Overnight…

The USDJPY continues to slide…

While the EURUSD shoots up past 1.34 again.

The harmonic picture for EURUSD just got very complicated.  Another test of the yellow channel bottom to match the last downside move?

The dollar, of course, is taking it on the chin — dipping below the low of Aug 8, but reaching its own supportive channel bottom.

The eminis tagged the purple 1.618 and got a bounce, and are currently up only .25.

There’s much focus on the 10-yr note, which is threatening to breach the 3% mark.

The harmonic picture indicates it will, with the pink .618 and white 1.618 together, just above at 30.13 and 30.17.

But, as the chart shows, there is resistance from the top of the purple channel, the top of the yellow channel, and the yellow .382 Fib line — not to mention plenty of intervention from TPTB working to keep it below 3%.

UPDATE:  10:30 AM

SPX moving through the white channel line; going long here at 1651 for protective purposes. Stops at 1650.

This is likely a fleshing out of the red channel, which has become quite lopsided with the price movement since last Thursday.  If SPX can break 1654.79, the next resistance is the white .786 at 1660.86.

Note that TNX has dropped down to backtest its broken .236 channel line.

UPDATE:  10:55 AM

One wildcard is USDJPY, which — though it made a new low this morning — is approaching the red .618 Fib level.

We might normally expect a significant bounce at the .618, but I believe the pattern is probably correctly labeled below.  Point B is already in at < .618, signalling at least a Bat Pattern down to 96.12.

Note the pair is still trading well below the latest H&S neckline.

continued for members…

UPDATE:  11:55 AM

Keeping an eye on the bonds… The 10 year futures have reached strong resistance at a longer-term channel midline.

UPDATE:  12:34 PM

We should get a reaction here at the red midine.  I’ll try a short position at 1657 and see if I can get a few points out of it down to the TL around 1650-1651.  Stops around 1658.15.

UPDATE:  1:02 PM

Nothing doing on the reversal.  Switching back to the long side here at 1658.

UPDATE: 1:50 PM

I’ve been doing some serious second-guessing this morning.  I’ve made the bearish case pretty clear over the past few days.  This morning, I’ve come up with what I think is a pretty good bullish case.

It starts with a drop from 1658 here down to 1651-1653 to form the right shoulder of an IH&S that targets 1672ish or the top of the red channel where it intersects with the yellow .886 at 1672.72.

I’m switching back to the short side at this time, as this scenario looks promising.  If SPX moves strongly back through the red midline, I’ll gladly switch sides.  Stops around 1659.

Now, the move could be completely done at 1672.  It would be the top of the red channel and the perfect opportunity for SPX to turn back down.  But, if it dipped just 10-12 points and rebounded, we would be looking at another IH&S targeting 1698-1700.

If it reaches 1700, SPX will have broken out of the white corrective channel (around 1687 on Friday the 23rd.)  A 10-15 point pullback there would open the door to a 3rd IH&S targeting 1750 — which happens to be the 1.618 extension of the move down from 1709 to 1646.

This is all highly speculative, of course.  We would this morning’s low of 1646 to serve as a big reversal.  And, that’s actually what put me onto the scent of this scenario.

If this morning’s low holds, it defines the perfect bottom of a channel that is the bigger brother to the purple channel that guided prices from 1343 last November to the 1687 top in May.

I The top of it, as we noted ages ago, reaches 1823 in late August — as early as the 26th-27th.  It’s simply wider now, having grown to accommodate the 1560 and 1646 lows.

Interestingly, it intersects with both the LT yellow channel midline and the white channel .236 at that specific time and place.

It doesn’t mean things will play out this way, of course.  But, it’s a heck of a coincidence.  It would obviously take some incredibly accommodative comments from the Fed when its July minutes are released tomorrow.

With employment still tepid and interest rates pushing higher, it’s hard to imagine the Fed pushing ahead with an aggressive taper at the moment.  But, we’ll find out soon enough.

Keep an eye on SPX (which has formed enough of a right shoulder already, but could easily do more) and DX (a close above 81 helps this theory.)

I have a conference call coming up, so might not get to post until after the close.  I’ll go long again on any strength through the red midline at about 1657, and would stay long overnight if SPX closes above 1658.70 or so.

UPDATE: 12:58 PM

Going to cash here at 1653.