Currencies are relatively quiet this morning in the midst of a slew of earnings and economic data. The dollar looks like it could hit our downside target of 79.50 – 79.59 from Jan 25 [see: Update on DX] this morning if the yellow channel holds, but note that its midline intersects with the bottom of the white channel (support) just below current levels.

EURUSD looks like a lock to tag the 1.618 at 1.3490 we’ve been tracking the past few days.

This e-mini chart caught my eye this morning…

With the overnight slide of 8 points, the e-minis give the impression of a broken channel and back test.   Now, it might be one of those dips from which we quickly recover as occurred on the 16th.  But, for those playing the intra-day moves, this bears watching.

This ES channel equates to the small purple channel within the larger white one on SPX.  So, as yesterday, watch the channel midline for signs of something more significant.  It’s currently around 1498.30.

The 15-min RSI should see a bounce at the red trend line if the trend is to remain on track.

As we discussed yesterday, there is a great deal of economic data due out this week.  But, all pale in comparison to the FOMC announcements following their two-day meeting getting underway right about now.

Last we heard, dissension was growing over how and when to throttle back on QE.  The language that alarmed the Dow 20,000 crowd:

While almost all members thought that the asset purchase program begun in September had been effective and supportive of growth, they also generally saw that the benefits of ongoing purchases were uncertain and that the potential costs could rise as the size of the balance sheet increased. Various members stressed the importance of a continuing assessment of labor market developments and reviews of the program’s efficacy and costs at upcoming FOMC meetings. In considering the outlook for the labor market and the broader economy, a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.

Needless to say, an increase in hawkish rhetoric could really do a number on this rally.

Odds are we’ll see another day like yesterday, with market makers shuckin’ and jivin’ to try and convince us a larger move is underway — the better to shake loose some of our hard-earned money.  But, I unless we see a huge miss on economic data or earnings, I don’t expect any fireworks until Bernanke steps up to the microphone (though much of the juicy stuff will have to wait for the minutes to be released.)

UPDATE:  10:00 AM

The Conference Board’s Consumer Confidence Index came in well below expectations: 58.6 vs expectations of 65 and Dec 2012’s 66.7.  Most of the rise in pessimism was the result of worsening job market conditions.  Those expecting more jobs in the months ahead dropped from 17.9% to 14.3%. Twenty-seven percent expect fewer jobs — unchanged from last month.  A full 22.9% (up from 19.1%) expect their incomes to decline.

Briefing.com tracks the data and puts it in a nifty little chart (reflects data through December.)  There are a lot of potential interpretations here, but to me it comes down to “expectations coming back in line with reality.”

And, though I don’t have the time to construct a chart, I’m pretty sure that expectations — the yellow line — have tagged the top of a descending broadening wedge (megaphone) while present conditions have formed a garden variety falling channel.  Both appear to be at or near their upper bounds, meaning a breakout or a fall is imminent.

Global Economic Intersection posted an interesting article last month that showed the relationship between consumer confidence and past recessions.  Definitely worth a read for those who pay attention to such things.

 

So far, the market is pretty much shaking it off, with a dip to the white channel midline the extent of the reaction.  If the midline holds yet again, there’s a good chance we’ll hit our upside target later today or tomorrow.

continued for members…

UPDATE:  11:25 AM

The midline did hold again, and SPX is inching higher — having just broken above Friday’s high.   Note the RSI break above the yellow TL.  We could see 1509 in the next hour or so.

We’re getting very close to our target area [from Jan 23, see: Now What?] at which I expect a significant reversal.

DX did, in fact, reach its target area (the red box below), but missed the .786 by a couple of ticks (79.66 v 79.591.)  RSI bottomed out at the intersection of the two channels discussed earlier this morning.

I think it’ll go lower still, perhaps even to the .886 at 79.5 intra-day if/when SPX tags 1509.

The EURUSD completed the Crab Pattern we’ve been watching, tagging the 1.618 extension at 1.3481 a few minutes ago.  Note the negative divergence on the 4-hour chart.

A strong reversal here would strengthen the case for the red channel over the purple on the daily chart, which would likely result in a retest of the 1.20-1.24 range.

UPDATE:  12:15 PM

SPX continues to inch closer to our target area.  Two small potential Crab Patterns also suggest 1509, and the 15-min RSI indicates it’s very doable after a back test of the purple channel mid-line.

I would strongly consider placing stops around this area.  There are so many negative factors working against the market at present — including the economic data — that it’s taking quite an effort to make any headway.  Being long for these last few points is tantamount to picking up pennies in front of the proverbial bulldozer.

Remember the post on the Dow’s double top from last week [see: Dow – Double Down]?  Here’s the updated chart:

UPDATE:  1:20 PM

SPX is on track, having back-tested the 75% channel line.  15-min RSI still looks positive.  I expect to sell my long position and go short at around 1509.

UPDATE:  3:40 PM

Sometimes “imminent” can seem like forever.

Just crossed 1509 [finally!] and the 5-min chart looks like it’s almost out of steam.  The top of the little white channel is about 1512.40, but 1509.30 is good enough.  Going to go ahead and close out my long here and open a short position.

I’m probably a little early (I usually am), but an earnings miss or negative outlook by market darling Amazon — which reports after the close — could really do some damage.

Interesting chart on AMZN: a 12-year old Crab Pattern (white), 6-year old Crab Pattern (yellow) and 18-month old Crab Pattern all converge right about here.  Here’s the big picture…

…and, the close up:

UPDATE:  4:15 PM

Not a great report from AMZN — should see some pressure in the morning.  The chart below includes the after-hours action — essentially a dip to the channel bottom and .886 rebound.

more after the close…