Charts I’m Watching: Feb 28, 2013

Yesterday was a great example of the beauty of Harmonics.  In conjunction with my RSI work and channel work, we were able to rack up 23 points on a day when the big picture is still fairly negative (remember Italy, the sequester, negative GDP, retailers’ horrid guidance?)

By drawing important Fibonacci lines in the sand, we made the market prove to us it had more upside by crossing those lines. As we’ve discussed many times before, Harmonic Patterns don’t, by themselves, always tell you what the market is going to do in a particular time frame.

But, they do an excellent job of “if-then” forecasting, such as “if the market reverses at Point A, we can be very confident of reaching Point B.”  Again, combining this information with other fairly reliable patterns, we can capture most of the points most of the time

The market didn’t fall out of bed overnight, so I’ll take a long position on the open this morning in anticipation of tagging the .786/.886 combo at 1521.11/1521.19 or the .886 at 1525.70.

Fresh charts in a few…

UPDATE:  9:45 AM

The channel placement is still somewhat speculative.  But, again, in a volatile situation like this, the market will show us whether it has more potential or not.

We are nearing the .786 retracement of the move down from 1530, and the .886 of the move down from 1525.  They’re on top of one another, lending added validity.  So, all else being equal, we can expect a reversal here — especially given the 60-min RSI chart.

Note we’re taking a 2nd crack at breaking out of the yellow channel at 61 — the range in which most moves fail.  Stay tuned.

UPDATE:  9:50 AM

Just tagged our target level, so I’m booking the 5 points from this morning here at 1521.29.

A strong move back up through 1521 opens up 1526.  The immediate downside target is around 1510 a combination of Fib levels and the next lower purple channel line (the 25%.)  If that doesn’t hold, the bottom of the purple channel is currently down at around 1494.

BTW, I’ve had a number of questions about the new fund in the works and the changes it might bring for this website.  I think the past few days are an excellent example of why a fund makes a lot of sense.  Yesterday, I was in and out of the market (on these pages) six times for a total of 23 points:

  1. Bought at 1497
  2. sold at 1507 (+10)
  3. bought at 1507
  4. sold at 1514 (+7)
  5. bought at 1514
  6. sold at 1520 (+6)

Twenty-three points on 1497 is a little over 1.5% — a decent day, especially given that it occurred on a bounce in the midst of a downturn, which are generally tricky.  Twenty or thirty of those in a year would be a great year for most investment advisors.

Given that it takes a few minutes to identify a situation, a few more to chart it, a few more to make the chart readable for members, and more still to post it online and compose a cogent comment or two, it’s challenging to get that information out to readers fast enough so that you can capture every single point that I do.

Then there’s the issue of how to trade the information.  I just shorted SPX at 1521 with the expectation of an initial 10-point drop.  Suppose it pops up to 1525 60-seconds later?  Were you stopped out?  Do you hold on?   Wait, now it just dropped 20 points!  You refresh the screen…where’s the update!?

While you’re anxiously refreshing the webpage, I’m looking at RSI channels (in multiple time frames), various chart patterns, checking the dollar/euro/bonds/VIX, looking for any news just out, etc.  I make a determination and either trade on it or sit pat.

I then start the process of updating the chart and posting it online with supporting comments.  Best case…3-5 minutes.  Worst case, all hell is breaking loose and it takes 10-15 minutes or more.

This is why I like the idea of a fund.  For better or worse, it’s the quickest, most efficient way to transfer value from my noggin into your net worth.  Investors can go on with their business meeting/golf game/ski run and leave all the sweating it out to me.

BTW, I know a fund isn’t for everyone. For the rest of us, the website will continue to provide the exact same kind of information it always has.  But, it will evolve, ideally becoming more efficient with streamlined delivery accompanying the charts for the veterans and investment professionals who want to go it alone.

For example, those who have been around for a while would completely understand a comment like “hit .786/.886 combo at 1521, Gartley/Bat or Butterfly Point B?  Charts later.”   That way, I could cut down on the time it takes to convey the essence of the post.  I’m also looking into ways to post the information on a chat-like platform, which might also eliminate email and log-in problems.

The trick with investment advisor clients is finding a way to deliver timely information at a reasonable price without giving away the secret sauce to potential competitors.  It will mean substantially higher fees for future subscribers ($2,500 on Mar 4), but won’t affect current members who have taken advantage of the current membership offer.

Have you locked in your subscription price yet? CLICK HERE

More shortly

UPDATE:  12:50 PM

SPX won’t go down without a fight.  It has retraced almost .886 of its declines from 1521.37, meaning it’s about to reverse at 1520.65 and head lower (a Bat Pattern) or is destined for the 1.618 at 1525.29 — also the .886 retracement of the 1530-1485 decline (1525.70) and the level of the last high on the 25th.

As noted earlier, a push through 1521 opens up 1526.  SPX has till about 1:30 EST to decide: push up through 1521 or a channel breakdown.

Note the close proximity of the white channel line, which will always, always offer support… until it doesn’t.

The RSI picture is mixed at present, so we’ll stay focused on harmonics and channels.  Looking at other indicators, the dollar is hanging in there in its own rising channel.

It recovered its midline just before equities opened this morning, and broke out of its a channel on its 15-min RSI.  It tagged 82, but hasn’t yet been able to break above — much less reach its short-term target of 82.136-82.281.

UPDATE:  1:20 PM

There’s our answer, a breakout above the .786/.886 Fib at 1521.11.

Playing the long side again, with initial target of 1525.70, trailing stops starting at 1521.

Charts in a few…

UPDATE:  2:05 PM

Getting pretty close, now.  This should also be a tag on the large purple channel midline and the proposed yellow channel top.

UPDATE:  2:20 PM

Let’s review the implications to our forecast of tagging 1525.70.  We started into this yesterday, but got interrupted by a pretty wild intra-day ride.

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