We’ll start with the weekly version of the chart of channels I posted last night…

The parallel diagonals are by no means the only way to skin this cat, but they do demonstrate the market’s tendency to relate future moves to past and present.  Just about all the turns are guided by the red downward-sloping trend lines; most of those that aren’t are guided by the purple upward-sloping lines.  The handful of turns that don’t relate to either all correlate with a Fibonacci level.

There are two rising wedges visible on the chart.  The dashed red lines both originate off important lows — the late 80’s/early 90’s and the Mar 09 low and come together for an apex around January 2013 at about the 2007 high of 1576.  The solid yellow lines originate off the Mar 09 and Oct 11 lows and feature an apex around May of this year at about 1472.

What’s particularly interesting to me about these two wedges, besides the bearish implications of rising wedges in general, is how they relate in time and price.   Note that the average rising wedge breaks down at about a Fibonacci .618 of the time from its origin to its apex.   And, in most cases rising wedges break down at Fibonacci price levels as well.  Let’s look at our two wedges.

First, the smaller yellow wedge’s apex at 1472 comes in right at the .886 Fib level of the Oct ’07 – Mar ’09 decline — which is also at about a Fibonacci .886 of the red wedge’s rise from Mar 09 to its apex.

Second, the time from inception to apex for the small yellow wedge is 3.1 years.  The time from inception to apex for the larger, red wedge is about 5 years.  Divide the former by the latter and you find the time relationship between the two is a Fibonacci .618 — seen in the following graph.

A close up reveals that movements within the small, yellow wedge are nearing some important Fib levels.  Prices are very close to the .886 (1418) of the price range.  And, Wednesday Mar 21 will mark the .786 of the time range.  Again, both of these measurements assume an apex of 1462 on May 7 — a location which is as close as I can draw it, but a bit of an approximation.

Last, note that the intersection of these to Fibonacci levels occurs at the intersection of two of the channel lines we drew in that first chart above.  While channel lines are much more guidelines than absolute rules, a bounce at that four-way intersection would certainly make a lot of sense.

From what I read, the most logical Elliott Wave count is that we’re setting up for a wave 4 correction — unless this is the 5th and final wave up in this monster bear market rally.  This would be a very logical place.  Note also that there is very noticeable divergence on the daily chart, with the mother of all back tests on the dashed yellow TL that was broken two weeks ago.

One last note on this RSI chart… the drop in RSI from that brief downturn was massive compared to a measly 38-point price drop in SPX.  Compare this to the RSI drop in July, for instance, and it’s pretty clear that the technical damage done to the market’s internals has yet to be reflected in prices.  A strong downturn in the next few days could rectify that.

Last, thanks for your patience this week as I rush to finish the new website layout.  Lots of moving pieces that I think folks will enjoy, but it’s taking time.  I’m watching during the day, of course, as things develop (or not.)  But, I’ll be keep my posts to a minimum unless there’s something important to say.

Good luck to all.

Every once in a while, I make myself sit down and reassess everything I believe about the markets.  As most readers know, I’ve been bearish ever since my first post on May 2, 2011.  The excessive bullishness I saw in the markets had finally gotten to me and, as fate would have it, I sat down to write about it.

Back then, I saw we were approaching a trend line coming up from the late 1980’s and drawn through the 2002 lows.  We were also approaching the .786 Fib retracement of the Oct 2007 – Mar 2009 Gartley.  We were very deep into a rising wedge, and we were also about to complete a large Crab pattern that dated back to Apr 10.

Sure enough, that was a potent combination.  The market topped that day, and didn’t finish dropping until almost 300 points later in what was widely considered (by bears at least) to be the first wave of P3.  Now, 330 points and many redrawn wave counts later, it’s a great time to reassess the big picture.

First, it’s worth noting that we’re back to within 45 points of that long-term trend line — currently at 1451 and rising about 8 points per month.  We’re also bumping up against a new rising triangle.  And, the .886 Fib retracement of the Gartley is up ahead at 1472 — around the end of May on the TL.

