SPX made a minimal backtest of the red channel top yesterday as anticipated. From our initial post:
If the .618 [in CL at 48.46] holds and the bounce is strong enough, then look for SPX to hold at the broken red channel top (and white channel bottom at 2102) coming up shortly.
CL’s .618 Fib level did hold, and the bounce was strong enough that after SPX reached our target (2103.20) low for the day, it rebounded to 2110.70.
Last night, CL bounced a second time at yesterday’s bottom.
And, USDJPY ramped higher — the better to convince us that the Fed’s dedication to higher equity prices ain’t going away anytime soon.
Aside from that…not much going on in the markets ahead of Yellen’s congressional testimony. Expectations are for a non-event, and the early morning trading certainly reflects that. However, it would be a rare Humphrey Hawkins day that didn’t produce some significant price action before it’s all over.
A few other news blurbs…
- Case-Shiller put out a less than rosy report on housing sales trends.
- JPM brings NIRP (negative interest rate policy) to the US.
- Greece says the eurozone approved its latest offering
And, here’s an interesting interview (aka book promo) with Dr. Pippa Malmgren, former member of the Plunge Protection Team. Best quote:
“There is no price discovery anymore by the market; governments [are] imposing prices on the market.”
And, with that, we’ll tune in to Chair Yellen’s testimony.
continued for members…UPDATE: 11:15 AM
USDJPY reversed at the white .618, and has tested the rising TL from last Monday.
VIX has reached potential Fib fan support.
And, DX is looking weak.
In the mix, SPX just reached the red 1.618 at 2116.36 — a potential turning point. Though, it’s important to note the purple .1.272 (2124.19) is probably the better target, and that the yellow 1.618 is just ahead at 2138.
At some point soon, the rising white channel will yield to the purple. It will probably involve a dip to the purple midline — currently around 2088, which is also the SMA10.
I have left the red dot roughly in place because a drop to the SMA10 and the purple channel line there would be more supportive of another leg higher. But, past FOMC-driven algorithm ramps haven’t always played by the rules. More often than not, they bust through resistance and/or chart patterns, and later come back to backtest them.
Looking at the e-minis, the red 1.272 looks like a decent target, with a prior sharp reversal at the .786 (unlike SPX.) It suggests the 2124 rather than the 2116 target for SPX.
