Charts I’m Watching: May 6, 2013

The dollar continues to hover around the midline of the falling white channel within the rising purple channel.

Closer up, we can see the short-run positive trend. But there are two harmonic interpretations that could play either way depending on how DX handles that midline.

The ES has tagged the top of the purple channel from Nov 2012 at a 1.272.  Should see a reaction, but not really due until the 1.618.

SPX closed right at the 1.272 on the small white grid on Friday.  Like ES, it’s not due a reversal as there was no .786 action to speak of.

We’ll go long on the opening (1614.40), but be ready for any move back through the Fib level and/or white channel (1613.75ish.)

A back test to the broken neckline (the purple oval), the broken purple channel midline or yellow trend line (yellow oval) is to be expected, but not absolutely necessary.   Rising channels have been showing extraordinary strength lately (e.g. the white channel within the red channel within the purple channel.)

Interesting that the DJIA is off this morning, while SPX continues to try and power ahead.  Seeing the same on the Nikkei, which by my reckoning is due for a stout sell-off to at least 12,678 or 12,360.

Note the yellow channel midline tag, the .618 and 1.618 tags. When that purple channel finally breaks, it should be substantial.

SPX’s white channel will eventually break down — perhaps for 15 points or more — but in the absence of a catalyst, it’s prudent to wait for the actual breakdown rather than anticipate it.  There’s blue sky all the way to the .75 purple channel line (1622ish) and nothing else waiting there except for the 1.618 extension of the action since Friday (1621.93.)

UPDATE:  10:50 AM

Getting the break down finally?  We’d need a break not only of the white channel, but the .75 line of the red channel (about 1615.20) to be on the safe side.

UPDATE:  10:55 AM

There it goes… taking a short position here at 1615.15, tight stops around 1616.

This is very likely a short-term play, not any kind of major move.  Such a move would require a decline through the red midline (currently 1608) and, then the purple midline (1606.)

If it pushes below 1612.85, look for strong support between 1606-1609.65.

UPDATE:  11:43 AM

Stopped out.  Back to full long.

This has the feel of a melt-up: no particular reason to tumble, and plenty of room to run.  I’m going to take advantage of the quiet session to do a little work on the medium-term forecast. For now, the near-term targets identified last week remain in place.

Back later.

UPDATE:  2:47 PM

SPX is back-testing the neckline for a little H&S pattern that targets 1623.80.  It’s pushed just below the white midilne, but the red .75 offers support around 1617.55.

UPDATE:  3:57 PM

Saw a push through the red channel line at 1617.55.  The immediate downside looks to be about 1616.50, with additional exposure down the the targets mentioned this morning.  This is likely a shakeout rather than a reason to panic.

I’ll continue working on the forecast this evening, and try to get it posted late tonight.


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