Interestingly, we recently completed a large Butterfly Pattern and Inverse Head & Shoulder Pattern for a 46-point reaction at the Gartley’s .786, which led to a Crab Pattern within a Crab Pattern and Inverse H&S; pattern that all point to current prices (1405-1409.)  It’s not a perfect fractal of the last move, but it’s pretty darned close.

Also entering the picture above is one of the purple channel line drawn from the 1576 Oct 07 high.  It’s placement is somewhat inexact, but note that it is precisely parallel to the trend line connecting the 2002 and 2009 lows, and all the other parallels which have been influential over the past 10 years.  Today, it crosses in the vicinity of 1439.

While a move down from here would make perfect sense, it seems odd that we’d leave the .886 Fib line untouched at 1472, particularly given its proximity to the trend line from the 1980’s and the rising wedge apex — all towards the end of May.  There’s also a 1.272 completion at 1451 of the large Butterfly pattern ranging from 1370 to 1074.

All this leads me to believe we’re likely to see a reaction in the next few days, a decent-sized drop down to 1380 or so, followed by one last ramp up to the 1450-1470 area.  If I’m wrong, and we see a larger drop here, things could get ugly in a hurry.

More tomorrow.

The Crab and Butterfly Patterns, like their cousins the Gartley [see: The Gartley Explained] and Bat, offers early warnings of potentially significant reversals in price trends.  Like the rest, they are thought to be successful about 70% of the time.  Combined with sound trade management technique, they can provide significant returns with limited risk.

CRAB PATTERNS

Crabs, like all harmonic patterns, feature a precise series of coiling retracements  — failures to retake the previous highs and lows.  Unlike the Gartley and Bat, however, Crabs surge higher than the price level that starts the pattern before reversing, usually to 1.618X the price range previously established.

For an example of how Crab patterns work we’ll look at this past January.  On January 23, 2012, SPX had gained 45 points in the previous five sessions, and seemed ready for a pause.  It opened strong that morning, a continuation of the overnight ramp job in the futures, but on negative divergence.

Sure enough, it fell 16 points by the following morning, completing an a-b-c move and tagging a low of 1306.06.  It bounced hard off 1306, and attempted to regain its recent high.  But, it failed just past the .618 fib level at 1316.63 and fell back towards its recent low.  Here, it failed again, putting in a higher low and heading back up again.

At this point, we had a Point X (the origin of the pattern at 1322.28), a Point A (the 1306.60 low), and a retrace to Point Bat 1316.63.  It reversed here, putting in a Point B that was in the required range of a .382 to .886 retrace of the XA decline.  Some prefer a Point B below the .618 retrace, but many (including myself) believe a reversal at up to the .886 is perfectly all right.

After the reversal, we saw a Point C in the required range of .382 – 886 retrace of AB, and started heading higher.  Point B was only slightly higher than the .618 retrace, so there was a possibility that we were working on a Gartley or Bat.

Remember, a Gartley Pattern requires a reversal at the .618 and plays out to the .786.  A Bat features a reversal below the .618 and completes at the .886.   Given a reversal this close to the .618, many traders would attempt to play each prospective pattern as it came along.  We’ll save a discussion of various strategies for another post.

Suffice it to say that after SPX cleared the original Point X, a reversal at the 1.618 extension was definitely in the cards.  We saw a slight pause at the 1.272 — where a Butterfly sometimes reverses — and reached the 1.618 when we gapped open the following morning.  Because the final surge was so strong, we overshot by 1.17 — reaching 1333.47 versus our Point D target of 1332.30.

Like all Crab Patterns, the degree of the reversal is a function of many other factors.  The strongest reversals are those that take prices in the same direction in which the market was already trending.   But, in general, we look for a move of .618 of the AD price distance.  Beyond that, we look for other Fib levels such as .786, 1.272, 1.618, etc.   They’re charted below in yellow.

