We’re at another one of those interim Fib levels where we could see a pullback before the final assault on our target.  ES and SPX are both apparently intent on bagging 1800.

The dollar has continued its drop as expected.  Watch for a potential backtest of the broken white channel midlines.

USDJPY, after reacting as we expected at the .886, has found channel support.

I suspect that, as the pair goes, equities will go with respect to the size of the pullback.  Note that the pair has backtested the rising wedge we’ve been watching.

But, this is where wedges get tricky, as the time period one is charting, shadows, tails, etc. can influence the look of the wedge.

TNX has reacted at the .618 retracement of the drop from 29.84 to 24.71.  Bonds should get a small bump (and rates drop) from whatever equities sell-off we get here.

Downside targets coming up.

continued for members…

Ideally, we’d get a 3-wave move back to a significant Fib level here.  My leading candidate is the purple 1.272 at 1787.41, which lines up nicely with the red 1.272 extension at 1787.67 where it intersects w/ the purple channel midline.  A close second would be the confluence of the yellow 1.272 and red 1.618 at 1784.

The SPX chart is pretty clear on the potential to reach 1823 — but, not the timing.  I like the purple midline intersection best, which would mean a top as early as tomorrow morning.

Though, Wednesday is also a great candidate, with retail sales, homes sales, CPI and FOMC minutes all being released on the same day.

UPDATE:  11:00 AM

Should see that reversal here at 1798.20-1798.92 if we’re going to get one before the next thrust higher.  The Fib action has been pretty accurate thus far — deep retracements on every move and counter-move.

UPDATE:  2:05 PM

Nice little triangle forming.  Remember, they break both ways and often feature false break-outs.

UPDATE:  2:30 PM

Moment of truth for the rest of the downside: either 1-2, 1-2 on the way to 1784-1787 or a moonshot from here.  My money’s on the 10-point drop.

UPDATE:  3:25 PM

We’re sure whether 1787.67 or 1784.38 looked better this morning.  Looks like we’re going to split the difference at the white .618 at 1785.85.  Either way, 1785 looks like an excellent place from which to mount the assault on 1837.

But, trade safe.  Always use stops.

If 1784.75 holds as the low — which I think it will — it works nicely with the bigger picture.  Note that the 3.618 extension of this morning’s drop lines up with our forecast of ES 1837.  There’s also a nice Fib overlap at 1821.