We got the reaction on the dollar and euro we discussed yesterday afternoon.  So far, it’s pointing to a continuing sell-off of equities.

continued…

The channel target – now at 1393-1396 – remains the most likely objective.  As we discussed yesterday, the RSI chart shows substantial support just below.

I’m trying out a different set of channel lines this morning — the purple lines in the chart below.

Here’s a close up:

UPDATE:  10:10 AM

The move down has broken a few smaller falling wedges, so I hesitate to slap a new pattern on the chart.  If nothing else, it might influence movement within what could also be a lopsided channel — meaning all the action is on the lower half right now.

We’re getting a bounce off the lower bound at the moment, but the wedge and midline are above at 1402 and 1404.  The prudent course is to be short unless either is broken; but, as can be seen, this could result in lots more whipsawing action — the name of the game lately.

The purple .886 Fib level is for the smaller of our patterns — from 1415 to 1266.  It has had lesser impact on prices than the larger, red pattern from 1422 to 1266, but it’s worth keeping an eye on anyway.

UPDATE:  10:30 AM

I’ll bite on the “breakout” and try some longs here at 1400, with a target of 1407-8 and tight trailing stops (1404, again?) This will likely be a day trade — playing the channel swings and seeing what sticks.

 More in a few minutes.

UPDATE:  11:13 AM

Prices stalling here at the fan line from 1576 (through the 1419, not 1422). But, the RSI indicates it’ll make it at least to the other side of the channel.

UPDATE:  11:42 AM

Went ahead and closed out the longs for a quick 9 points at the channel boundary and the .618 of the last drop.  Will try some shorts for just a few points — probably 1402-04. Stops on the breakout at 1410, which I think is fairly likely this time.

Charts in a bit.

UPDATE:  12:48 PM

SPX threatening to break out here.  I think it probably will, and am going long again here at 1409 with a tight stop at 1407.

Here’s the 30-min chart, that shows we’ve broken and back-tested resistance.

BTW, that white TL we just broke is our neckline from the Feb-May Head & Shoulders pattern.  I’ll adjust my stop to 1407 to allow for a back test of it.

The EURUSD also looks like it wants to break out here – perhaps heading for a higher high on negative divergence (the top white TL on the RSI.)  I still think we have a shot at the .886 at 1.2617.

DX is stalling, but the 15-min RSI has broken through key support and hints at lower prices.

UPDATE:  1:35 PM

If SPX does break out here, we’ll need to watch the .786 (1412.25) and .886 (1414.06) levels carefully.  That wasn’t much of a reaction at the .618.