In this instance, we reached the .618 level at 1316.53 a few hours later, bounced at the .786 at 1311 and continued to 1300, very close to the 1.272 Fib level.  All in all, we had a 33-point move off the 1333 high — about 2.5%.  For an active trader, a 33-point move opens up some very profitable opportunities.  However, it’s often difficult to forecast the degree of the move, so many traders play the reversal and get out once a modest profit is in hand.

We had a little help in anticipating the degree of this reversal because once we reached and reversed at the .786 on the way down, there was a possibility that we’d go on and complete a Butterfly pattern that normally extends to the 1.272 or 1.618.  In fact, that’s exactly what happened.

BUTTERFLY PATTERNS

Butterfly Patterns are the fraternal twins of Crab Patterns.  They require a Point B at the .786 XA retracement, rather than the Crab’s more generous range.   And, they complete at either the 1.272 or the 1.618 extension.

In the example above, we saw a completion only 14 cents away from the 1.272 extension target.   Note that the previous Crab pattern melded into a Butterfly: the Crab’s Point C became the Butterfly’s Point X.  And, the Crab’s Point D became the Butterfly’s Point A.

Because Butterfly Patterns can extend to the the 1.272 or the 1.618 Fib levels, they can be a little tricky.   Playing the 1.272 means placing appropriate stops, just in case it’s the 1.618 that shows up instead.  The results are similar to other harmonic patterns — with objectives starting at the .618 of the AD, and going up from there.

Here, we saw a nice move to the .618, which reversed to the .236 before moving on to the .886.  There, it reversed to the .618 before zooming on to the 1.272 and eventually, the 1.618.   Total move: 53 points for about 4%.  Again, playing patterns that pay off in the direction of the trend usually means greater payoffs.  Anyone who doubts the power of Fibonacci would do well to study that chart!

Those readers not yet asleep or cross-eyed from the above might notice that the payoff from the Butterfly Pattern created yet another Crab Pattern.    Note how the original small purple Crab Pattern  melds into the medium-sized, yellow Butterfly Pattern that morphs into the larger, purple Crab Pattern.

Relabeling the points, it’s easy to see.  Yet, I’ll be the first to admit that in the heat of the battle, it’s sometimes tricky to keep all the various possibilities straight — especially when dealing with smaller patterns that might or might not be part of larger patterns.  Again, I look at technical analysis, chart patterns and fractals to try to sort it all out.

When the new website is up and running, I’ll track as many major and minor patterns as I can on the major indices.  Traders can take advantage of knowing where to look for turns, while longer-term investors can gain confidence in positioning their portfolios.

Speaking of the new website, I should get back to it.  But, I’ve had lots of questions about Crabs with all the larger patterns currently completing [see: Coming up Crabs], and wanted to get the info out asap.  Good luck to all.

Two thousand and fifty-six years ago, on March 15, 44 B.C., Julius Caesar — the most powerful man in the world — was stabbed (a Fibonacci 23 times) to death, in fulfillment of a soothsayer’s prophesy: “beware the ides of March.”  One notable ringleader, one Marcus Junius Brutus the Younger (of “et tu Brute?” fame) was a former enemy whom Caesar had forgiven and brought into Rome’s inner circle.  It is said that when Caesar saw Brutus among his attackers, he covered his face with his toga and resigned himself to his fate.

Brutus’ mother was one of Caesar’s mistresses and some speculate that Caesar himself was Brutus’ true father — meaning, of course, that Brutus may have committed the unspeakable sin of killing the goose that might have laid many golden eggs for him.  But, he was persuaded by his fellow conservative senators that Caesar had grown too powerful.

Needless to say, it wasn’t the smartest move the lad ever made.  Although the Senate hastily granted amnesty to its most homicidal members, the people were less charitable.  Brutus found himself haunted and hunted and, after losing a battle of epic proportions, took his own life.  It marked the beginning of the end for the Republic.  Coulda, shoulda, woulda.

