Markets continue in a consolidation mode post breakout.  The EURUSD seems to have found its footing, with a couple of choices still possible for the operative channel and harmonic pattern in the near term.

The USD appears to have found support at the intersection of the rising white channel and the .382.  If it’s able to hold these levels, look for a return to test the yellow channel midline and the .618 at 82.577.

SPX just reached a small scale 1.618 at the midline of the small white channel.  We have been waiting for a backtest of the IH&S neckline (yellow, dashed) and/or broken TL’s that would confirm the operative rising channel.

This price level has potential. But, given the strength of many of the European markets, such a pullback might have to wait until SPX reaches our next target.

We’ll keep an eye on 1622, as a reversal through it would likely mean the back test is on.  I’d probably try an interim short there, with the most likely target being the intersection of the red channel midline and the IH&S neckline around 1614.09 around 12:15 ET.

continued for members…UPDATE: 10:05 AM

Just got the move we were discussing above.  Trying an interim short position here at 1622.

UPDATE:  12:45 PM

Bailing on the short position here at 1624.  We had a .786 reversal and a move through the .886, which signals a Butterfly to the 1.272 (1625.69) or 1.618 (1628.16.)

I’m having issues with TOS charting software this morning — trouble posting charts.

UPDATE:  1:50 PM

The charts are back in service again.  First, a quick update on where we stand on the daily charts…

The Crab Pattern that might have — but, didn’t — produced a substantial reversal at the 1.618 extension of 1555.57 is still intact.  It offers another shot at a reversal at the 2.24 extension of 1637.15 — just 1.90 from the purple 1.618 at 1635.25.

I’ve also added in a few alternatives to the TL from 1994-2003.  It’s not always clear whether or not to include tails or shadows when drawing trend lines.  On a very long-term line such as these, it can make a big difference.

Without boring you with the details, the resulting lines represent the different possibilities.  The red and grey lines have obviously already been exceeded, though we might see a back test to them some day if the market ever stops melting up.

But, the purple and yellow lines are still up above — and not all that far away at 1643 and 1658.  When all is said and done, they are close enough to the potential harmonic target range of 1635-1637 to be considered in play.

There’s also the matter of the IH&S target up there around 1641.  That’s a bit of a cheat, as it derives a target based on a completion of Apr 29, when SPX came a few points short of the neckline.  It didn’t actually complete until May 3.

Put it all together, and include my long-held belief in the importance of May 13 from a cycle standpoint, and you might get something like the pattern below:  one last spurt to 1635-1641 followed by a 5% correction to 1576 (and, potentially to 1555.)

I’ve inserted a harmonic grid originating at 1641 because of that IH&S and because a 61.8% retracement from 1641 gets us to 1576 — the previous all-time high from 2007.

I’ll write more later about how this scenario fits with the analog on which I’ve been most focused.  Sneak peek: not bad.