The Market

The markets are a little skittish today.  The current rising channel is currently broken, but only just below the .886 of the previous high.  What matters is where it closes.  Anything around 1700+ is helpful to the bulls; 1702.60 would be even better.  Note the placement of the TL from 1994/2002.

The USDJPY continues to consolidate, forming a pennant within the pennant.  It has to break one way or the other by mid-December, and after all this coiling will likely break big.

A close-up:

Interest rates (TNX) obviously hit our target from several weeks ago.

While these were an important couple of Fib levels, the rising white channel could easily usher rates up to 3.35 or 3.82 by year’s end.  It’s lower bound, however, is way down at 2.02; so, take your pick of economic/political/Fed scenarios.

The Trip

Heading into the home stretch – only 5,000 miles to go.  Thanks, everyone, for a great response so far.  It’s working out best for most of you to do one-on-one meetings, so we’ll stick with that unless there’s a need to double up.

The fund website is partly up; I’ll post here when it’s fully live.  If you have contacted me about a city below and haven’t yet heard back, please contact me ASAP.  It’s quite possible an email slipped past me.

 

SEP 23-27

Saturday/Sunday: Philadelphia/D.C. (taken)

Monday am:  New York (breakfast meeting – taken)

Monday pm – Boston (meetings at 2:00 and 3:00, available after 5pm)

Tuesday: New York (currently available between 11:30 – 2:30)

Wednesday: Chicago (meetings at 9:45 and 11:00 (ORD), available after 12:30pm — either downtown or in O’Hare area)

Thursday am: Chicago (until 10am)

Thursday pm: Indianapolis  (no slots available)

Friday/Sat:  Minneapolis and/or Denver  (tbd)

Saturday: San Francisco (tbd)

Greetings from Philadelphia. Still on the road… will update the schedule for next week this afternoon.

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ES’s rising channel is intact at these levels, but it’s important that it hold here.  A failure to remain above 1707 would open the door to 1666 or lower.

The more important development is the dollar, which has broken down from the rising red channel.  There’s a very good chance it will break 80, probably to 79.60.

GLTA.

Greetings from Houston.  I’m still on the road, but wanted to toss out some thoughts.   The Bat Pattern that completed yesterday is holding, with no breakdown or break through the prior highs. SPX sitting tight at 1700.

That’s about to change, of course.  The key level on the upside is SPX 1710 (ES 1705.)  A drop through SPX 1695 probably targets 1657 and, ultimately, 1600.

While, a burst through 1710 indicates 1721 (ES 1722) and then 1760.

The dollar suggests equities downside, so I’d bet in that direction with tight stops — as the potential for a positive surprise far outweighs the negative.

The current rising red channel (parallel to the last two) still offers a pretty clear shot at SPX 1823/ES 1837.

UPDATE:  13:00

No taper.  ES through 1705.  Buy.

That sucking sound is the dollar, which could easily slip beneath 80 today.

UPDATE:  4:15 PM

ES tagged our initial target, the 1.272 of the drop from 1685 on May 22.  The more legit target for that pattern is the 1.618 at 1767.  An alternative is the 1.618 of the drop from 1705 on Aug 5 which targets 1755.  We could still get a decent reversal here, but I’d rather stay long with loose stops.

At this rate we should arrive at ES 1837 by Oct 7-11.  Note, this is the same interim target we posted on the chart below on Aug 23 — the most bullish case.

 

 

I’m traveling this week and next, so won’t be posting intra-day.  But, hopefully this big Bat Pattern completion hasn’t escaped anyone’s notice.  I’m shorting here at SPX 1704.89/ES 1698.25, with stops just above the previous tops (1709.67 and 1705 respectively.)

Initial objective for each is its .786, with a secondary objective at the .618s.

UPDATE:  4:05 PM

ES reached our objective moments ago — the .786 @ 1687.83. I’d take the 11 points profit and go to cash here, though a drop through 1687 would get me interested in playing additional potential downside to 1674.34.

GLTA.

As mentioned last week, I will be out most of this week and next, visiting pebblewriter.com members across the country.  We’ll talk about the markets and how to make sense of all the scribbles on our charts. I’ll also answer any questions you have about our Fund scheduled to launch Oct 1.

BTW, I sent a separate email update a short while ago to all those who have expressed an interest in the Fund and completed the accreditation questionnaire.  If you didn’t receive it, please add your name to the list HERE.  If you’ve already filled out an accreditation questionnaire and added your name to the distribution list but didn’t receive this email, please CONTACT ME.

Please feel free to forward this post and/or bring friends to these get-togethers — just give me a head count when you RSVP so we don’t have any issues with venues which will, for the most part, be centrally-located hotels or restaurants (recommendations gladly accepted.)  Details for this week’s venues will be posted late tonight.