Ben Bernanke, arguably the most powerful man in the financial world, has found himself in the crosshairs more than a few times lately.  Although hired by Bush as his chief economist and later Fed Chairman, Republicans have been leading the assault.  In turns, the bearded one has been accused of being too conservative, too aggressive, too dovish, too accommodative, too political, too aloof, too stilted, too talkative and…of course, too hairy.

Ron Paul proudly refers to himself as the thorn in Bernanke’s side.  Rick Perry warns that Bernanke will be “treated ugly” in Texas if he continues to print money so recklessly (not sure what that means, but I think it involves a pickup truck and 50 feet of chain.)  On the other hand, Paul Krugman faults Bernanke for his “shameful passivity” and for “wimping out” and Maxine Waters wants him examined for signs of demonic possession.  Even yours truly has disparaged the guy.

What everyone seems to have forgotten is that Bernanke, for all is faults, is their golden goose.  He and his spawn are the only people on Earth willing and able to perpetuate the ponzi scheme that’s preventing them from being lynched.  Bernanke’s no great fan of the American body politic.  In fact, he lays the blame for the financial crisis squarely at politicians’ feet.  But, he understands that failing to keep the music playing will reveal the fundamental flaw in the way the economy has been run for the past, oh, sixty years.

In short, we industrialized nations have made too much money.  In a world where billions work for less than a dollar a day, we’ve paid ourselves too handsomely.  America, chief beneficiary of the world’s reserve currency being the dollar, has particularly benefited.  And, our financial system is outstanding at funneling excess liquidity into ventures in search of capital — whether or not they make good economic sense.

But, as we’ve seen from the South Sea Bubble, the Dutch Tulip Mania, the Dot Com debacle and the housing crisis, the system isn’t so great at turning off the spigot.  Our political leaders, whose continued employment is made possible through the largesse of those profiting the most from these ventures, aren’t about to stop the music.

And, so, we’re left with bubbles — both popped and in need of popping.   The world can’t afford cars, clothing or electronics made in the USA.  So, those Americans who are employed in the making of things are, by and large, part of the bubble.  Many of our services, crops and natural resources are, likewise, overpriced in a global economy.  And, thanks to the wizards of Wall Street, assets in this country are burdened with debt in excess of their ability to service it.

The only viable solution is the Big Red Reset Button — only, no one’s got the nerve to press it.  Politicians?  Forget it.  The financial establishment?  Only if suicide somehow became profitable.  The Fed?  Bernanke’s a self-acclaimed expert on all things Depression. Read his   treatise on the Japanese problem, or his famous helicopter speech and you’ll see how deathly afraid of deflation he is.

And, so, on we go — creating out of thin air the trillions needed to fool people into believing the economy is doing just fine.  Bernanke knows how this ends.  Because, whether it’s $20 trillion, $30 trillion or $50 trillion, there will come a point of recognition when those we count on to finance our deficits will find other bubbles in which to invest.  In other words, the music will stop.  And, the man who let it happen will draw his toga across his face and await his fate.

ORIGINAL POST:

You can go whole days, even weeks without seeing very prominent harmonic patterns (Gartley, Bat, Butterfly, Crab being the most common.)

So, it’s really creepy to see just about every index I chart complete bearish patterns — all at the same time.   I take this as a sign that we’ve reached an important top, though I’m not sure if it’s the end of Minor 2 or a smaller subwave.  In any case, look for a significant downturn as soon as the usual OPEX nonsense has passed.

In no particular order, here you go:

COMP

DJIA

SPX

RUT

I’ll post more after the close.

UPDATE:  12:35 PM

And, that’s a tag.  We might get a little throwover, but any meaningful rise from here is going to take some serious doing and should require a pullback first.

It’s coinciding with a Crab completion (and double top) on XLF – the financial ETF.

And a tag of the fan line off the May 2011 top and third test of the Crab completion amidst a back test for RUT.

