Charts I’m Watching: Jun 20, 2013

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Investors around the world were apparently shocked to hear Bernanke repeat what he and other Feds have been saying for months: they’ll likely cut back on bond purchases if the unemployment picture improves.  Talk about risk-off…

Between that acknowledgement and the recognition that things aren’t so rosy in China, markets have continued to sell off broadly overnight, with the eminis currently down to the purple channel bottom at 1608. For more on China, check out Zerohedge’s great articles starting with THIS ONE.  For more on the Hindenburg Omen recurrence, check out Albertarocks’ excellent coverage HERE.

The two previous dips have exceeded the channel bottom, so the important issue is whether or not we get a bounce here.

The dollar obviously did, as expected, reverse at the .707 Fib.

But, it should find tough resistance at the intersection of two channel midlines and a .618 of the 84 to 78 slide.

SPX fell to our 1633 target toward the end of the session, but the bounce didn’t hold.  This morning, it appears very likely that SPX will join the eminis at the purple channel bottom which, once again, becomes the line in the sand. 1608 is an important previous low for bulls to hold.  The critical level is 1593.

I will short on the opening, but be prepared to switch sides once there.

UPDATE:  9:36 AM

The decline appears to be slowing as we approach 1608 — the previous bottom and the red TL from 1994/2002.  Bulls should take a stand here, so I’ll play a bounce at 1608.

Just tagged 1608.34, which is good enough for me.  Full long here with obviously very tight stops.  For additional support, we have the red .886 at 1604.61 — though these patterns are already quite messy.

As long as 1608.07 holds, this can be characterized as a very deep retracement of the rally from Point C.  Any breakdown and that pattern loses all credibility.  Either yesterday’s 1654.19 high becomes our new Point B or, if 1598.23 is taken out, we’re looking for a new Point A altogether.

We have several important economic reports coming out at 10am:

Judging from the market’s skittishness, I would imagine that poor results would bolster investors’ expectations re the Bernanke put.  But, I suspect the PPT is standing by just in case…

UPDATE:  10:05 AM

Apparently the NAR didn’t get the memo, and reported very strong results: +4.2% to 5.18 million units. This won’t help the bounce.

The Conference Board is playing ball, however, with a 0.1% increase versus 0.2% expectations — perfect for the “bad news is good news” paradigm.  But, is it enough to offset the rosy housing numbers?

Oops… the Philly Fed’s survey numbers were very positive — also a negative for a market addicted to QE.

Needless to say, a drop through 1598 would change everything — as opposed to the many things that will change with a drop through 1608.07.  Coming up, our revised forecast with the three most likely scenarios.

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