Keep an eye on the channel we’ve been charting since Tuesday.  If SPX breaks out, it’s time to take an interim long position.

Upside potential if this is only a countermove is the white channel midline around 1561.45.

UPDATE:  10:00 AM

Things are happening faster than I can type this morning.  We just reached the white channel midline and are still going strong.  I’ll set stops here and see if we can reach the purple .25 line at 1563.40.  Charts in a few…

UPDATE:  10:12 AM

Almost reached the .25 line and immediately backed off, triggering stops on my long position at 1561.45.  Reverting to full short.

The falling purple channel I’ve inserted is more a place holder than anything else.  It’ll give us something by which to judge the upcoming moves.

UPDATE:  10:45 AM

Here’s the chart I’ve been focused on this morning.  Even with all the whipsawing, the 60-min RSI shows a likely move lower to tag the bottom of the big white channel.  The reversal at 1562.60 came in slightly higher than the midline.

But, as the chart shows, many of the reversals have missed a precise midline tag — making reading RSI channels equal parts science and hermeticism.  Remember, each data point happens on the hour, so the current blip lower than the midline could reverse itself and turn higher in the next 20 minutes.

UPDATE:  11:15 AM

Seeing some support at the (new) proposed channel midline.  Stops at 1561.50ish.

UPDATE:  1:20 PM

I’ve had several questions about whether the push lower than our original 1560 target busts our leading forecast.  Many hours of charting later… I don’t think so.  Once SPX broke through 1560, we targeted 1549 — which we came every close to tagging yesterday (1549.80.)

I had no objection to taking the 23-pt profit, but I think there’s more where that came from.

continued for members…

If SPX runs up to the top of the falling purple channel again (about 1557-1558), it will have formed a potential Butterfly Pattern with the .786 at this morning’s low of 1552.52 and targeting the 1.272 at 1546.32 — 0.10 away from the Mar 25 low.

More importantly, though, it would represent a .786 retracement of the rise from 1538.57 to 1573.66 (red pattern below.)

If it happens really quickly, a fall to 1546 would tag the intersection of the red .786, the bottom of the white channel, the bottom of the big rising purple channel, and the midline of the falling purple channel.

If we get a clean tag on (especially) the red .786, it will seemingly set up a Butterfly Pattern to the downside 1.272 or 1.618 (1529 and 1516.)  This is a move that could excite the bears and would draw in a lot of put buying.

However, by tagging the bottom of the white channel, we could easily expect a move back to the top which, at that point, would be around 1576ish, also the neighborhood of the yellow 1.618 and the purple 1.618.

I’ve placed purple Point D there (purple circle) around very late today or early tomorrow morning, which — if it worked out — would represent a 30-pt move to the upside.  It’s only one scenario, but it’s one I rather like.  More importantly, it’s the scenario that would confuse and collect the most in options premiums from bulls and bears alike.

If we don’t get a quick reversal at 1557-1558, then 1546 is much less likely. The bottom of the purple channel is rising quickly, and by the end of the session will be around 1549 (where it intersects with the white channel.)  In that case, the harmonic pattern to the upside would have 1549.80 as its Point A and would target the 1.272 at 1580.12 or the 1.618 at 1588.37.

Scenario #2:  if the move up through 1556.60 tops the white channel midline again, we’re probably looking at a Bat Pattern with 1549.80 as Point A.  Such a pattern would target the .886 at 1580.92.  And, there’s a very appealing target there next Tuesday where the large purple channel .25 intersects with one of the rising white channel lines.

In either case, I strongly suspect that any move that’s much higher than 1576 will terminate at the purple midline (though the rising red, dashed TL has stopped 8 in a row, now.)

On April 11, the midline of the purple channel intersects with the TL connecting the 2000 and 2007 highs (red circle.)  Also on Apr 11, the .25 line of the same channel crosses 1576 (yellow circle.)  So, take your pick.

But, unless North Korea launches a missile in our direction or some other headline risk comes to the fore, I still fully expect 1576 to fall.

UPDATE:  3:45 PM

Possible break out on the falling purple channel.  Getting very messy in here.  I’m not very fond of any of the patterns.  The Butterfly down to 1546.32 means a push below the white and purple channel bottoms.  While a push higher would run into horizontal resistance right at the intersection of the falling white/red channel line and the rising white channel.

I’m going to close my short position and go to cash here.  I think we’ll probably leak a little higher, but there’s too much resistance just overhead at 1562 to risk an overnight position.