And, a tag of the completed Crab target at tip of the completed Butterfly pattern for COMP.

And, even a Crab completion on AAPL.

I am closing my bullish positions and increasing my bearish positions across the board.

BTW, just saw a news blurb touting BAC, that it’s about to get a Golden Cross — where the SMA 50 crosses above the SMA 200.  Yes, it probably will.  But, it’s worth noting that the last time it did this was Feb 15, 2011 when BAC closed at 14.77.   Investors who bought on the news ignored the negative divergence and recently completed Crab pattern.

BAC got as high as 14.91 two days later, then promptly headed south — shedding 2/3 of its value over the next 10 months.

Today, as BAC tacks on another 3.7%, it’s worth noting that it just completed a Crab pattern on negative divergence.  As noted above, XLF also just completed a Crab pattern.

I have no way of knowing for sure, but I suspect BAC is at least ahead of itself, and quite possibly setting up another Golden Cross fake out. 

UPDATE:  12:20 PM

SPX closing in on our 1401.53 Crab pattern completion.  The RSI back test continues to hold, meaning we should get a decent reaction off those prices — though with tomorrow being OPEX it might be muted or delayed.

ORIGINAL POST:  1:20 AM

Haven’t looked at AUDUSD lately.  The small Crab has completed at the 1.618.  A .618 retrace would take us to about 1.069.

Looking at the big picture, this appears to me a completed wave 1, with a wave 2 to come.  The long term weekly shows a completed rising wedge with a completed back test.  I am predisposed to expect a breakdown of the equities market, and this scenario fits just fine.

The only potential hitch is that the price action since July 2008 looks like a big Crab, with the Point B at the .886 Fib in Nov 09. 

Bats extend to the 1.618 — not the 1.272.  So that would argue for a further price rise to 1.2234 — a higher high and break out rather than down from the completed rising wedge.  It would be analogous, IMO, to SPX completing that Butterfly to 1433.

Focusing in a bit on the pattern, there is some logic to it.  The large purple Crab pattern’s completion at the 1.2234 would correlate pretty well with the medium-sized Butterfly pattern (in red) that completes at 1.2125 (the 1.618) — although the 1.272 is another option at 1.1539.

So, I’m left with the option of believing the chart pattern or the harmonic pattern.  I suppose the prudent move is to play the upside for now, and watch for a break of the previous highs.  A move higher would no doubt mean the Butterfly is in play, and a test of the rising wedge’s trend lines and those 1.618 Fib levels is on the way.

It would mean a redrawing of the rising wedge, much like a rise to 1433 would entail for SPX.  Although it seems unlikely, given the USD’s strength, so did an SPX ramp from 1074 to 1400.  What was once widely assumed to be a wave 2 has turned out to be anything but.  Should be interesting to watch.

FOLLOW UP:

As curiousmind pointed out below, I was probably off base when I remarked that AUDUSD fulfilling the possible Butterfly/Crab to 1.2234 would be analogous to SPX fulfilling its Butterfly to 1433.  They’re in different time frames, though the price targets are potentially analogous.  I’ll explain more after the close.

For those of you who missed it, Greg Smith of Goldman Sachs resigned in a very public way today.

Among his musings in the NY Times Op-Ed:

The interests of the client continue to be sidelined in the way the firm operates and thinks about making money”… “it’s purely about how we can make the most possible money off of them”… and, the classic “I have seen five different managing directors refer to their own clients as “muppets.”

This was not some disgruntled associate who didn’t make vice president.  This was the Executive Director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.

Regular readers will recall that just a few days ago I wrote about very similar experiences as an FNG in the brokerage business.  While there are some notable exceptions — some of whom I’m proud to call friends — many brokerage firms are populated by veterans who don’t mind ripping people off and young guys who don’t yet understand that their success will involve ripping people off.

