be appropriate to end asset purchases late this year. Many other participants anticipated that it likely would be appropriate to continue purchases into 2014.

Several participants emphasized that the asset purchase program was effective in supporting the economic expansion, that the benefits continued to exceed the costs, or that continuing purchases would be necessary to achieve a substantial improvement in the outlook for the labor market. A few participants, however, indicated that the Committee could best foster its dual objectives and limit the potential costs of the program by slowing, or stopping, its purchases at the June meeting.

I suspect that using the word “end” rather than “taper” will attract some attention.

continued for members…

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The currencies played out exactly as we expected overnight — but the equities ramped anyway.

The eminis are showing +10 right now and are likely to test the Jun 19 high after a miniscule reaction at the .886 Fib level.

In so doing, ES have pushed up into the purple channel.  With the FOMC June minutes released tomorrow, it appears to be the only play the markets have: ramp as far and as fast as possible before BB reiterates the Fed’s intention to taper if/when.

I am a bit surprised TPTB don’t try to build more of a base for a meaningful rally.  I guess this falls into the category of “get while the getting’s good.”  Far be it from me to stand in the way.

A 10-pt pop on SPX doesn’t run into any resistance other than the Jun 18 high, so I’ll play along on the long side on the opening, but watch for any pullbacks near 1654.19.  The gap from Friday will apparently remain open for now.

A 10-pt pop also leaves SPX in no man’s land: 10 points shy of the .786 at 1660.03, but 5 points over the line separating the purple channel from reality.

UPDATE:  10:05 AM

The 10-pt ramp job has been pared back to a 5-pt rally that’s stuck at the purple channel’s lower bound.

I’ll go short here at 1646 on the off chance that we’ll get a back test of the white channel top and or gap fill down to 1632.  Tight stops on this one, though, as it might just as well be a back test of the broken purple channel bottom.

From a trading standpoint, this is a bit of a quandary.  If you expect the FOMC’s minutes to boost the market, the .786 and .886 of the 1687 to 1560 decline are just overhead to provide resistance at 1660 and 1672 respectively.

If you expect them to disappoint, we’ve already pulled back from the purple channel incursion and, despite what intra-day height we reach, are likely to close at the channel boundary.  What more is there?

I suspect SPX will remain in a trading range for the next 24 hours — with current prices pretty well indicating investors’ current expectations re the Fed.

If this situation seems vaguely familiar, it should.  On May 21, the market rallied on expectations that Bernanke’s testimony the following day would be bullish.  One of the biggest ramp jobs in recent memory followed that night, and SPX shot up 17 points in the opening hour on May 22, only to provide a great shorting opportunity at 1687.

The forecast I posted on the 21st called for a drop to 1600 in early June, followed by a .786 retracement to 1670 and a subsequent drop to 1560 before a rally to 1823 around the end of the year.

Here are the charts from back then [see: If It’s Tuesday]:

We got the drop to 1600 right on schedule.  But, instead of rallying to 1660 next, we got another leg down to our 1560 target two months ahead of schedule.  Now SPX is working on that retrace to 1660.

To me, the wave picture is a mess.  At 1560, we had a nice little A=C corrective move down from 1687.  A push above 1654 would certainly help confirm that 1560 is all the correction we’ll get anytime soon.

But, there are three potential problems that need to be overcome first:

1. SPX dropped out of the purple channel back on Jun 19
2. the currencies are positioned as though a correction is imminent
3. the white channel bottom was never tested

I’ll take the next hour or so to review the big picture.

continued for members… (more…)

NDX lost 83% of its value between 2000 and 2002.  Its 2007 high came close to retracing a Fibonacci 38.2% of the losses before the next crash lopped 56% off the top.  Now, as it tags one important Fib level and approaches another, is there another big correction around the corner?

What does it mean that the latest red channel — parallel to the one formed off the 2002 low — just broke down?

The major channels generated by NDX’s 1994, 2000 and 2008 lows are shown below in white and purple.

NDX just nudged the purple midline, and is closing in on the white .382 channel line.  But, the placement of very long-term channels is subject to interpretation/error, and being “just a little off” can lead to large errors in forecasts.  So, we look to other indicators for confirmation.

A large Crab Pattern (in white) dating back to 2007 recently completed at 2993 — very close to where the purple midline crossed.

The May 22 high of 3053 would be a relatively easy “top” call if not for the fact that the yellow IH&S target is still a few points away at 3100 and the .618 retracement of the drop from 4816 to 795 is 227 points away at 3280.

