ORIGINAL POST:  9:15 AM

E-mini futures are up big overnight, but have yet to exceed Wednesday’s high.

A positive revision in BLS’s Nov and Dec employment numbers makes 2012 look better than it did, but I’m not sure how it helps today’s 12.3 million unemployed or 8 million underemployed or 2.4 million marginally attached…

 

Markit Mfg PMI actually a little lower than Jan 24 flash numbers.

Verdict: not chasing this ramp job unless it exceeds recent highs — which I don’t believe it will, at least not from this news.

Remember, we have Reuters/U of Michigan Consumer Sentiment coming up at 9:55 and ISM’s Mfg Report on Business at 10:00.

Watch the channel midline here…

continued for members…

Getting another little bump from the Consumer Confidence and ISM reports, details in a few.  Just crossed 1509.

I’ll play along on the upside, but will keep a tight rein on the downside, as the upside is likely only to one of the two 1.618 targets in our range (1515.24 or 1518.57.)

With the push through the white mid-line, look for a back test to 1507.50 or so.

UPDATE:  10:40 AM

Setting up for Crab completion at 1518 — also top of white channel.

Watching the 15-min RSI white channel — tag of top appears likely (higher lows, higher highs.)  But, momentum is bleeding off fast at the moment.

UPDATE:  11:15 AM

Midline held on the backtest and SPX just topped 1511.  The daily RSI that we left off with yesterday shows a nice rebound and negative divergence — the conditions I felt were most likely going to be consistent with a top (3 of last 4 tags of yellow channel…)

I’ve mentioned this before, but it’s worth repeating: the daily RSI only shows the EOD value.  So, the upturn from below the white midline would completely disappear if we were to reverse strongly on the day — something that can easily happen with tops.

So, it’s always a good idea to examine 60-min and 4-hr charts, too.  The highs and lows they print can’t be erased as easily.  Thus, they offer hints as to the shorter and longer-term moves.

The 60-min RSI below shows both the upside case (the white channel) and the downside (purple.)  It’s no guarantee, but the break out of the purple channel offers support for the notion of higher prices.  Best guess at this time is that the white channel midline will be tagged at the “top.”

It pays to try out alternatives based on that assumed target area to see if it really makes sense.  In other words, is there a new channel that would logically be formed with a move to that RSI level?

Here’s an example, building off the above chart.  I look to see which charts have the best fit (the most significant reversals off the different channel lines.)

Yellow probably looks best, with two bottom tags and a top tag to go with several interior reversals.  It would have a H&S feel to it with a reversal anytime soon, and I can envision the yellow 75% line (which was tagged in 7 previous reversals) matching up with a 1515 or 1518 price level.

The DJIA reached that important 14,000 mark the talking heads have been going on about for the past two weeks.  At least we won’t have to listen to that drivel any more (how long till we’re hearing 15,000?)

UPDATE:  2:30 PM

S&P has topped 1514, reaching 1514.41 in the past half-hour.  There are likely no more than another few points left in the rally, so I’m comfortable taking profits here and re-shorting.  If SPX goes any higher, it should top out around 1518.

1518 still lines up exceptionally well with several key chart patterns.  But, there are likely enough enlightened investors watching these levels that the market could fall a few points short — especially if sellers/shorters get spooked as the market makers are sure to try to do.  If you’re like me and thinking about holding out for the last few points, at least set a stop just below 1512 or so.

Note 1518 is the purple Crab Pattern’s 1.618 and just past the red Crab Pattern’s 1.618. Also, a trend line drawn through the Jul 21, 2011 top and the Apr 2, 2012 top slices precisely through 1518.57 today or Monday.

Not just close, but exactly through 1518.57.  It also comes within 23 cents of the Sep 14 high (1474.28 v 1474.51.)  This reversal is either highly probable or one of the best fake-outs of the past couple of years.

Here’s a close up of the daily chart:

RUT daily closing in on a flock of Fibs… 920-933 looks ripe for a reversal but, as always, use stops.  The white 1.618 at 1020 intersects with the white channel midline in about 2 weeks and RUT needn’t top on the same day as SPX.

DJIA, likewise, has more potential upside –maybe 14,145.  But, it’s running on fumes.  As tempting as it is to hold equities into the weekend, I think there’s more risk than reward.