I haven’t heard the term “muppets” used to describe clients, but it did inspire some thoughts.  With apologies to Jeff Foxworthy…

If your broker calls you with Clippers instead of Lakers tickets…

If your commissions exceed your annual profits…

If your mailman sighs and tells you how sorry he is when he hands you your monthly brokerage statement…

If your bathroom walls are papered with stock certificates from Flooz.com, Boo.com and Webvan…

UPDATE:  2:20 PM

If I were Jamie Dimon, I would have pulled the same gag — announcing a stock buyback and dividend increase hours before the Fed was to announce the stress test results.  It gave JPM a shot in the arm, enabling a 7% ramp on the day.

Why was it such a good idea?  JPM was coming up on its .618 fib level, and more importantly was about to run smack dab into an important internal TL and a fan line off the Mar 09 lows that stopped the Oct 2011 rally in its tracks.

After the announcement, JPM cut through those trend lines like “buddah” — cruising up to the .786 where it’s currently taking a breather on its way to the .886 at 46.02. 

Only problem is, he forgot all about the bigger, badder fan line coming down off the Mar 2000 all-time high.  It’s currently lurking just overhead at…umm… a smidge over 46.

This is the puppy that stopped the 2000 run, the 2007 bull run and the 2011 bull run.  It’s possible it’ll be broken, but it’s gonna take more than a slick PR gag.

Stay tuned.

ORIGINAL POST:

It’s pretty rare that VIX closes below its Bollinger Bands without a strong rebound over the following days.  Combined with the nice bounce we got off that long term trend line yesterday, I think these are very attractive levels at which to buy — whether for long term or just a rebound.

Meanwhile, SPX closed above its Bollinger Band and is closing in on its Crab target of 1401.53. 

Not to beat a dead horse, but the RSI is still back testing a broken major trend line, as well as bumping up against the red TL that shows the negative divergence.  For this back test to complete at the same time as we’re completing a bearish Crab pattern is significant.

RUT RSI has put in a little hook, indicating the back test is likely complete and the next move is down.

My only slight hesitation is that we never quite tagged the 838.15 Bat pattern .886, coming up 5-pts shy at 833.02.  If we got a strong intra-day push to 838 to correspond with SPX hitting 1401, the RSI’s would still have a clean back test on the day and we’d have a cleaner downside picture going forward.

The other possibility, because Friday is OPEX, is that  RUT lingers in this 830-838 range for the next three days, tagging that .886 Fib before starting down.

But, I should stress, harmonic patterns don’t require precise tags on their Point D.  Many, many patterns come up short or overshoot by a few points.  So, those who are bearishly inclined should trade accordingly.

More later.

UPDATE:  3:30 PM

The market is moving higher, probably towards the 1400-1405 area we discussed this morning.  This response to the “no news is good news” Fed statement feels very much like a speculative blow off.  JPM and the financials are leading the way higher, probably heading for a 10% gain in the short run, as JPM announced a dividend increase and stock buyback.

There are two potential harmonic patterns to watch.  For now, my money is on the Bat with .886 target of 16.49.  I’m adding some XLF calls and FAZ puts to hedge out my existing short position over the next few days — if it takes that long.  A reminder, Friday is OPEX.

Negative divergence is very marked at this time, and VIX got a great bounce off the lower price and RSI trend lines which, if it holds, gets a nice bullish (for VIX) channel started.

A tag of SPX 1401 on this strong negative divergence looks like an attractive set up to add to shorts.

UPDATE:  2:20 PM

Nothing of any import in the Fed statement, except a little more cautionary language re inflation.  But, they blame it on higher oil prices, which they then shoot down as being transitory.

On another note, the homebuilders ETF XHB has finally reached its Butterfly’s 1.272 Fib level and completed the RSI back test we’ve been watching.  I’m opening a 5% short position in our model portfolio.

And AAPL, everyone’s favorite stock, is nearing another Crab pattern completion in the thin air just beyond the rising wedge in place since 1994.  Look for a reversal just shy of 568, which would tie in nicely with NDX Crab pattern discussed below.

