SPX is only about 2 points from completing a Gartley Pattern at the .786 retracement of the move down from 1438 to 1411 — smack in the middle of the upside target range I charted yesterday. There is still potential to the .886 at 1436, so set stops accordingly.
The EURUSD and DX remain positioned for sizable moves.
continued for members…
UPDATE: 9:45 AM
We got the .786 tag at 1432.87. I’ve closed Friday’s short-term long at 1433. But, as discussed yesterday, the .618 reversal at 1428.23 yesterday morning leaves open the possibility of a Bat Pattern completion at the .886 Fib at 1435.55.
Note, also, that this is a smaller pattern among larger, potentially more important ones.
For instance, we never quite tagged the 1.618 (red pattern) at 1439.49 on the 12th — not to mention the .786 or .886 of the 1474-1343 drop itself (larger, white pattern) at 1446 and 1459 respectively. While not necessary, a tag of either would tie things up in a nice neat bow.
UPDATE: 10:15 AM
The EURUSD continues to inch higher, though it’s well past a point of any support and is showing negative divergence on every time frame.
The tangle of channels drawn between May and December is a little difficult to follow, but suffice it to say that every possible alternative shows channel resistance at current levels.
If, for whatever reason, the pair pushes through key resistance, the next higher Fib level is an .886 at 1.3320.
UPDATE: 10:50 AM
SPX is showing more strength than I expected. I believe the .786 at 1446.44 is in play, so will ride along on the upside with any sustained push through 1440 — likely just an intra-day trade. Watch out for the double top as we’re seeing on the EURUSD.
There is a channel coming into play (below in red) that I haven’t talked about much before. Along with the yellow channel SPX just poked above, I believe it will probably put an end to this 2nd wave up — though we could still get that intra-day push to the .786.
UPDATE: 1:10 PM
SPX just tagged the .786 mentioned above, pushing just beyond 1446.44. I’m closing my intra-day longs (again) here at 1447 and will see what kind of reaction we get here. Charts in a few.
UPDATE: 1:20 PM
SPX just tagged the apex of the rising wedge (in purple) that broke down on the 13th.
Bottom line, it’s quite normal for a wave 2 to retrace 78.6% or even 88.6% of the wave 1 decline — especially when there is so much at stake, as is currently the case — from a political and economic standpoint. Though I’m hedging my shorts, I’d rather be racking up gains here. So, if the analog breaks, I’m just as happy to switch sides.
Just remember that this analog has had its peculiarities, such as the .618 drop to 1343 verus 2011’s .500. So, a .786 wave 2 (versus .618) doesn’t particularly concern me. What does concern me is a low-volume ramp job by the Plunge Protection Team.
The downside case is so apparent, and justified by the macro picture (not to mention the impossibility of a “good” outcome in the fiscal cliff mess) that the PPT surely understands the importance of taking a stand here.
If today’s gains can be held and added to, even slightly, we might be seeing a break-out. But, I have some more charting to do first. The dollar continues to weaken. The white channel is in danger of breaking down unless we get a reversal soon. More asap.
UPDATE: 3:30 PM
Despite the apparent strength of today’s rally, I believe the downside case is still intact. Consider the following charts (I’m using SPY to present a less cluttered view.)
Try as I might, it’s difficult to see the latest rally as anything other than a back-test of the recently broken white channel. As a bonus, we’ve tagged the 75% channel line within the purple channel. We’ve also retraced .786 of the drop, which is perfectly normal for a corrective second wave.
The daily RSI channels are also very compelling. RSI should see resistance from a falling red channel line as well as two rising white channel lines — one major and one minor. They both parallel prior channel lines, which adds credibility.
The larger white channel line, in particular, is typical of those that signal downturns. Having been broken in early October, it is being back-tested. Many other such back-tests have produced significant downturns, especially when they occur at the intersection of a significant channel line.
BTW, this works for bottoms, too. And, it further legitimizes the channel lines selected.
The dollar is the one chart that has me wondering a bit. DX has retraced 78.6% of the September 14 low (as opposed to EURUSD, which has retraced over 100% of its high.) Again, a .786 2nd wave is not unusual.
But, there was no appreciable .618 Point B on the yellow grid, so a Gartley isn’t specifically indicated — leading me to believe a Bat at the .886 (79.043) is still on the table.
With EURUSD so overbought, though, I wouldn’t be surprised to see a move to the .886 occur overnight or intra-day tomorrow morning.
Several other fast movers are also hitting channel resistance and/or completing back-tests. Hmm…
Comments
11 responses to “Charts I’m Watching: Dec 18, 2012”
PW–of the significant declines shown on your daily SPX chart with RSI tops and bottoms highlighted, notice that the RSI always displayed a Class A or Class B negative divergence at the daily chart level. Unless we get close to or pass 1475 with a lower RSI reading, we don’t have that important ingredient for a significant decline. JMHO.
Hey Newb — check out the last chart on Wednesday morning’s post. I think you’ll find it interesting.
Really like the blue box. I won’t be as quick as other seasoned traders to spot your intent. So clear indication of your intent and action is appreciated as I kind of missed your Friday’s long position.
Seasonality is just too strong now. Republicans all appears determined to get a deal done (what a difference a few months made). That puts a a floor in the market. As you can see the market did not drop when Boehner said there wasn’t progress while rallied when any slightly positive news came out. That means the market is not ready to go down.
I suspect we won’t see any serious pullback before the end of the year. No politicians will spoil the party, Europe, US, Japan or China.
Look at momentum stocks like AMZN, eBay, banks. People are buying. Very tough to see selling causes.
Guess we’ll find out soon enough.
Recently the boat is listing heavily to the call side as well.
Yes! ISEE calls/puts Monday hit a 52-week high of 208. http://www.ise.com.
PW, What day does today relate to in the analog? Is it still in play?
Day 75. Yes, I believe it is. I’m working on some charts to make sure. Will post as soon as I’m finished.
Hi Pebble,
What is your current sense of timing for the decline? I know based on the analog you’d expected it to begin already – but we are getting into a thinly traded holiday market with bullish seasonality. Do you still expect a sharp decline to begin in the immediate future, or at this point is it likely to wait a couple of weeks until after the holidays? (I imagine waiting that long would stretch your analog past the breaking point). Thanks…
This looks like a .786 retracement of the 1474 – 1343 wave 1 down. I don’t mind the analog being stretched a week or so, but beyond that I’d be concerned.
Positive seasonality at play here. From the clues I am looking at, I fully expect your targets to be met. However, patience is required until Santa has finished his work.