Charts I’m Watching: Nov 1, 2013

The fact that we made it through an October without a major hiccup in the markets is more a testament to the Fed and the PPT than to a healthy economy.  But, that’s okay.

ES stuck around at our price target long enough to also tag our timing target, and should now be ready to resume its ascent along the red channel.

It bears repeating that just because the market behaved as we expected over the past few days, there is no guarantee it will continue to do so.

The key to our strategy is developing a forecast, taking the appropriate position, and then being ready to switch sides whenever we reach a reversal point or when the forecast stops working.

In this case, we not only reached our target price (the solid yellow line) on time, but we reached the bottom of a well-formed channel.  ES should rise from here.  But, if the red channel should break down, it’s time to consider a short position.

Remember, yesterday we identified 1749.33 as the key support for ES.  It’s actually 1748.8, but either is fine.

Key price levels are 1752.50 for SPX and 1749.33 for ES. If those don’t hold, there’s potential for more downside — an intra-day overshoot of the channel bottom or a new channel as discussed yesterday afternoon.

UPDATE:  11:15 AM

ES is just about to tag our key support level at 1749.33.  I would play along on the downside on any drop through 1748, but with stops at 1749 just in case it’s merely getting a little over-excited.  As usual, I would go into the weekend in cash.

I have to run out for a lunch meeting — might be back before the close.  In any case, more later.

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