Watching the eminis this morning…

Rallying with the dollar again…   Something’s gotta give.

We discussed what a push up to the white midline would mean last week [see: Dollar Daze.]

As SPX approaches the white .618 at 1573.93, we’ll find out whether the H&S Pattern is still in the cards.  Note that this is the .618 retracement of the 1597 to 1539 decline between Apr 11 and Apr 18.  It was our secondary target, as discussed yesterday [members’ section: 2:35 update.]  And, it’s arriving right on schedule.

We’ll look for a pullback here to backtest the neckline just established (1561.50) and then a rally to 1567 either late in the day or (more likely) tomorrow morning.  From there, though, I’d give a continuing rally to the 1574 level a 60:40 shot.

The beauty of investing with harmonics is not so much that they tell you where the market is going — although that can be nice when it works out like this.  It’s that you know relatively quickly whether or not you’re on the right side of a trade.

I’m going to take the 19-pt profit on our interim long position (from 1555 yesterday) and revert to full short here at 1573.70.

Obviously, SPX has quite a head of steam going, so loose stops make sense here.  I’ll likely reestablish a long position if it moves strongly through 1576.

UPDATE:  10:25 AM

So far, so good.  The MM are making their move to stop out the weak shorts.  Remember, 1576.09 was the 2007 high and a key level of resistance/support.  Many traders would naturally use it in setting stops at, say, 1577.

I’m going to hold short here, as all my other indicators continue to point south.  It might seem a little counter-intuitive, but the bulls need a retreat more than an advance right now.  A 10-20 point reversal would set up a potential Inverted Head & Shoulders Pattern that targets 1617 or so (shown below in red.)

Whereas, a push through 1577 would likely fizzle out at the white .786 (1584) or .886 (1590.)  But, I’ll keep an eye on it, anyway.  The best laid plans, etc…

SPX has obviously pushed back into the purple channel from the Nov 2012 low of 1343, the bottom of which is way back at 1568.  We’ll take a look at what this does to the medium and longer-term scenarios.

BTW, I am posting the updated charts for DJIA, NYA and RUT this morning.  NYA is already updated, and I’ll get the others up ASAP.

continued for members…NYA is backtesting a rising wedge and possibly completing the right shoulder of its own H&S Pattern.  If it reverses here at 9100-9116, it will likely find its way down to the lower channel line at the H&S target of 8515ish.  They intersect around May 14 — which is my favorite target date for the next significant low.

As I was typing that, SPX pushed up beyond 1577 and just tagged 1578.27.  I’m very hesitant to climb on board, as this looks very overbought to me.  Note this a backtest of the white midline on the 5-min RSI chart below.

And, the 15-min RSI shows an extreme at the intersection of two channel tops.

The Rodney Dangerfield of Fib lines — the .707 — is just ahead at 1579.38 (the square root of .500.)   I’ll consider adding an interim long if we top it.

It’s worth noting that a reversal at the .707 instead of the .618 means a Bat Pattern isn’t really in the cards unless we count the 1560 high on Apr 22 as our Point B.  It was a 12 point reversal that lasted only an hour, so I’ve not considered it that important before.  But, it was the .382 Fib, so it is a credible option.

If the .707 should end up being the Point B, it points to a Crab Pattern — which, in this case, would target the 1.618 at 1635. Though we would need to be wary around the .786 just in case it was the Point B in waiting.

If the .382 Fib was our Point B, then a Bat Pattern at 1590 is a real option. In either case, a push beyond 1579.38 justifies an interim long or even a short cover — not because the move to 1584 or 1590 is so juicy, but to protect against the possibility of a Crab Pattern playing out.

One big tell would be where we close.  Obviously a reversal back out of the channel (about 1565) would be very beneficial to the bears’ case.

UPDATE:  12:24 PM

Just tagged the .707 at 1579, so I’ll switch to the long side and plan on re-shorting at the .786 (1584.23) or the .886 (1590.36.)  Stops around the 1576.09 former high.

I’ve adjusted the IH&S neckline and rising white channel to reflect the .786 as today’s high.  The channel looks like a decent fit.

And, the IH&S targets a slightly higher level of 1632 — close enough to the white 1.618 of 1635.25 to call it a good fit as well.  If we should get a reversal there, a drop to the intersection of the just-broken white channel (I’ve changed it to red, below) and the purple channel bottom — around 1568 on Thursday — would set up a right shoulder that’s roughly parallel to the left.

UPDATE:  1:08 PM

Just got stopped out on the long position, so short from 1576.  Will go long again at the 1566 level mentioned above or the purple channel bottom at 1564.  Charts in a minute.

UPDATE:  1:12 PM

Not sure what that was, but we’re back at the channel bottom.  Long again, with stops at 1561ish.

UPDATE:  1:15 PM

Apparently someone was able to phish an AP tweet that there had been an explosion at the White House.  That was intense!

Pardon me while I reset a few passwords.

UPDATE:  1:45 PM

Apparently there was no bombing, just someone who probably bought a few thousand puts and had some fun at the market’s expense.  We’re back above our stop level of 1576.

I guess we have an undisputed Point B, now.  In other words, that move takes away a lot of the impetus for a .786 or .886 reversal.  We simply wouldn’t need one in order to complete a Crab Pattern to the 1.618 up at 1635.

On the other hand, it increases the odds that 1579.58 was the top for the right shoulder of the traditional pattern.  I need to spend a little time studying this.  I’ll stay long for the moment with 1576 stops.

UPDATE:  2:20 PM

Just got stopped out again, although a lot less drama this time than during the Twash Kwash.  Back to the short side, with stops at 1577.

It seems to me that episodes like this might serve to instil a little more caution in a market that’s forgotten the meaning of the word.  QE_n didn’t stop the market from dropping a quick 1% based on a tweet; and, it won’t stop the market from dropping a quick 5-10% when something big actually does happen.

For the big guys using algos and the little guys like me who believe in stops, these things are good opportunities.  For everyone else, they’re understandably scary.  Maybe this tilts the market a little more bearish.

UPDATE:  3:25 PM

It doesn’t seem to have distracted SPX from its appointment with 1584.  Here we go, with the last-30-minutes-of-the-session ramp job.  I guess TPTB need to show all the folks sitting at home that everything is all right in the markets.

Just got stopped out on the short position at 1577.  I’ll take an interim long here at 1577 to play the upside to the .786 at 1584.23.  Key levels: 1578.75 and 1579.58 on the upside, 1576.09 on the downside.  It’s tight stop time again.

For those who have been waiting patiently for the RUT charts, here you go.  If SPX closes in the channel today rather than reversing to 1565 by the close, there appears to be upside to the channel top — currently around 935.

But, like SPX, there’s plenty enough of a right shoulder to call this a H&S Pattern that’s 5/6 complete.  A reversal to 900 would complete it all the way and target 841 — near the.886 of the May – Oct 2011 crash and very close to the bottom of the rising wedge in the next week or so.

It looks like SPX is going to close in the purple channel today.  So, we’ll call this a bullish sign and stay long into the close (unless there’s a quick reversal or tag of 1584 in the next few minutes.)

DX is still going strong, but hasn’t yet reached the .786 or .886 of the latest decline.  So, we’ll still look for 83.258 – 83.446 on a breakout of the RW — as soon as SPX gives up the ghost.

And, the EURUSD looks like it’s due for a bounce here at the intersection of the bottoms of the rising purple channel and the falling wedge.

I have fund biz to attend to; will try to post later tonight.

GLTA.