PLEASE RSVP by Monday evening and let me know which meeting you’re able to attend.  In some cities, there are quite a few of you.  In others, only one or two.  Please don’t assume someone else will RSVP.  If I don’t hear from someone in your town, I might cancel that visit in favor of a town where folks have expressed interest.

If I have inadvertently left your personal neck of the woods off the schedule, it’s either an oversight or I have no idea where you live.   Please CONTACT ME ASAP and I’ll make every effort to squeeze it in.  I have some wiggle room here and there, but it’s first come, first served. And, there’s always next time.

Here’s the tentative schedule.  I look forward to meeting you!

SEP 16-20

Monday-Tuesday morning: LA

Tuesday afternoon: Orange County

Wednesday am: Dallas

Wednesday pm:  Houston

Thursday am: Atlanta/Nashville

Friday:  Miami

SEP 23-27

Sunday-Monday: Philadelphia/D.C.

Monday am – Tuesday: New York

Wednesday: Boston

Thursday: Chicago

Friday:  Minneapolis and/or Indianapolis?

Saturday: Denver/San Francisco

 

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I’ll do a market wrap-up at the end of each day or the following morning as travel permits. But, intra-day posts will be few and far between.  For those of you who could care less about meeting and are peeved that I’m not working the markets these next two weeks, please feel free to contact me and request that an extra 2 weeks be tagged on to your membership.  I promise I won’t take it personally!

July 2013 was our second best month since inception: 15.96% versus 5.08% for the S&P 500.  This brings ytd 2013 to 92.95% (18.67% for the S&P 500) and the average monthly return to 11.95%.

As expected, we didn’t repeat last month’s 26%; but, July helps answer the question of whether our strategy can succeed in the face of a steadily gaining market.

I made an effort this month to reduce the total number of trades — about 40% fewer than last month (I’ll post on the performance page.)  I continue to try to find a balance between  trade volume and performance.

Our hit ratio was terrific this month, with over 90% of trades in the green.  But, we also suffered our first 1% loss since May: a 1.2% loss on a short position held over a weekend that was partially offset by a concurrent trade.  Fortunately, these trades have been few and far between, and we have yet to incur a negative month or even week.

But, this incident raises my interest in switching the primary focus of our forecasts to the E-mini S&P 500 contract rather than the S&P 500 index.  It’s how I intend to invest in our upcoming fund, as the e-mini offers tight spreads, minimal trading costs, and the ability to leave positions open overnight while maintaining effective stops loss orders.

The only other way to protect oneself is go to cash every night — which means lots of trades.  More on this in the coming weeks…

*   *   *   *   *   *   *   *

The Fine Print:

1. Represents performance of a theoretical portfolio, where SPX is bought or shorted based on signals generated by my research.  Your mileage will vary.
2. Assumes no leverage:  100% long, 100% short or 100% cash.
3. Prices listed reflect the index at the time tops/bottoms are called and/or trades are made and are believed, but not guaranteed, to be accurate.  Dividends ignored.
4. MTM = marked to market.
5. Results are since inception of pebblewriter.com on March 22, 2012.
6. Past results are not necessarily indicative of future results.  See Disclosures and Use Agreement for important information.

ORIGINAL POST 2:20 AM

ES just reached the .618 Fib retracement (of the 1705-1624 drop) at the bottom of the red channel.  I’ll go long here at 1676 on the assumption that the channel and Fib will hold.  Stops at 1666ish.

UPDATE:  7:30 AM

Rising red channel or purple?  We’ll know soon enough by whether ES can climb back above 1680.48.

The canary in the coal mine, the USDJPY, is back above the yellow midline and white channel top (for now) which is bullish for US equities.

The red IH&S neckline held its recent test, and we have two higher highs and higher lows so far.  I’d be more confident in the pair’s upside if it could break through the purple midline.  But, the yellow channel could tack on quite a few percent without its help.

More later.

UPDATE:  10:29 AM

Getting a little sell off following the crummy consumer sentiment numbers.  Retraced .886 of the rise from 1674 to 1682, should hold here — stops at 1673ish.

Re SPX, as long as 1681.96 holds, next stop should be 1692.08 — the .786 retrace of the drop from 1709 and the 1.272 of a well-formed Butterfly Pattern set up since yesterday.

UPDATE:  3:15 PM

I have to run out for an appointment.  I wouldn’t hold long over the weekend, but I would definitely hold long on any move through ES 1682.25 with an intial target of ES 1684 and ultimately 1686.  I would short on any weakness upon reaching those targets, but I suspect it will occur in the last few minutes of the session, so the more practical approach is to go directly to cash.

More later.

