The World According to Ben is inflationary.  It is confident.  Its citizens consumers buy stuff today because it might be too expensive tomorrow — or, just for grins.  It’s a world plagued not by irrational fears, but by irrational exuberance.  It’s a return to those thrilling days of yesteryear, when nothing bad ever happened, as long as you owned your house (preferably 2-3) and borrowed lots of money to fill that house with plasma TV’s and Porsche’s.

But, we’ve been down that road before.  Seems to me it didn’t end terribly well.  Fortunes were lost, families were torn apart, lives were ruined when the bubble burst.  Ben would like us to think this time will be different, that the Fed is now watching so closely that such a thing could never happen again.

But, isn’t it interesting that CPI just posted the biggest monthly spurt in over 2 years?  And, of course, that was before Benny’s helicopter even lifted off.  As Zerohedge put it:

“In other words, the food inflation which is already spreading through the economy courtesy of the record drought, is about to be supported by some brand new Fed-generated inflation. Luckily, as yesterday, nobody uses gas or food.”

Here’s the chart of the day year.   For those unfamiliar with Bat Patterns, learn more HERE.

Not all Bats mark huge reversals.  Since we could put in a Point B at the .618 retracement, there’s the possibility we’re constructing a Crab Pattern that ultimately targets the 1.618 (2138.)

Point B could also have been the .786 reversal at 1370 in May 2011, which would indicate a Butterfly Pattern targeting the 1.272 (1823) or the 1.618.  On a scale this large, these are obviously patterns that could take years to play out.  And, we never use harmonic patterns in a vacuum; their targets must be supported by other technical analysis.

The last really big Bat Pattern we completed was in January of 2007, when SPX had retraced 88.6% of its 2000 – 2002 plunge from 1552 to 768.

There was a relatively minor pullback of only 98 points; but, it was certainly enough for traders to capitalize on.  Note the pullback to just below the previous Fibonacci level (the .786) was a nicely formed Crab Pattern — one of our other favorites.

Bottom line, be ready to short with some gusto at 1472.43.

 

CHARTS:  9:40 AM

The dollar came oh-so-close to hitting our 78.818 target this morning.  Recall that this is the .886 of the larger red Bat Pattern (lot of Bats going around) and should provoke at least a bounce — maybe much more.

The daily RSI shows how very oversold it is, but that doesn’t mean it can’t go lower — simply that it is likely nearing at least an interim bottom.

Meanwhile, SPX is nearing our 1472 target. I will ease some stops into the equation as we approach it, as I’d like to remain long for as long as possible.  This is a 35 point gain since we went long yesterday at 1437 with the Fed’s announcement.

Note, this is a biggie — the .886 of the Oct 07 – Mar 09 crash from 1576 to 666.  It’s a big ol’ Bat Pattern that should provoke quite a reaction. But, lots of folks are watching it, so it’s possible some of them might jump the gun and sell before actually tagging it.  Then, again, we could be seeing a lot of short covering still; and, we could just as easily overshoot it.

We’ll watch the RSI’s for any sign of weakness.  Having topped 1464.71, it will ideally turn into support.  If we get a reaction, I’m thinking the green channel line we just topped would be a good initial downside target (1439ish.)

If you can watch the market like a hawk, the 5-min can be more effective than a round number stop.  Market makers know where the stops are (yes, yours too!) and love to trip them on the way to their ultimate target.

Whole lot of overbought going on in the RSI above…

Note that the dashed purple channel line cutting across our path at 1472.43 is one of those blue channel lines from the 30’s we discussed yesterday.  This one just happened to intersect with the 1422.38 high from April.

UPDATE:  10:10 AM

DX just tagged the .886 we discussed above.  Should get a bounce here, and SPX (1469) should tag 1472 any minute.  Can’t resist a few Sep 146.5 calls at .72, just for grins.

UPDATE:  10:20 AM

Going ahead and pull the plug on my longs here at 1474.  The 5-min, 15-min and 60-min charts are all showing negative divergence.  I’ll place stops at 1475 or so, trailing lower as need be, just in case it makes another run higher.  But, this should be the start of a nice downturn.

