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A new day, a new bounce.  As we discussed late yesterday, SPX has reached the bottom of the purple channel that’s guided it since 1343.  So, naturally, we’ll get some reaction — probably at least to the white midline at 1495.

Whether it sticks or not is pretty much up to Ben.  Press conference at 10AM EST.

The yellow channel on the 30-min RSI shows decent support here.  Looks like resistance at the purple midline, though, likely in conjunction with the white midline mentioned above.

I’ll be surprised, though, if we don’t make it all the way back to 1497 for a proper back test of the H&S neckline – yellow dashed line.

UPDATE:  09:40 AM

That’s close enough for me.  I’m closing my ST long position taken yesterday (3:50PM update) at 1490 for a 6-pt gain and will let my core short position ride — for now.

Many Bernanke pep rallies have left me feeling like a crash test dummy.  I’ve learned to keep my stops tight or stay on the sidelines all together.  For intrepid day traders, I suggest staying nimble.  A breakout or breakdown is to be expected.

But, we did just complete a H&S Pattern, and that counts for something — as do the incomplete harmonic patterns.  We’ll take a look as soon as the Bearded One is done scolding Congress for messin’ up a good thing.

UPDATE:  12:30 PM

Equities are clinging to gains following Bernanke’s testimony — which was mostly a non-event.  IMO, he said nothing to help the bulls’ or bears’ case, which means Italy and the sequester will likely drive prices over the next several days.

We should continue to see periodic bounces over the balance of the day, but the onus is on the bulls now to turn the trend.  We’ll keep an eye on the 5 and 15-min RSI charts to determine breakouts that merit an intra-day long, and revisit the daily charts to get a sense of intermediate-term possibilities.

continued for members…

UPDATE: 1:00 PM

BTW, we’re getting a little break out on light volume.  It should fizzle out shy of the neckline, but watch for any break above 1497.

I’ll play along on an intra-day basis from here at 1493 and see where it goes — probably just a few points.  Tight stops are indicated.

UPDATE:  2:35 PM

Just reached 1498 on negative divergence after carving out a little rising wedge on the 5-min chart.  Will take the 5 points and run.  Core short only again.

More in a few…

UPDATE: 3:30 PM

It’s still a little early to feel very confident about the intermediate picture, but I think we have more downside in store.

It’s always iffy, drawing channels based on just a few days market action.  But, the chart below represents my best guess.  SPX has broken through and backtested (twice) the neckline of a pretty solid looking H&S Pattern that targets 1463 or so (in yellow.)

However, this would mean a breakdown of the purple channel, the bottom of which successfully held both yesterday and today.  So, we’re faced with a choice: the H&S target, the purple channel support or something in between.

The channel was good for nearly 200 points since last November, so I’d hesitate to discount its importance.  But, H&S patterns deliver about 70% of the time.

Given the narrow range we’re talking about, I’m taking the approach of letting the market tell us what it has in mind.  This means taking short-term long positions on any move through the H&S neckline at 1497, and lifting them on the way back down.  The bottom of the channel is around 1490 now, so I’d make darn sure I’m full short anywhere below that.

As to a core position, I’m short – just because I think the sequester is coming and the market hasn’t fully priced it in.

More later.