Initial claims plunged to the lowest level since 2006, but there are questions about the accuracy of the numbers.  In any case, it sure doesn’t hurt the prospects for a taper this month.

The USDJPY has fallen back below the “breakout” point — the top of the white channel — after slightly exceeding the latest .786 and the purple channel midline.

It appears to be backtesting the yellow channel midline, so we should see more weakness to back below 99 — perhaps 98.66 or lower.

DX has fallen significantly in the past few days, testing the white channel midline and putting in a potential bottom in search of a Bat Pattern Point C.

It dipped as low as 81.595 overnight, very close to the .618 (81.535) retracement of the gains from 80.77.

ES poked up slightly higher in the after hours yesterday, but has since settled back down to its .786 and is still butting up against resistance at the red channel midline.

UPDATE:  10:00 AM

SPX is still reaching for its .786 after having closed the last remaining higher gap yesterday.  Its sweet spot could be up at 1695.  The purple 1.618 intersects there with the top of the falling red channel and the former H&S neckline (purple, dashed.)

Note: another 8 points higher for SPX would mean ES tagging its .886 at 1695.85.  In either case, I see a possible drop here to flesh out the red channel bottom as we have a series of lower highs and lower lows since yesterday’s highs.

I think it’s prudent to remain short, reconsidering if ES exceeds 1690.50.  ES target is 1679.20.

UPDATE:  10:10 AM

The EURUSD has reversed off its .618 at 1.33 at a channel top.

However, the light blue channel line it tagged overnight is a potentially bullish support level.  It belongs to a channel dating back to Jul 2012, though this channel is notorious for its frequent excesses in both directions.

UPDATE: 11:45 AM

This day means something different to each of us.  For many, it’s a touchstone: a reminder not to take life for granted, to make thoughtful choices.  Wishing all of you a thoughtful day…

Don’t judge each day by the harvest you reap, but by the seeds that you plant.
Robert Louis Stevenson

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The USDJPY has backed off the .786 Fib line (white) and the purple channel midline and appears set to backtest the broken white channel top.

DX bounced nicely off the rising white channel bottom on Monday, backtesting the falling white channel midline in the process.  It’s due for its rally to resume, but hasn’t yet made up its mind.

And, ES has slipped below its red channel midline and backed off yesterday’s highs in the process.

I’ll explore a short position here at 1681 and see if we can put together a few points to the downside to flesh out the red channel — the bottom of which is currently around 1667.  Stops around 1683.25.

The 4-hr chart, as it often does, puts things into perspective a little better.

continued for members… (more…)

We went long at 1669 yesterday afternoon when ES broke out of both the rising white channel (from the 1624.75 bottom) and the  falling white channel (from the 1705 high.)

This morning, it also broke out of the rising wedge (red, below) and is closing in on the .786 retracement of the drop from 1705 to 1624.75.

This move greatly increases the odds of the bullish scenario we discussed yesterday playing out:

A strong reversal there (the white .618 at 1674.34) would set up a Gartley to the .786, but at this point the better candidate is a Bat Pattern up at the .886 (ES 1695.85, SPX 1700.)

ES shot right through the .618, so the Bat Pattern to 1695.85 jumps to front and center.  Note that the purple 1.618 at 1693.92, lending credence to that price target.

As always, a garden variety .786 Wave 2 is still on the table.  So, be cautious around 1687-1688.  A reversal at 1687.31 would set up juicy downside scenario, so bears could dig their heels in at that point.

UPDATE:  8:30 AM

Here’s the chart cleaned up a little.  I’ve sketched in a rising red channel that’s parallel to the two prior acceleration channels (1530-1685 and 1553-1695) just for grins.

Those prior channels were insanely steep — producing 155-pt and 142-pt gains in about a month each.  It’s nice to have a frame of reference.

Are bulls completely out of the woods?  Hardly.  That state of bliss is reserved for new highs and budget compromises.

In fact, the last time ES pulled a rally out of a bear’s mouth (from 1596-1649 on Jun 6 and again on Jun 13 — the rally so nice, they did it twice) the market plunged 96 points in 4 days.

Stay tuned.

UPDATE:  9:20 AM

Inside day for DX so far, still working on backtesting the falling purple channel top and falling white channel midline.

And, USDJPY — while clearly breaking out of its falling white channel — is still having a tough time breaking back above the purple midline or back into the rising white channel.  The fact that it’s still backtesting both suggests that reaching the .786 (tagged today) or the .886 will prompt a decent downturn.

Speculating here, but USDJPY .886 tag at 100.87 coincident with ES .886 tag of 1695.85?

The EURUSD, meanwhile, is still trying to join the party.

UPDATE:  9:45 AM

Assuming ES/SPX retrace .886 of their losses from 1705/1709…then, what?

continued for members… (more…)