Today’s action should serve to let off some steam after a rather ferocious bounce from last week’s lows.  The horses that took prices higher are all backtesting key support levels.  Whether or not they will hold is the question on everyone’s minds.

SPX should reach Friday’s target lows without too much trouble — being that it’s no longer Friday.  Remember when stocks used to occasionally sell off into the weekend?  Note that our current forecast has been updated.

I’ve also updated charts on NYSE, RUT,  COMP XLF, VIX, EURUSD, NG and GC over the weekend and will be posting these throughout the day.  If you haven’t yet signed up for automatic notifications and/or twitter alerts, this would be a good time to do so.

continued for members…

SPX has Fib support at the gray .382 (1969.28) as well as the red channel midline which I show as around 1972-1974.  Depending on when it occurs, the backtest could also count as a tag of the rising purple channel midline.Note the bright purple box up around 2076 around Sep 7.  This represents the notion that SPX will break out of the falling red channel over the holiday weekend.

USDJPY dropped almost all the way to the SMA200 again, but should focus on the red .618 at 121.78 going forward.  It has TL support at 120.984 should SPX need a little prompting to reach 1969.28.And, CL is back above the long-term trend line from 1998.  I don’t view this as sustainable, and expect to see a return to the rising white channel midline (42.51?) sometime in the next few days. UPDATE:  10:03 AM

SPX just tagged the .382, reaching 1968.02 so far.  The purple midline is a little lower, as are moving averages on the 60-min chart.  I’d hold the short a bit longer, at least until CL and USDJPY signal a reversal.  Stops at 1969.28 would make sense.

Remember, the purple channel is in its infancy.  I took my best stab at it, but the midline could be off by a bit.

UPDATE:  10:25 AM

UPDATE:  10:51 AM

The rebound is losing momentum……possibly because USDJPY has reached a small scale .618.  It appears to be poking through, but watch for a reaction.  If it’s rejected, I’d want to be short again.UPDATE:  10:57 AM

UPDATE:  12: 38 PM

Well…it was rejected, but hasn’t broken down.  In fact, it’s trying to break out.  Complicating things, CL has shot 6% higher on the day — supporting SPX’s melt-up along the SMA200 on the 5-min chart.  Unless USDJPY breaks down in the next few minutes, it’s time to abandon the short position, currently at 1981.  Note, however, that the purple midline is rising pretty rapidly.  It would be possible to tag it without a lower low later in the day.  UPDATE:  2:40 PM

Apparently, no one else believes this decline either.  SPX has gone sideways all day, with every opportunity to go ahead and tag the purple midline.  Now, it’s found support on the little white TL from last Tuesday’s lows.

CL is now up 8.5% on the day and within spitting distance of our 50 target — an incredible 30% gain since Aug 24.  How’s that working out for you, Japan?  Ready to play ball, yet?  CL has no doubt maxed out here, but USDJPY is also bumping along sideways.  So far, no effort to backtest and take off.

UPDATE:  2:55 PM

Although I’d feel better if USDJPY tagged that white TL.  Maybe after SPX gets going…   UPDATE:  3:04 PM

SPX has backtested the midline of the falling white channel we constructed.  This is potential overhead resistance, so I’d be cautious until this is cleared.  Keep an eye on USDJPY, CL and NKD for clues.Note that when SPX returns to the top of the white channel, it will have completed an IH&S that targets 2011ish.  This would be close to the cluster of Fibs between 2013-2015.

For now, the next higher target is the channel top (1982ish) followed by 2000, possibly by the end of the day but more likely early tomorrow.  Tightish trailing stops are advised, and I’d bail on any move below the purple midline — currently around 1968.  It would potentially signal a further drop to 1957.34 or so.

But, I don’t expect it.  I expect the IH&S to play out and SPX to continue at a nice clip tomorrow.  I’d be long overnight if you’re able to hedge and/or monitor your position.

I want to get those other charts up, so I’m going to sign off and focus elsewhere for the rest of the afternoon.  I’ll try to check back in if anything dramatic happens.