That’s how much the S&P 500 futures initially sold off after Congress missed the official deadline last night. Kinda sums up how much confidence we have anymore in their ability to accomplish anything.
The dollar has almost reached our 79.60 target from Sep 20 [see: Quick Update] — briefly dipping below 80 this morning.
This is a somewhat optimistic target, as the potential for a much larger drop is very real. When the rising red channel from April 2011 broke down on the 18th, it opened up many lower harmonic targets.
The most appealing one on the chart is 75.18-75.45. This represents a .786 retrace (white grid above) of the red channel’s rise from 72.86 to 84.97, and dovetails nicely with the 1.618 extension of the smaller Crab Pattern in purple.
It’s too early to estimate the timing, as neither the falling white nor the falling purple channels are very well developed yet. For now, I’m assuming around the end of the year — though it could easily push into April 2014.
Keep in mind that 80 is an extremely important level of support for the dollar index. The Apr 1995 low of 80.14 marked the beginning of a 6-year rally that peaked at 121 in Jul 2001 as stocks were almost midway through their 2000-2002 crash.
UPDATE: 10:23 AM
SPX just reached the top of the falling white channel at 1691 (ES 1685) — great place to be short (with tight stops, of course: SPX 1696ish.)
With SPX about to close 10 points higher, I’d have to congratulate the PPT. But, even the last-minute ramp job couldn’t produce a breakout. I’d have no problem holding short in the E-minis overnight, as SPX only briefly peeked above 1696 and slipped right back down.
The E-minis themselves backtested yesterday’s H&S neckline at the top of a channel, but couldn’t hold the level and appears to be done (for now.) The pattern looks like a breakout, smells like a breakout, even quacks suspiciously like a breakout. I just don’t think it is.
I think it’s more of a fakeout, but would suggest stops in the 1696 range just in case. Wouldn’t be the first time I out-thunk myself.
The USDJPY should have at least another 1.30 to go, and I wouldn’t be surprised to find that today’s rally was more about relief at not having crashed and burned than optimism about political prospects.
Don’t get me wrong. If/when the Grupps get their act together, the rally should proceed with all due haste. I just don’t see it happening just yet, and the charts offer just enough of a hint that I’ll give the bearish position a little more rope.
Keep an eye on DX, which really should tag 79.52 before stocks turn around.