Nice little intra-day sell-off again yesterday, culminating in a last minute positive close — another shake-and-bake by your friendly neighborhood market makers to separate you from your hard-earned money. Look for more of the same today.

Today’s news is all about currencies.  Draghi’s comments are successfully taking some of the bloom off euro’s today.  The euro is up 11% since Draghi’s “whatever it takes” speech last July 26.  What has it gained them?

Oil got a little cheaper — at least through the end of the year.  Germany might not care, but  Spain, Italy and France exporters are feeling the pinch at a time when they can ill afford it.

IMHO, this will set up a battle of political wills between the haves and have nots in the EZ.  Bucking the global trend and trying to achieve nominal growth without more accommodative monetary policy is doomed from the get-go.

The EURUSD chart shows how the market feels this will ultimately be resolved.

Though the pair will likely find support right about here — an important Fib line (red .618) and the intersection of two prominent channel lines.

The top of the big falling white channel is still out there as an upside target.  Timing would determine price, of course, since the channel features a fairly steep slope.  But, the range currently includes the red .886 at 1.3995 (the top of the purple channel), the white .500 at 1.3956 and the purple .618 at 1.3832 (the purple midline.)

 

SPX isn’t enjoying the plunge in the EURUSD.  I’m taking an intra-day short position with the channel line cross at 1508 with a target of 1497.29 – 1499.29 — the .886/.786 of the latest run up.  Charts in a few.

60-min RSI shows likely downside to at least the red midline and white channel bottom.  This likely translates into the .886 at 1497.29, but the purple midline is way down at 1492, so I’ll give it some rope (and reconsider our upside target) if SPX dips below 1495.

 

continued for members…

UPDATE:  12:35 PM

SPX reached our target from this morning and has rebounded 6 points to the midline of a little falling channel off yesterday’s highs (white below).  The channel probably won’t hold, but offers potential pivot points around which to plan short-term trades.

For anyone looking to re-short after the bounce, keep an eye on the midline, where 5-min RSI shows resistance.  It’s currently around 1504.50 — just shy of yesterday’s 1504.71 low for you Wavers.

I’ll likely re-short here if we can’t push through the midline.  We still haven’t seen much positive divergence on anything other than the 5-min charts and the pattern doesn’t quite look finished.

UPDATE:  1:45 PM

Got through the midline safely, but there’s another one to consider — the yellow channel midline here at 1506.60.  It intersects with the white channel 75% line, and the white .618 Fib is just above at 1507.  So, be cautious here.

A strong push through both points to the red .618 at 1508.67.

Resistance above that includes the top of the white channel at 1509.80. the white .786 at 1510.26, the top of the larger white channel at the red .8896 of 1513.08.

But, the one that looks like trouble is the intersection of the two purple channel lines at the light blue .886 (and red .786) of 1511.26-1511.44.

Remember a reversal and subsequent push through a .786 Fib level hints at a Butterfly Pattern, which completes at either the 1.272 or the 1.618.

The white grid that started at 1514.41 on Feb 1 shows a reversal at the .786 of 1510.26.  Its 1.272 is 1519.68.

If the red grid, which started at 1514.96 on Feb 5, also saw a reversal at its .786 (1511.44) we might also look for an extension to its 1.272 at 1519.44.

In other words, the two latest potential Butterfly Patterns feature a 1.272 that intersects with the purple 1.618 we’ve been tracking at 1518.57.  Remember, this is the Crab Pattern target from the 1422 to 1266 plunge last Mar-June.

A review of this chart is a good reminder that we’re essentially at the target now.  Being long for another few points is very much like picking up pennies in front of a bulldozer.

IMPORTANT NOTE:

On this website, I track where I think the market is going.  And, I think there’s currently a better than 50:50 chance that we’ll tag 1518-1520 before heading down to 1425 or so (initial target = bottom of the rising wedge.)

But, I certainly wouldn’t advise someone who’s either putting new money into the market, or who can’t keep a very close eye on their current investments to be long in this situation.

If that nuance doesn’t register with you, based on your knowledge and/or experience, this is an excellent time to be on the sidelines.  Because, if I’m wrong about the 50:50 odds playing out as predicted, we could easily get a gap down to 1474 or lower any day now.

 

UPDATE:  3:35 PM

I have to run out for a lunch meeting.  I’ll leave my long position as is, but would put on protective shorts again with a strong move through 1504.50 — which would likely mean SPX is in search of a good Point C for the last leg up.  But, the dip from 1508.55 to 1504.66 was probably it.

I’ll post more later tonight.

GLTA.