My apologies for the late post this morning. My wife is having some health issues that made for a late night. Probably nothing…but, it left me a little groggy. Given the markets’ current state of flux, it makes picking an initial stance a little more challenging than usual.
So, we’ll pick up this morning where we left off yesterday — completing a very deep retrace of yesterday’s .618 opening pop, or angling for a .786 or .886 retrace of the move down from 1709? I’ll play along on the downside at the opening, but will watch for a reversal at the white .500 (1694.28) or .382 (1692.89.)
The USDJPY broke out of the very narrow channel it’s been in since establishing the latest right shoulder last Friday — a pretty decent bounce at the midline of the falling white channel.
We should see a backtest of the neckline and broken rising white channel, which we’d normally associate with a rising equity market. However, a deepening equity sell-off as I’ve been discussing could also provoke a more meaningful reversal in the USD’s fortunes.
It certainly looks primed to rebound — at the bottom of a channel and falling wedge and .886 retrace.
UPDATE: 9:33 AM
I’ll try going long here at 1695.14, stops at 1694. As yesterday, the key remains breaking 1700.18.
There’s also the matter of a potential falling channel with a (current) top around 1699 — increasing the importance of this price level.
UPDATE: 10:15 AM
The channel is holding so far, and the 15-min RSI looks like it’s running into resistance.
I’m going to get stopped out at 1694, so will play the short side. Stops at 1697ish.
There’s a high probability of being whipsawed here, though, as there’s plenty of support at 1688-1690, and the neckline of the potential H&S (yellow) at 1686. Charts in a few…
UPDATE: 10:25 AM
I still favor the downside case we discussed yesterday, though it’ll take a break below 1684.90 to confirm. Yesterday’s rally to within 4 cents of the 1700.18 high sure didn’t clarify things.
So, in the meantime, 1704-1706 remains on the table. This is definitely one of those times when it might be better to step aside and let the markets decide.
UPDATE: 11:00 AM
Getting some momentum going on the downside, but we’ll likely run into that support mentioned above — probably at the intersection of the falling white channel midline and .886 at 1689.72.
UPDATE: 11:08 AM
I’ll try a long position here at the channel midline — 1689.54. Stops at 1688ish, though that just sets up more whipsawing with the intersection of the .886 (of the rise from 1684.91) and neckline at 1686.65.
continued for members…
Bottom line, the charts are still a mess.
UPDATE: 11:20 AM
Back to the short side with the break of 1688.38, but it’ll probably be very short-lived: 1686 or so.
UPDATE: 11:27 AM
Back to the long side here at the neckline: 1686.02.
For those who might have forgotten, 1687.18 was the important May 22 high that kicked off the drop to 1560.33. SPX bounced hard and appeared to be headed for a Bat Pattern .886 retracement at 1672; but, it sliced right through the .886 and the potential double top — exceeding it by 22 points before this correction from 1709.
In other words, we’re right back where we started. It could be a second back test, or it could be that SPX is forming an important top. Either way, it’s a consolidation. And, it’s a break from all other large (95+ points) potential Bat Patterns or double-tops since 2007.
This, in itself, makes me wonder if an important top is playing out. Our rising red channel broke down on Tuesday, and the next major(ish) channel bottom doesn’t arrive until 1672 (it’s just an expansion of the old purple channel from 1343 in Nov 2012.)
The next real channel bottom is the white channel which signals 1576. As we’ve discussed, this would make for a nice flat (1687 to 1560 is almost equal to 1709-1576.)
I have no trouble seeing the move down from 1709 to 1684 as five waves, and the move to 1700 (both times) as a corrective flat. If so, this morning’s initial dip is a 3rd or C. We should see an initial move to 1694 or so.
UPDATE: 12:45 PM
Going short here at 1693.70. Possible 4 or A of 2? All I know is it tagged the intersection of two channel lines just below this morning’s initial low of 1694.13. Looks like a safe bet.
UPDATE: 1:30 PM
Looks like I was premature. If the .618 doesn’t hold, then the .886 at 1698.53 is back in focus. I’ll take a long position if it bounces off the .618 backtest.
UPDATE: 2:40 PM
Going long here at 1691.44; stops at 1690ish. The target is a Bat Pattern at 1698.53, but the .786 at 1697.12 is about where the channel top and the little white midline intersect at the end of the session.
UPDATE: 3:42 PM
Looks like no last minute heroics for SPX. Will try shorting here at 1691 for a few points prior to the close, stops at 1691.50.
While we’re waiting to find out, here’s a couple gold charts to chew on… Note that it’s running out of steam at the intersection of the white channel midline…
…and the top of the red channel.
Stopped out on SPX, going to cash.