UPDATE:  2:10 PM

RUT and IWM continue to push slightly higher, but show every sign of being stuck below their previous highs — with RSI back tests, TLs off the previous highs and Bat pattern completions looming just overhead.

Just an observation, but I’ve seen a big uptick in insider sales over the past couple of days (CEO’s, Chairmen, CFO’s… Google, Qualcomm, etc.)   Think they know something we don’t?

Meanwhile, NDX is approaching its 1.618 target of 2687, and is approaching its own rising wedge apex on the weekly chart.

The Fed statement is coming up at 2:15 PM EDT.  See you on the other side.

UPDATE:  12:40 PM

SPX has breached 1381.50, but seems to have stalled here.  If it doesn’t hold here, the next step higher should be 1400-1405.

I’ve adjusted the RSI TLs to as bullish a position as I can imagine, and there is room for a slight push higher.  A tag of the dashed yellow RSI trend line should complete the back test; although, SPX prices themselves could go higher as a result of the negative divergence already present.   The RSI section is expanded in the chart below.

Interestingly, the 1.618 of the small Crab pattern (in purple, at tip of r.w.) we discussed below is at the absolute apex of the rising wedge on the daily chart.   I’ve seen this pattern play out many times before, where the break down of a rising wedge results in an overshoot of the previous high, tagging instead the wedge’s apex — such as this occurrence in 2009-2010.

Here, the final push beyond the apparent break down of the rising wedge was a Crab pattern (red) that played out precisely to the 1.618 extension and, also, within 9 points of a Bat pattern (purple) off the Mar 09 low.

The exact same thing is happening with VIX, which is tagging the apex of the falling wedge VIX had been in prior to its break out and exaggerated back test.

UPDATE:  10:55 AM

VIX has broken one of the trend lines we discussed yesterday and is holding at the other…for now.

The close up shows a tag of the TL, as well as the expanded channel we discussed on RSI and a drop well below the lower Bollinger Band and a tag of the yellow price trend line (formerly known as the falling wedge.)

UPDATE:  9:55 AM

Stocks holding on to the overnight ramp courtesy of positive German sentiment survey…  just bested the previous high by a smidge, setting a new high of 1378.75.  Two leading outcomes are a double top and a bullish Crab pattern.

The double top, which is intact as long as the beat of 1378.04 isn’t by “much,” also means the back test we’ve been watching on the daily RSI holds.   The 60-min chart above shows the back test holding at a trend line connecting Feb 3 and Mar 9.

The alternative view, a Crab pattern, complements the fact that we’ve completed a small inverse H&S; pattern with 1340 as the head and 1375ish as the neckline.  The target would be around 1410, though the 1.618 of the potential Crab comes in at 1401.53.

To move that high, of course, means breaking through 1381.50 — the original Gartley target from the huge 2007-2012 pattern.  This target was never quite reached, and I continue to think SPX wants to tag it once and for all.  It’s the purple Fib line marked 78.6 – 1381.50 on the above chart and Point D on the chart below.

A close up of the daily chart shows the RSI is currently beyond the limits of a back test, but what counts is the value at the end of the day.  Though, I could live with a slight overshoot on the day. 

 

An extreme close up shows how RSI has gone sideways more than anything the past two days.  In any case, we have significant bearish divergence on the daily chart.  I’m prepared to scale back shorts and add long positions at 1383 if the technical picture turns positive along with prices.

ORIGINAL POST:  7:30 AM

The ECB reported that banks utilized its emergency overnight lending facility to the tune of EUR15.61 billion Monday — a doubling of relatively high interest rate (1.75%) borrowings since Friday’s EUR632 million.  Deposits remain elevated at EUR795.2 billion — with most of the banks’ borrowings under the LTRO going directly back to the ECB itself.  Total borrowings (two operations) under LTRO now total EUR1.02 trillion.