NDX reacted nicely at 3053, shedding 228 (7.5%) before beginning a rebound that, like SPX, recovered slightly more than .618 of the losses.

So, top or not?

continued for members… (more…)

The eminis reached a natural turning point overnight, completing a Bat Pattern on the purple grid… …and tagging the .618 retracement of the drop from 1685 to 1553 in the process.

SPX should follow suit — meaning a very good chance of a pop and drop in our target range from last Wednesday [see: Fireworks Ahead.]

That’s why I won’t be surprised if, while no one’s watching on Friday, we reach 1638 — the .618 of the 1687 to 1560 correction.

A close today at 1618  — .618 of the decline since 1626 on Monday and the intersection of the falling red channel top and rising white channel midline — would set up a nice looking right shoulder targeting the downside.

But, it would also set up a Crab Pattern with a 1.618 extension at 1640.23, less than two points from the grey .618.  Something to think about…

UPDATE:  9:33 AM

That’s good enough.  I’ll short here at 1640, with stops around 1645.

There’s at least a 50:50 chance of tagging the .886 at 1643.49, but we could also see things unravel rather quickly with the .618 tag.

This morning’s push completes the long-awaited backtest of the purple channel — depending on how it’s drawn.  I’ve revised it hundreds of times since SPX 1343 eight months ago.

It’s important to remember that backtests don’t always complete as precisely as we’d like — even when the channel is perfectly drawn.  That’s why we use the harmonic patterns, and other indicators to confirm.

Note that USDJPY has reached our target from Jun 28:

USDJPY is pushing up toward the .786 retracement of its drop from its May 22 103.72 highs. Conspicuously, the intersection of the white channel midline and the .75 line of the yellow channel I show taking over is at that price (101ish) on about July 4.

continued for members… (more…)

FTSE (represented here by UKX) overshot a double-top by about 2% on May 22 — completing a Crab Pattern in the process.

It fell back to test the .786 at the bottom of a well defined rising channel, and has since retraced almost .618 (655.01) of that slide.

If it’s able to penetrate 674 again, the yellow 1.272 is waiting up at 763 (late Oct, early Nov.)

If not, there are multiple H&S Patterns waiting in the wings that could usher UKX down to the mid 500s — starting with a bounce at the channel bottom around 610 (Jul 25.)

The eminis completed a Gartley Pattern based on the Jun 19 high (purple pattern) overnight that saw a second tag of the purple channel bottom (from 1343 in Nov 2012.)  This pattern could rule the roost, though with the breakout of the red channel the reaction could be limited to a backtest of that pattern.

With the .500 reversal on the white grid on Jul 1, a Bat Pattern at 1670 remains a possibility down the road.  As last night’s tag #2 illustrates, the backtest of a broken rising channel doesn’t always mean lower prices ahead.

The dollar is at a critical point — having reached the top of the purple channel and pushing through to the top of the yellow channel.

I’ll go long on the opening, but don’t be surprised if SPX doesn’t simply tag our target and reverse.

UPDATE:  09:32 AM

SPX just pushed through Monday’s high, but tagged the midline of the yellow channel and should reverse here at 1627.  I’ll switch to short and see how much of a retracement it can put in.  Perhaps 1620-1621?  Stops at 1627ish.

This is likely a backtest of the broken white channel midline, so higher prices are likely in store for those who are patient.

Note that by topping Monday’s high, SPX just cleared two bearish short-term harmonic patterns from the chart.  The prominent patterns left on the red grid (from 1654.19) are the Gartley or Bat Patterns at 1634.1 and 1643.49 respectively.

On the grey grid, Monday’s high already retraced .500 of the drop from 1687 to 1560.  So, the next significant target is the .618 at 1638.72.

As we discussed when we went long Wednesday at 1605 [see: Fireworks Ahead]:

That’s why I won’t be surprised if, while no one’s watching on Friday, we reach 1638 — the .618 of the 1687 to 1560 correction.

A close today at 1618  — .618 of the decline since 1626 on Monday and the intersection of the falling red channel top and rising white channel midline — would set up a nice looking right shoulder targeting the downside.

But, it would also set up a Crab Pattern with a 1.618 extension at 1640.23, less than two points from the grey .618.  Something to think about…

A push through 1629ish negates the potential H&S pattern setting up (in red) as the right shoulder would exceed the head.

UPDATE:  10:05 AM

I think that’s probably going to do it for the pause.  I’ll go long again here at 1621 with stops at 1620ish.

