Caution Advised

With a positive August within its grasp, ES is bumping up against its SMA50 again. Only this time, it has DJIA’s completed IH&S and VIX’s breakdown on its side.

Our analog remains on track, with another potential turning point today its next test. Bottom line, don’t go into the holiday weekend without protection.

continued for members… SPX has no shortage of upside targets. The SMA50 at 2945.60 and .618 at 2949.34 are the initial resistance. If SPx can push through then there’s the .707 and 1.272 at 1967.40, .786 at 2983.93 and the .1.618/.886 at 3004. July’s close was 2980.38.

The most important key will be VIX. Can it drop through 17, even intraday?

Also important — USDJPY, which is currently above its SMA10/20 and potential up to the SMA50 at 107.27 or the channel top around 107.83. CL is still hovering around its SMA200 — with great signalling potential.As we discussed yesterday, the analog called for a new high today — which would suggest at least the SMA50 or .618 at 2949.34, both of which would exceed the Aug 13 high of 2943.31. But, that high was so close to the .618 as to suggest a rise to the .786 or .886 from a harmonic standpoint.

The .786 would allow SPX to register a slight gain for the month and would also intersect the yellow midline — a nice plus. It would also align with ES’ flag pattern and channel midline at 2985.

Last, we can’t ignore the synchronicity of the .886/1.618 combo at what is also the top of our big falling white channel. We’ll see what transpires throughout the day, but this has been my favorite target for quite some time — well before SPX started having trouble with its SMA50.

Given that DJI has completed a big IH&S but spent the night at its neckline, there’s a good chance that whatever rally we get today unwinds by the close. If DJIA closes back below the neckline, it’s as though it never happened.

UPDATE: 12:46 PM

At the halfway mark, and it’s been a pretty wild day so far, with the overnight ramp failing almost immediately after the open. If Trump had tweeted that he was delaying tariffs instead of insulting small business owners, we’d still be on the rise…

SPX is back to even on the day, but just barely.

ES is holding the little red TL since testing its SMA100 – but, it doesn’t feel very stable yet.VIX broke out and is currently having trouble getting back below its SMA10, let alone the SMA200. DJI is back above its neckline at the moment. USDJPY and NKD are doing their part of prevent any damage, but have yet to ramp stocks higher. CL is one of the biggest problems… sitting below TL resistance and barely above the yellow TL. It’s going to need to make some big moves here if SPX is to see new highs. It’s running out of time.On the whole, this is not a very inspiring rebound. It looks like we’ll close flat — at DJIA’s neckline as occurred in 2015. If so, the odds of our analog playing out — a big downturn beginning Tuesday — get a boost.

UPDATE: EOD

In the end, the complications involved in letting the Dow’s IH&S play out proved to be the limiting factor.

Again, the rally was well short of what our analog said, even though the timing was right. The next drop, if it follows the 2015 path, should be an A-B-C drop that looks something like the one below. There’s still some question as to whether we should treat 7/26 (the actual top) or 7/30 (the forecast top) as day zero.

So far, the turning points have fit better with the 7/30 starting point, so I’ll got with it until proven wrong. If it holds, then we’d be looking at an an initial slide to next Wednesday Sep 5, a bit of a bounce, then the rest of the drop on Sep 11 or Sep 12.In 2015, the initial drop didn’t quite reach the SMA200, while the second drop overshot it. But, keep in mind that here in 2019, some of our drops have been steeper and deeper than back then. So, don’t get too attached to a particular day if you’re trading this thing.Likewise, the bounce from day 32 (July 7) up to the July 20, 2015 highs back then was pretty impressive — nearly a complete retracement. Given that this market has seen very muted bounces by comparison, I’ve inserted some more modest bounce points.

Depending on how much selling pressure there is, we could finally see the USDJPY break down and tag the .886.

And, given that RB and CL have been hanging on the past few days, I think they’re both likely to drop to their next lower targets. VIX is interesting in that it’s about to complete a small IH&S pattern (yellow neckline) targeting 21.44……as well as a larger pattern targeting 30.67 (purple neckline.)