UPDATE:  12:25 PM

Back online.  I don’t know if it’s my computer, WordPress, Firefox or GoDaddy, but things had slowed to a crawl here.  Had to shut down, run Disk Utility, etc.  Things seem to be running much better now, so probably my computer — which has seen very heavy use during the several 20-hour workdays this past week.

SPX is back to 1469 after dropping as low as 1465.  This is likely a bump on the way lower, but I want to remind anyone else who’s short to please use stops. It would be shame to give back the 37 points we’ve scored since yesterday just because the market doesn’t feel like reversing at the .886.

I don’t think it’ll happen…just like I didn’t think the Fed would pull the trigger on QE yet.  The point is, it could.  And, it pays to play it safe — especially if you can’t sit glued to a monitor 24/7.

I’m watching the 5-min RSI, wondering if it’ll turn at the broken trend line.  The channel on the 60-min RSI shows the immediate downside potential.

Not to mention the price channel itself…

Remember, the upper bound of that channel is also a very significant TL.  Viewed in this manner, I could make a case that we’re back testing the previous channel that ran from Aug 5, 2011 to the 1422 peak.

UPDATE:  1:00 PM

Some initial downside targets…

Each of the dotted yellow lines above is a Fan Line from the 2007 high.  FL A is through the most recent high of 1426.68 and currently sits at about 1425 — a 49-pt pullback from this morning’s high.  It also has the benefit of keeping the Elliott Wave folks happy with the upside case, as it would keep SPX higher than the April 1422 high.

Fan Line B is through that 1422 high, and currently sits around 1407.50.  It intersects with the lower bound of our red channel on Sep 24 and would potentially keep the channel alive.  It also intersects around there with the .886 of the current pattern — a legitimate pullback as we push toward the 1.618 extension of a potential Crab Pattern at 1518  (just saying…)

Fan Line C is through the April 2 high, but without the shadow.  It’s obviously the most extreme of the three, and would cause SPX to lose the channel it’s currently in.  It also intersects with the Big Bat’s (1576-666) .786 — the next major Fib lower (of May 2011 1370 high fame) around December 31 — a long, slow decline.

Of the three, I’m most attracted to B.  I think it’ll be appealing to TPTB to keep this rocket ship on track, and what better way than to keep it in this incredibly steep channel to the moon.  It also intersects with one of our big red channel lines [see: What A Wonderful World]  that originates at the October 2007 shoulder, so it could be seen as a back test of that.

Any pullback should be at least to 1444, the broken green and red channel lines from our study yesterday and the mid-line of the channel we’ve been in since June 4 at 1266.

This isn’t a formal forecast yet, just intra-day noodling from your humble and very sleep-deprived servant.  But, it has appeal.  More this weekend on the forecast.

UPDATE:  2:00 PM

Probably a little premature, but here’s a potential channel for the 15-min chart.

We’re caught a little bounce on that little RSI TL, but the channel’s still intact.  The 5-min RSI indicates we might push lower.  I’m watching to make sure RSI doesn’t push up through the downward sloping TL.

Meanwhile, the 60-min still shows plenty of room to the downside…

…as does the daily:

UPDATE:  2:45 PM

Here’s why the market’s currently stuck.  The differences on the 5-min chart are subtle, but will decide whether we stay in the narrow downward channel or not.  Which will play out?  Day traders should be thinking about stops here.

UPDATE:  3:10 PM

It isn’t going to go down without a fight.  Refining the above charts a little…  The bottom of this little channel is currently around 1460.

UPDATE:  3:15 PM

Updated VIX charts show a good chance of a bounce off the yellow channel line and the .886 of the recent 13.3 to 18.96 ramp (small purple pattern.)

The RSI certainly looks ready to bounce.  New channel up, or a pause on the way down?  Given the way negative divergence has worked with VIX, a higher low on RSI could easily correlate with a lower value — maybe retest the 13.3 lows in conjunction with higher equities after the Bat reaction we get?

I feel a forecast coming on.

