Analog Update: Aug 15, 2019

SPX plunged 86 points yesterday to 2839.64, 4 points below the Day 13 optimized price target indicated by our analog [see: Analog Watch July 15] when last updated on Aug 5.

The dilemma that target posed is that SPX already tagged it on Aug 5. It was unclear, therefore, whether we’d get a slightly lower low or closing low on August 14 before the strong bounce ensued. I posted a slightly lower secondary target at 2816.47 that would accommodate the analog and another at the SMA200, now at 2795.73.

The other dilemma is that SPX peaked two sessions early. I adjusted each turning point forward by two days but, as we discussed at the time, an adjustment wasn’t necessarily appropriate. We’ll only know for sure when the next bounce commences.

Several hours ago, it looked as though the 2816 target would get tagged. Futures reached 2817.75 around 3:30 ET (yes, I was watching…I lead a very exciting life.)

It didn’t last, however. So, anyone holding short for the idealized target in the cash market could face the same dilemma as on Aug 5 when futures tagged an important downside target (the SMA200) after hours and bounced before SPX had a chance to follow suit.

Regardless of whether or not SPX makes it down to 2816.47 (probably) or 2795.73 (possibly) yesterday’s collapse was an excellent test for our analog. It is very clearly on track.

Speaking of things going as planned, DB just tested its Jun 3 lows. It has a long tradition (thanks to a very generous Uncle Mario) of bouncing at horizontal support — sometimes for years. So, I’d take profits here and only re-short on a drop through 6.49. The charts indicate lower prices ahead — though it’s always possible the ECB will come up with a better solution than lowering rates and increasing QE.

While we’re on the topic of easing…anyone happen to catch this morning’s economic data? Retail sales and labor costs hardly support a rate cut, let along multiple rate cuts. From Briefing.com: