Lots to cover this morning, as SPX slightly overshot our latest downside target on Friday.  Recall that we added the 2838 target on Aug 19 [see: Fine Tuning our Analog] when it became apparent that SPX’s downturn would be delayed.As it turned out, 2838 was a better downside target than the 2857 target originally forecast by the analog.

Thanks to a timely bounce by USDJPY at our 104.74 target last night [see: Update on USDJPY]… …and Trump’s predictable make-it-up-as-we-go trade announcement this morning, SPX will open about 20 points to the good this morning — still on track with our analog which has been roughly 98% accurate since inception.

continued for members…

The original drop to Aug 14 was forecast to be 5.7% (6.1% after adjusting for Fibs/channels.)  It ended up being -6.7%.  The bounce from there was forecast to be 4.1% (4.5% after the adjustment.)  It ended up being 4.0%.  The drop which just concluded was forecast to be 3.9% (-4.3% adjusted) and ended up being -3.5%.

Bottom line, the average of the actual percentage moves was 102.1% of the forecast moves and 93% of the adjusted moves.  In other words, the original forecast was more accurate than the adjusted forecast — with the exception of Friday’s final lows.

This makes sense, especially if we assume that the analog is “trying” to get back on track with the original path suggested by the 2015-2016 moves.  If none of that makes sense, don’t worry about it.  It’s a technical argument which will no doubt inform some future adjustments.  The question, now, is where will this current bounce end up?

We have a range of possible upside targets.  The chart below shows the original path with one slight alteration: moving the Aug 27 target to Aug 30. I am leaning toward the conclusion that the analog will shift to date targets which would have been in place had the top occurred on our original target of July 30 – two sessions later than the actual top on Jul 26.

This would suggest a top of Aug 29-30 — which makes sense from a number of different standpoints, not the least of which is that prices typically ramp into the end of the month. What about price?  Our analog clearly calls for a higher high than the ones we saw earlier in the month — which obviously fell short of our analog target. The analog calls for a 5.5% (6.0% adjusted) bounce from Friday’s lows which would put SPX at 3006 or 2991 (adjusted) with an average of 2998.56.These numbers fit nicely with the charts — though it’s tough to square them with the reality posed by what’s going on in the world.  In terms of motivation and tools, USDJPY can be ramped up to the SMA200 or so with the assistance of our besties in Japan (anything to save the Nikkei) and VIX can be hammered back down below its SMA200.  Note that VIX’s SMA10 is about to cross back below its SMA20.

Between the two of them, this should do the trick in powering SPX back up past 2943.31.Once it’s there, we have a few choices.  The Fib picture suggests the .886 at 3004.51 — a Bat Pattern target set up by the initial reversal below the .618.  If it can’t make it that high, then the shortfall target would be the .618 itself at 2949.34.

This would require a punch through the SMA50, currently around 2946.51. So, SPX would run into overhead resistance at the SMA50 just before reaching the prior cycle high of 2943.31.  It sets up a likely intraday push of pretty strong resistance which could yield a pretty powerful pop if it breaks.  The SMA50 is the last major moving average on the daily chart.

If SPX can punch through 2949.34, then we have the .786 at 2983.93 and then the afore-mentioned  .886.

For you wavers out there, note that an A=C corrective wave which terminated at the SMA200 (currently at 2802.53 and rising gently) would require a Point B at 3009.27 – pretty darn close to the .886 at 3009.27.  If the C wave were .886 of the A wave, it would suggest a Point B at 2984.30 — quite close to the .786 at 2983.93.  A .786 C wave would indicate a Point B at 2965.37, just shy of the .707 at 2967.66.

The .886 and A=C target are so close to the analog target of 3006.07 that I favor a target range of 3004.51 – 3009.27.  But, given that the bounces from two weeks ago were subpar, I’m prepared to be disappointed.

Note that ES has broken above and backtested the red neckline and just broke out of a small consolidation pattern.The neckline referred to above isn’t really a neckline anymore.  Since ES made a lower low last night, the right shoulder busted the pattern.  Still, the former neckline – now just a TL – should serve as a nice springboard for ES once it’s broken.The 5.5-6% bounce the analog calls for would mean an average of 1.1% to 1.2% per session for each day this week.  SPX is currently pushing above a 1% gain, as is DJIA.  That’s with a 1.1% gain for USDJPY and a -0.20% drop in VIX.  If VIX dropped below 16.99 (a 14% drop) I believe SPX should have no trouble piling on at least another 4.5%.

If CL can also push back up to its SMA200 or above, then a pop up to SPX 3004-3009 should be a breeze. Interesting that things are heating up in Iraq thanks to Israel’s recent bombing attacks…

More later.

UPDATE:  1:43 PM

If SPX can push above 2875, it will have completed a small IH&S with the red neckline targeting 2916.  If it can get to 2916 tomorrow morning and reverse a little to, say, 2900, then a push through 2913.70 (the purple TL/neckline) would complete an IH&S targeting 3003.  Doesn’t mean SPX will take this particular path, but it’s one more indicator that corroborates the 3004ish upside target.  Obviously, a rally like this in the midst of very unsettled global events (not to mention another 2s10s inversion) is swimming against the tide.  But, that’s the neat things about analogs: they give you something to hang your hat on when making out of favor bets.

I’m going to take a break.  Will be back before the close…

UPDATE:  3:55 PM

A few minutes before the close and SPX is still sitting at around a 1% gain on the day.  If the analog holds overnight, it should gap up above the SMA5 200 in the morning.ES is breaking out again, but is likely to backtest its SMA5 200 sometime during the after hours. VIX’s SMA10 (18.52) has officially crossed below its SMA20 (18.55.)As long as the White House can stifle some of the idiocy, SPX’s rally continues to look good.