 

UPDATE:  3:30

We certainly called the dollar right.  It slightly exceeded our 78.818 target and has bounced nicely.  Also, looks like a good new channel coming up through this morning’s low — TL “D” as we speculated earlier.

Those SPY 146.5 puts I bought this morning at .75 are currently trading at 1.27.  Nice…

Here’s our updated 5-min SPX chart.  That thin red TL is the 2nd highest channel line in the red channel up from 1266.

A close at these levels would leave us with a shooting star candle on the day we completed a five-year Bat Pattern. I like those odds, and will hold short through the weekend.

 

It’d be really something if we were to close down on the day…

 

UPDATE:  5:00 PM

FORECAST ALERT!!!

I’ll dig up the actual numbers this weekend, but here’s a back-of-the-envelope calculation that intrigues me.   Many observers have noted the diminishing impact of each successive QE exercise.  What if…

• QE 1:  666 to 1228 = 562 points.
• QE 2:  1010 to 1422 = 412 points (412 = 73% of 562)
• QE 3:  73% of 412 points is 300 points.  1266 + 300 = 1566.

It just so happens that 1566 is a stone’s throw away from 1553 — the Crab Pattern 1.618 extension of last year’s plunge from 1370 to 1074.  It also happens to be the apex of the rising wedge we broke in April.

Darned if it wouldn’t also make for a very nifty double-top (not to mention a perfect right shoulder for el patrón de cabeza y hombros grande) somewhere around the time we tumble off the fiscal cliff with our new, lower credit rating.

I definitely feel a forecast coming on.  Better lie down and let it pass.

Have a great weekend, everyone!

 

P.P.S.  one last chart…  I don’t always watch it, but today AAPL got within 3.02 of a 1.618 extension of this week’s 683-656 drop and 3.58 of a 2.618 extension of July’s 620-570 drop.

It also tagged a channel line that dates all the way back to September 2002.

Monday could be very interesting…

 

P.P.S.

I had a couple of emails regarding the delay in my 10:20 AM update.  I thought that update had posted when I had to reboot my computer (see the 12:25 update.)  So, my apologies.

It’s just me here, folks.  No trading desk, no hot receptionist, no tech guy, no gofers.  So, on a day when I put up 30 charts and write 2,000 words — on the heels of a 30-chart and 4,000 word post deconstructing the four major crashes over the past 84 years (and a contest, what was I thinking?) — stuff is gonna happen.

 

My wife tells me I’ve slept a total of 20 hours over the past four nights (which kind of explains this rant.)  If he were alive today, I’m sure Lloyd Bridges would agree it’s been a long, long week.  I should have suspected as much when my web-hosting service GoDaddy went kaput right in the middle of Monday’s session.

On the bright side, we reached our 1472 target and scored 46 points since the Fed announcement yesterday.  Now, some of you might have missed: (1) the dozens of times I’ve named the 1472 target since March 18 [see: Big Picture]; and, (2) the dozen charts and mentions in yesterday’s post; and, (3) the three mentions and five charts beginning at 9:40 this morning.

A few of you might have waited until my 11:47 email to act. But, you still could have sold/shorted near 1470.  Sure, you would have only made 44 points this week instead of 52.  But, that’s still 3.1% in one week.

It’s not as nice as last week’s 3.6%, but it brings our total since March to 61%.  That doesn’t suck too much, especially for a portfolio that didn’t involve leverage or praying to Tim Cook (AAPL was up a measly 16% over the same period.)

I guess all I’m saying is I’m pedaling as fast as I can.  Pebblewriter.com is a labor of love that, at almost six months old, doesn’t yet cover the bills (my college-bound girls eat a lot.)   Maybe some day I’ll wax poetic from the Orient Express or an Oceanis 58 docked in Saint-Tropez, and go weeks between trades.  But, in the meantime, I trade for a living.

If you’d like me to sleep more, trade less and get e-mails out in a snappier fashion, let your friends and colleagues know about our little experiment.  It’s a win-win with a very simple equation: the more members we have, the more I can focus on the blog.

Thanks.

 

 

 

 

 

Just for grins, let’s give away some pebblewriter.com memberships.  Since we’re likely to have some fireworks this week, I’m curious as to what folks are expecting.   From now through 6pm EDT on the 11th, submit your best guess as to the closing quote for the SPX on September 13th.  One entry only, please, and verified Disqus ID’s only.   Post your entries on Disqus below.

Prizes are as follows:

• closest to the mark:  one year membership
• 2nd closest:         semi-annual membership
• 3rd closest:               quarterly membership

First come, first served.  Once a particular number is posted, no one else may chose it.  I’ll do my best to police these, but it’s up to you to do your homework first.  And, while you’re at it, impress us with the logic behind your reasoning.  I have some monthly membership awards to hand out for overwhelming brilliance, creativity or humor.

If you’re already a member, you may use your award to extend your current membership or give it away to your favorite charity or a close friend.  All winners are responsible for any taxes, etc. on their winnings, entries are void where prohibited, and Fed employees are not permitted to play (unless you contact me first for a little “chat.”)

If Disqus eats your entry, use the “contact me” form in the menu above and I’ll post it for you as soon as I notice it.  Since GoDaddy isn’t fully up to speed yet, you could also copy me at pebblescribe at gmail dot com to be on the safe side.

Post entries below on Disqus, and good luck to all!

 

UPDATE:  6:45 PM

Here are the entries I’ve received, in chronological order, as of 6:00 PM EDT.

 

 

The median is 1416.59, the mean is 1422.60 with a standard deviation is 35.  Our most bullish entry is from FLASHRIP at 1482, and our most bearish bear is Brett at 1345 — meaning a whopping 6.2% tumble in the next 48 hours (ouch!)

Looks like 1411 attracted the most attention, with four entries around it;  1442-1449 had five, as did 1399-1404.  Lots of interesting and well-reasoned responses, and many who didn’t dare tip off the competition as to the method behind their madness.

Thanks to all who entered.  I know well how intimidating it is to put your thoughts out there for everyone to appreciate/ridicule.  It’ll be an interesting next couple of days.

Good luck everyone!

 

THE RESULTS ARE IN!

Congratulations to DJ, Kells44 and ewtnewbie, our top three winners.

SPX closed at 1459.99.  DJ entered 1460, so missed it by only a penny.  Kells44 and newb, last contest’s winner, were neck and neck.  A penny higher, and it would have been a tie.  But, Kells nabbed 2nd place by 2 cents with an entry of 1458, leaving newb in a close 3rd.

I’ll post more after I catch my breath.  Thanks, everyone, for entering.  We’ll do this more often.

 

 

 

 

 

It’s entirely likely the market will remain comatose for the next two days until the German constitutional court decision on the 12th and/or the FOMC announcements/press conference on the 13th.  IMHO, QE3 is very much baked into current prices; though, we should get at least a nice little pop if the central planners deliver as expected.

If not, expect a sizable sell-off unless Bernanke is able to let us down so easy as keep hopes very high (“we are postponing QE until October 12, at which point we will buy every POS bond in sight.”) It’s really that simple — which, of course, renders both fundamental and technical analysis meaningless in the short run and turns any long/short decisions made today into a veritable coin toss.

The German court situation is similar.  Draghi’s jawboning worked exceptionally well last week, producing a single-day 2.5 cent euro-bump versus the dollar that left it at least short-term overbought.  If, after adjusting their hats, the BVerfG reign (sic) on Draghi’s parade, look for the overbought euro to become oversold sehr schnell.

I have no special insight into either event.  Though, as I wrote last week, Dow Jones put out an interesting statistic last week regarding employment data: over the past 28 years, the August NFP stats have missed expectations 3/4 of the time.  For the past 10 years, the average adjustment after the fact is 62K.

Not that I think the Fed harbors any illusions about QE actually addressing the stifling unemployment in this country (yes, I’m cynical), but if they’re attempting to at least make it look good…this might play into their decision.  Their vastly greater concern is a stock market running on fumes and unbelievably leveraged banks whose solvency hinges on perpetuating the myth that their trillions in derivatives aren’t a bad hair day away from implosion [see: The Wipeout Ratio.]

Then, there’s the small matter of the election only eight weeks away from tomorrow.  The Republicans have stepped up Fed-centric rhetoric of late, practically guaranteeing an Eccles Building house cleaning if elected (though I suspect they’re only trying to lure some Paulies into the tent.)

At the end of the day, the Fed is at least as concerned with self-preservation as any other body politic.  After throwing “We the People”  under the bus for their friends on Wall Street, it’s hard to imagine them falling on their swords now for the sake of the economy (did I mention I’m a cynical bastard?)

As I perused the financial press over the weekend (anything to avoid doing my taxes), the euro zone’s financial melt-down dominated.  Criticism abounded, with a common theme being how much better America has handled the crisis.  While our friends across the Atlantic face many structural and governance challenges, the real difference between our fates has been the willingness of our politicians to spend $16 trillion more than they’ve taken in and our central bankers to stymie the natural market response — i.e., soaring interest rates.

Then, there’s the minor fact that the USD is still the world’s reserve currency.  As a wise friend of mine likes to say, until we go full barter and I start making your kids shoes in exchange for your extra chicken, it’ll remain so — even after we tumble over the fiscal cliff (we can’t really expect them to “fix” that in the months leading up to an election, can we?)

That’s where things get really interesting. The stock market’s ramp to new highs has taken our collective minds off the calamitous impact that a severe spending decrease and/or tax increase will have on our economy.  As our predicament comes home to roost, the (continuing) recession will finally be obvious to all.  Even if, by some miracle, Bernanke can muster enough spit and bailing wire to keep the markets from crashing, it’s not entirely up to him.

George Soros argued earlier today that Germany and the rest of the euro zone are heading for a Depression within the next six months.  Draghi and Merkel’s solid Eddie Murphy impression notwithstanding (Keep it together!  Keep it together!  Keep it together!), the weakened and over-leveraged US economy will no doubt follow suit.  Maybe the Fed will go down swinging, throwing good money after bad, and maybe not.  But, it will make a difference only in when and how — not whether — the markets will collapse.

In 1923, Dr. W. Frederick Gerhardt, head of Aeronautical Engineering at the University of Michigan reasoned that since wings provide lift, more wings would provide more lift.  He built a beautiful aircraft known as the Cycleplane that featured a total of seven wings.  It even flew a few times.

But it’s best known for the time it was being pushed along the ground and the entire contraption collapsed under its own weight.

As we’ve discussed many times in these pages over the past year, the solution for too much debt isn’t more debt.   There will be a point of recognition, sometime between now and December 31, when capital markets begin to reflect simple math.  The economic shock will be too great for even the Fed to mitigate.

When that happens, the rush to the exits will be swift and severe. But, until then, we’ll do our best to navigate the twists and turns — making the best of markets that are showing few signs of rational behavior.

Stay tuned.

UPDATE:  12:00 PM

Taking a little short position here at 1435, with a trailing stop of 1435 if the break of the 60-min RSI TL plays out.  Probably won’t go anywhere, but you never know.  Maybe the Soros comments will rattle some folks.

Made an interesting discovery in EURUSD this morning.  The RSI level of 73.108 reached Friday is relatively rare.  It presaged several decent corrections over the years — the most recent being April 28 – May 3, 2011 when the market topped at 1370.

Eight out of the past 10 instances were followed by SPX drops of 50 points or more — typically within 2-3 weeks.

UPDATE:  3:20 PM

Adjusting my stop to 1434.

UPDATE:  3:55 PM

Taking profits on the bulk of my shorts at 1429.30; will leave a small flyer position in place.

 

UPDATE:  EOD

What a crazy day.  As I was writing about the inevitable demise of the economy as we know it, the market started slipping.  Pretty soon we had broken an important supportive TL on the 60-min RSI — usually a clear sign of at least a little slide in prices.

I paused my pontificating to put out a trade alert, and found out that apparently everyone at GoDaddy went out to lunch at the same time, leaving no one to pedal the generator that keeps millions of sites open.