A drop to 1615-1616 would better establish a backtest of the red channel and also a right shoulder for the IH&S in the works (targeting 1650ish.)  So, set your stops at what works for you.

UPDATE:  10:15 AM

Just fell through our stops, so short again at 1620 for a likely trip to the purple channel bottom.

All SPX needs to do is loiter here just long enough to make the IH&S obvious.  Though, it could also decide to deal with this morning’s gap (1615.17?) while it’s in the neighborhood.

UPDATE:  10:24 AM

That’s good enough for me.  Back to a full long position here at 1614.77 with stops at 1609ish (.25 of white channel.)

Here’s a better look at the IH&S I mentioned in the 10:05 update (in purple below.)  Note that this morning’s gap is no more…

UPDATE:  1:35 PM

The downside risk, BTW, is that the bottom of the rising white channel (currently about 1600) still hasn’t been tested.  I’ll raise my stop on the long position to 1614ish.

I’m changing the color of the rising white channel to red, since it exactly matches the slope of the red channel that set up in the big rising purple channel from 1343.  It tacked on 151 points between Apr 18 through May 22 — about 10% in one month.

It first established its bottom at 45 points higher than the 1536 bottom after a 16 point pullback from the initial 61 point rise to 1597.  This morning’s high was 67 points higher than the 1560 low, and a 16 point pull back would put it at about 1611.

Applied to the current chart patterns, this would probably translate into a backtest of the broken red channel and/or a tag of the bottom of the rising red channel on Monday.  If the market simply kills time for the next 3 hours and closes at or near the neckline (1628.45?) of the nearly completed purple IH&S, this is a very reasonable scenario.

The current purple channel, IMO, is a bit of a stretch.  It has only held the job for a few days — since multiple predecessors were fired for incompetency.  There’s no reason to believe this one will last any longer.

UPDATE:  2:25 PM

SPX just closed the gap from Jun 19.   I’ll likely close my long position here and go short on the first sign of serious weakness.  But, if it can push through, the red .786 is just ahead at 1634 and the yellow IH&S target at 1632.

I’ll keep an eye on the USDJPY, which at only .50 below the .786 retrace of 103.72 to 93.78, is probably a very good indicator.  From the 12:13 PM update to the Jun 28 post:

USDJPY is pushing up toward the .786 retracement of its drop from its May 22 103.72 highs. Conspicuously, the intersection of the white channel midline and the .75 line of the yellow channel I show taking over is at that price (101ish) on about July 4.

UPDATE:  3:15 PM

For anyone who hasn’t yet had the chance, yesterday’s post regarding May 2013 has some interesting data regarding the ramp jobs that have become endemic over the past several months.

I knew they were responsible for much of the market’s upside lately.  But, I hadn’t realized they were responsible for all of it — and then some.

The trend continued in June, though I haven’t tallied the total yet.  Bottom line, there is a whole lot of manipulation going on.  Today’s close and tomorrow morning’s opening will probably play into it.

UPDATE:  3:25 PM

SPX just broke through the bottom of the rising white channel and the red midline at 1626.13.  This drop should stop by 1624 or so.  Any lower and I’ll probably change sides or at least get some protection going.

SPX looks like it intends to close at our near the neckline (1629) as we discussed earlier.  I’ll take a few minutes and discuss my expectations for the next week or two.

Before I do, I want to mention that there are three annual memberships left from the sale earlier this week.  I’ll update prices on the website this afternoon, so anyone who’s been thinking about it…here’s your last call to save $800.

continued for members… (more…)

After whipsawing back and forth for most of April, the market charged ahead in May with single-minded focus.  SPX was up nearly 6% at its peak, but gave up most of it to end the month only 2% ahead.

The red acceleration channel set up within the purple channel and caught many, including yours truly, by surprise.  There were only three negative sessions between May 1 and the 1687 top on May 22.

It wasn’t for lack of opportunities.  Many times, the market would close on the cusp of a downturn motivated by normally reliable patterns.  But, in almost every instance, an overnight ramp job would come to the rescue and the market would blow right through the resistance on the opening bell.

May’s reliance on overnight ramp jobs for net gains was truly stunning.  The following chart compares the total points attributable to gaps up and the subsequent hour of trading to the net points gained for each of the past three months.

May consisted of 22 sessions for a total of 143 hours of trading.  The net loss for 95% of those hours was 65 points, or -4.1%.

The other 5% of trading hours — the 7 times the market gapped up on the opening — added 100 points for a net gain of 2.2% on the month.

Throw in March and April, and the “bull market” begins to look every bit the product of gimmickery:  it  took 200 points of ramp jobs since the end of February for SPX to gain 172 points to the 1687 high.  Two more gaps up occurred during the late May decline for a combined 230 points expended…to produce a net 115-pt gain.

I backed off holding positions overnight — even though it meant for greater trading volume.  I’m a swing trader by nature.  I like big 50-75 pt swings over a week or two.  But, I was sucked into bearish setups way too many times — only to wake to a 15 point overnight ramp job.  The 60-min chart below shows many such instances.

The upshot: way more trades than I would have liked.  But, like April, it paid off: 13.1% versus 3.5% for the S&P 500.  This brings YTD results to 50.97% for a slightly better than 10% per month average.

But, it also underscores a quandary going forward: close out positions each day, or take a chance on continued manipulation in the overnight markets.  Those who trade eminis versus ETFs can sidestep such issues — an increasingly compelling idea.

Starting and ending the day in cash almost guarantees 4+ trades per day — about 88-92 per month.   I suppose it’s worth it for 10% per month; but, it makes communicating trades to members that much more difficult.  And, it makes a managed account that much more appealing.

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*  *  *  *  *

Sometimes a late session decline is a device by which market makers separate weak bulls from their money by running stops and/or just plain making them nervous.  And, sometimes it’s a sign of a market losing its grip.

Yesterday marked the 5th instance in this latest rising channel where the market suffered a late day plunge — though yesterday’s managed to return to almost even on the day.  It didn’t really matter so much where the final number was plus or minus.  What mattered was the loss of the purple channel.

The eminis, which already backtested their big purple channel from 1343/Nov 2012, are currently backtesting the midline of a new channel (in white, above) which would be confirmed by a tag of the .25 line or bottom — which is currently around 1580.

SPX was working on its own backtest, with several strong upside targets available in the 1629-1634 range.  But, yesterday’s setback will make those targets more difficult, if not impossible.

We’ll treat this backtest as the real deal unless the markets prove us wrong.  I’ll play the short side on the opening and see if we can’t flesh out the new white channel.  Looks like 1608ish.

UPDATE:  9:35 AM

SPX just tagged the .886 retrace (1604.57 v 1603.97) of the rise from the 28th at the .25 line of the new channel.

I’ll switch to a long position here at 1605 with stops at 1601 just in case.

For swing traders and trend followers, the momentum — and the most obvious path — is clearly on the downside.  But, the bounce north of 1601.06 — which came at a logical support point — keeps the upside case alive.

The bulls now need to push back up through the red .75 line, the white midline, and the red channel top — though the optimistic ones would point out that the rising white channel offers a new means by which to reach new highs.

The dashed red line rising through the chart is our old friend, the trend line from 1994/2003 — the lowest of the three generated by different combinations of tails and real bodies from way back when.  Remember, SPX reversed within 20 points of the highest of the three.

UPDATE:  10:05 AM

SPX is (so far, successfully) testing this morning’s lows.  Note that, even with this morning’s plunge, the IH&S is technically still alive.

But, it should be clear to everyone by now that there are several traditional H&S Patterns from which to choose.  The completed one with the yellow neckline (below) points to 1586.

The larger one with a red neckline that hasn’t yet completed would target closer to 1580.  Both targets are below the lower bound of the rising white channel, so would require that it break down first.

The neckline of the yellow IH&S we’ve been watching has now become resistance — meaning it is likely part of a falling channel I haven’t charted yet.

The upside case is looking weaker by the moment.  And, my gut tells me to go ahead and pull the plug on the bounce. But, this is a holiday week.  The market closes early today (1:00 PM ET) and, in 24 hours, most of America will be OD’d on saccharified and genetically modified starch and Bos primigenius laced with steroids, hormones and antibiotics (beer and burgers.)  What better time to launch a sneak attack on bears?

That’s why I won’t be surprised if, while no one’s watching on Friday, we reach 1638 — the .618 of the 1687 to 1560 correction.

A close today at 1618  — .618 of the decline since 1626 on Monday and the intersection of the falling red channel top and rising white channel midline — would set up a nice looking right shoulder targeting the downside.

But, it would also set up a Crab Pattern with a 1.618 extension at 1640.23, less than two points from the grey .618.  Something to think about…

UPDATE:  12:10 PM

Here we are, nudging 1618.  I’ll take the 13 points on this morning’s long position and go short for any pull back there might be.  Stops at 1620ish.

Coming up, a look ahead.

continued for members… (more…)

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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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