Charts I’m Watching: Apr 23, 2013

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.

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