No sooner had I sent an email version of the post and trade alert re my short at 1435, when I realized the email servers were down, too.  I switched to an old Gmail account and sent it out via email; hopefully, everyone got one.  I was a tad early, as it took a while for investors to believe that a dip was being allowed in the days leading up to Bernanke’s press conference (Thursday.)

Fortunately, there was plenty of remaining movement over the next hour or so and we were able to ring up another 6 points to the good.  Any other time, I’d stay full-on short into the close and overnight.  There is a strong case for continued weakness.  But, given the proximity of the German court decision re ESM and the FOMC meeting, I’m continuing to play it safe.  I kept a smallish position overnight, but took profits on the majority of my shorts.  Unless something changes, I’ll resume directional/swing trading again after Bernanke’s speech on the 13th.

Regarding the GoDaddy issue:  it continues to go down periodically.  As of a few minutes ago, the mail servers are down but the others are up.   There’s nothing I can do in the meantime other than send out email versions of each post and double-post everything to the old pebblewriter.blogspot.com address on Google’s Blogger until the dust settles.

BTW, as GoDaddy comes back to life, you will probably receive emails and/or texts advising you of “new” posts that were actually made months ago.  If you haven’t done so yet, register your email address in the window to the right and consider registering your cell phone for text advisories.

*  *  *  *  *  *  *  *

THE CONTEST

Just for grins, lets give away some memberships.  Since we’re likely to have some fireworks this week, I’m curious as to what folks are expecting.   From now through 6pm EDT on the 11th, submit your best guess as to the closing quote for the SPX on September 13th.  One entry only, please, and verified Disqus ID’s only.  Prizes are as follows:

• closest to the mark:  one year membership
• 2nd closest:         semi-annual membership
• 3rd closest:               quarterly membership

Post entries in the Disqus section of the THE CONTEST.  First come, first served.  Once a particular number is posted, no one else may chose it.  I’ll do my best to police these, but it’s up to you to do your homework first.  And, while you’re at it, impress us with the logic behind your reasoning.  I have some monthly membership awards to hand out for overwhelming brilliance, creativity or humor.

If you’re already a member, you may use your award to extend your current membership or give it away to your favorite charity or a close friend.  All winners are responsible for any taxes, etc. on their winnings, and entries are void where prohibited.

If Disqus eats your entry, use the “contact me” form in the menu above and I’ll post it for you as soon as I notice it.  Just to be on the safe side, you could also copy me at pebblescribe at gmail dot com.  Who knows when/if GoDaddy will get things going again?

Remember, post all entries in the Disqus section of THE CONTEST, not below.

Good luck to all.

 

 

 

 

 

ORIGINAL POST:  0930

The dollar and EURUSD have both reached short-term extremes and should bounce back strongly — if not today then very soon. Here’s the action as of the NFP print:

And, here’s DX’s action since then — falling out of the channel it’s been in since July 6. Does the dismal NFP report guarantee QE3?  The market is certainly acting like it.  Perhaps a case of buying the rumor, selling the news?

At this rate, the next natural stopping point is the 79.90 level, which is both a 1.618 and a .786 target.  But, this feels very overextended to me already.

The daily RSI is already at its lowest value since May 2, 2011, when the SPX topped out at 1370.58.  There is a potential landing spot down at Point X, which probably correlates with the 79.90 level.

I expect SPX to top out somewhere between 1435 and 1445. Note the long term RSI TL just above current levels on the chart below.  I’ll play along on the upside, but am watching for the first signs of petering out.

UPDATE:  10:15

SPX is also very overextended, with the 60-min RSI nearing a critical overbought level.  Note the market’s reaction each time RSI tagged the highest TL (red, dashed.)

EURUSD’s daily RSI has tagged a TL coming off the highest point in the past 15 years — March 17, 2008.

If it is expanding to a new channel (red, dashed) to the right (chart below) it is obviously very overdue for a back test of the previous one.  Such a move would potentially take it to the 1.2933 level in mid-October — the .618 of the move down from 1.3485 in February.

UPDATE:  11:00 AM

Just saw an interesting blurb from Dow Jones.  Over the past 28 years, the August NFP stats have missed expectations 3/4 of the time.  For the past 10 years, the average adjustment after the fact is 62K.  I imagine the Fed is also aware of these statistics.

