The eminis continue to bump along at harmonic resistance: the red 2.24 at 1626.41 and the small white pattern’s 1.618 at 1631.62.

ES 60-min…

The DX is right back to the levels reached on Friday — the white channel midline.  A thrust above would likely kill off the equities rally (or, at least hobble it.)  A retreat would be bullish.

The fact that it hasn’t yet pushed through has to be bullish in the short run, but the fact that it’s balanced on the precipice is ample grounds for caution.  Tomorrow marks the day on my charts where the white midline and purple midline intersect.

DX is poised just below both, so a push higher would be very important.

From a harmonic standpoint, a move above the Apr 4 high of 83.66 kills off a potential downside scenario to the white D.  Today’s high so far: 83.53.

SPX has opened stronger, completing the small white Crab Pattern 1.618, the red Crab Pattern 1.618 and the larger white Crab 2.24. The only harmonic target left is the white 1.618 at 1642.38.

I show the top of the purple channel at 1640.34 and the red channel midline at 1640.63.  Remember, 1640.90 was our preferred target.

It is right next to the IH&S target we identified in April and is a great harmonic fit with the downside scenario.  More on that in a moment.

SPX just tagged the red midline and purple top at 1640.89 — close enough for me.  I’m shorting here.

The white 1.618 is still up above at 1642.38 — and it’s a decent looking pattern.  So, we might be a couple of points early.  Any push higher and I’d likely just take an interim long.

There’s also an interesting Fib extension at 1646.73 — the 2.24 extension of the 1074 – 1292 rally in late 2011 as applied to the 1158 Nov 2011 low. It intersects there with the purple TL from the 1994 and 2002 lows of 445 and 776.

And, on a smaller scale, 1640.47 was the measured move target from 1626.74 yesterday.

UPDATE:  10:15 AM

SPX just tagged the white 1.618 at 1642.38.  As discussed above, if we don’t get a reversal here I’ll add an interim long position.

UPDATE:  10:28 AM

Getting a push higher, so I’m adding an interim long position here at 1643, with trailing stops.  If SPX pushes higher than 1648, I’ll consider abandoning the short position.

continued for members…

SPX is officially above the top of the purple channel as drawn — which means the channel probably needs to be adjusted.  I’ve repositioned it to give this move the benefit of the doubt.

Using the lows on the 60-min chart as a guide, and focusing on capturing the turns from the past two weeks, we get a top around 1650.  But, we won’t know for sure until the top is established.

What isn’t open to interpretation is the purple TL from 1994.  Remember, it is one of 4 such TLs formed by the combination of daily lows and/or closing lows from the 1994 and 2002/3 bottoms.  The purple TL is generated by the closing lows: 445.45 on 12/8/94 and 776.76 on 10/9/02.

The highest TL (yellow) is generated by using the daily low of 442.88 on 12/9/94 and the closing low of 776.76 on 10/9/02 (i.e. the combination producing the steepest possible slope.)  It’s currently way up at 1661.

I mention these TLs because, as SPX pushes up through Fib levels, they might be the bears’ last line of defense.  SPX just tagged the purple line at 1647.26, so we’ll see whether or not it can push through.

If it does, I’ll likely close the short position and switch to core long.  Otherwise, it might be time to close the long position from 1643.

UPDATE:  11:05 AM

I’m going to go ahead and close the long position here at 1647.  Tight stops on the short – 1648ish.

A quick look at the extensions…

…and the TLs…

…and a close up of the TLs and the most bullish purple channel placement I can justify.

Remember, the IH&S that nearly completed on Apr 29 targeted 1641.  The one that actually completed on May 3 targeted 1650.  I’ll update that chart and post it shortly.  In the meantime, looks like we’re back to the long side at 1648.

UPDATE:  12:20 PM

Here’s the IH&S chart I mentioned above.  Now that I focus on it, I can’t commit solely to the long side unless we push through 1650.  I’ll stick with an interim short position here at 1648.

UPDATE: 12:35 PM

Scratch that.  I’m going short here at 1648.26 with stops in the 1651 range.  Looking at the various RSI charts, SPX is looking very toppy here.  Negative divergence across the board, and some nice channel action.

The 60-min RSI…

…and the 30-min…

…and the 15-min.

The dollar has pushed up beyond the white and purple channel lines and the 83.66 former high and is heading for 83.85 on the way to 84.522.  I don’t think it’s as enamored with Tepper’s logic as are equity markets.

Charts on this in a moment…as I think it’s key.

UPDATE:  1:00 PM

The DX has completed most of a Bat Pattern, shown in white below.  Bats complete at the .886, which in this case is 87.076.  But, we could very well get a reaction at the .786 of 85.471.

If that’s all it is, it represents a 2.2% gain in DX, which should be good for a very modest decline in stocks.  The .886 would be a 4% rally, so more of a hit to equities.

Note the .707 reversal — which is almost the same size as the one near the .500.  This reversal argues for a Crab Pattern — which would extend to the 1.618 at 98.82 — a huge 18% rally for DX — the equal of the Nov 2009 to Jun 2010 move from 74.21 to 88.90.

It was the DX rally that accompanied SPX’s plunge from 1040 to 860 after it completed the large H&S pattern in June 2010.  Don’t remember that one?  It’s because the pattern flat-out busted as QE rumors started circulating in advance of Jackson Hole.

The currency markets recognized what was about to happen to stocks, but fell victim to Bernanke Panky. In fact, DX peaked on Jul 10, 2010 (slightly overshooting the .886 retracement of the drop from Mar – Nov 2009) the day after SPX bounced off the neckline rather than plunging down through it.

UPDATE:  3:36 PM

SPX is about to push through this morning’s high of 1649.71, so once again I’ve been premature in shorting.  Could SPX be going for the round number and IHS target of 1650?

RUT still needs 11 points to hit its target of 996, 15 for 1000.  DJIA, NYA and COMP have all hit or slightly exceeded harmonic and chart pattern targets.  And, DX is still going strong.

I’m inclined to view this as an overshoot that’s deserving of at least a small pullback. But, the odds of the analog to 1823 playing out have shot up dramatically these past few days.  We could have a replay of 2010, when the reaction everyone seems to agree was coming….doesn’t.

The prudent thing to do is to shut it all down here at the close, reassess and start fresh in the morning.  I might be leaving money on the table.  But, something’s broken at the moment and I don’t want to risk any more money standing in the way.

I’m going to go find out where my wife hid the Oreos… will be back after the close.