What would happen to this market if the Fed didn’t pull the QE3 trigger next week?  Or, how about a “Nein!” to ESM from the German Constitutional Court?  To my eyes, QE is very much baked into the dollar, the euro and the stock markets.

More in a few.

UPDATE:  12:00

A reminder, EURUSD is still back testing a 12 year old channel line.  It might get all the way there, and then again, it might not.  The diagonal purple trend line that cuts through the 1.272/.618 Fib lines dates back to the all-time low (.8227 in Oct 2000) for the pair.

Zooming in, we can see the recent channel action a little better.  If we measure the quick drops by adding the purple channels, we can see that this drop has already taken longer than the last two.

The pair went from its high to its low in only six months in 2008, bounced hard, and made another higher low five months after that.  Total time for the move:  11 months.  In 2009, it took only 7 months from the high to the low.  This time, we’re still working down from the high in May 2011 — 14 months so far.

Why?  The two previous drops benefited from a flight to safety (the dollar) that wasn’t hampered by $16 trillion in debt.  As bad as things are for the euro, the dollar is determined to give it a run for its money.  Whether we reach 1.10-1.12 or not will depend completely on the dollar’s ability to remain the cleanest shirt in the hamper/tallest jockey in the stable/most honest politician in the race.

More in a few.

UPDATE:  1:50 PM

I’m concerned that if/when this market cracks, it’ll go fast.  I’m setting stops at 1432 and will go short on any move lower.  My top scenario is a quick, but contained drop to 1425-1426, then a possible move higher into the German court decision on the 12th and FOMC on the 13th.

I’m not an EW fan per se, but I count an obvious five waves up from 1396 on the 4th.  I’m watching the channel setting on up on the 15-min RSI.  The asterisk marks a critical support point.

 

UPDATE:  3:15 PM

Apparently someone accidentally pulled the extension cord that powers the stock exchange; it’s been down for the past five hours and they just now noticed.  Just kidding, of course, but it sure feels that way.  Normally, this means big moves ahead, and I think this is no exception.

Here’s some charts I’ve been playing with.

VIX:

XLF:

McClellan Oscillator (NYSE) vs SPX:

 

UPDATE:  3:45 PM

Unbelievably orderly descent of the 15-min RSI on SPX.  Almost as though it was being orchestrated…

Prices, meanwhile, have made a perfect little pennant.  Ordinarily, these break upwards.

My inclination is to close out my long positions prior to the close.  Again, not thrilled with the idea of spending the weekend wondering whether someone is going to say the right thing or the wrong thing and send the market up/down 30 points on Monday’s open.

UPDATE:  3:57

Putting stop in here at 1437, will see if there’s a last minute spike.  Otherwise, selling on the close.

UPDATE:  3:00 PM

Back to cash for the weekend.  Done at 1437.80 for 5 pts and change on the day.

That was a heck of a lot of work for a whopping 3.24% the past four days.  SPX was up 2.2%. Definitely one of those weeks where the reward wasn’t quite worth the effort.  I’m pooped.

What’s more, my 13 year-old daughter leaves tomorrow for a week on the East Coast  — seeing historical sites from Boston to D.C. with her schoolmates.

I’ve been on the other side of the world from her many times, but this is the first time she’ll be the one far from home.  Not sure how I’ll handle it…but, she’ll be fine.  She makes friends everywhere she goes.

 

Hey, how about a contest around FOMC day just to liven things up?  How about a free 6 months membership for whoever gets closest to the close on the 13th?  I’ll put up a page this weekend with the details.

 

No, not in a “saves the world” sense.  But, he must have received my envelope full of liras because SPX is right on track to reach our target from the 4th [Counting Down, 3:30 update]. We’ll get into the specifics of his plan later, but first some charts.

We’ve reached 1417.59, the 1.272 of the two targets in the little Butterfly Pattern.  The 1.618 extension is still up ahead at 1423.31.

continued…

(more…)

His prepared remarks and Q&A may be seen here.