SPX seems destined to go up and tag the .786 Fib at 1414.81.  I’m closing my shorts on the opening and will possibly take another crack at shorting there if SPX shows any weakness.  Apparently yesterday’s dip is all the B-wave we’re going to get.  Swing traders will do well to remain long, but be careful around that Fib level.  Consider trailing stops.

EURUSD bumping up against the May 2011 channel again — negative divergence up through 4 hours, but not on daily.

UPDATE:  9:35 AM

For traders, 1417.92 is a decent place to try a short — the .618 of the drop from 1464.02.  I’ll try one with tight stops.  Leaving my core long position in place, raising trailing stops to around 1410.  1424 is just above.

UPDATE:  11:33 AM

Got a nice reaction just above the .618 at 1419.  There are two channels that could bring things to a screeching halt right here — seen below in yellow and purple.  So, 1419 should get some respect, with a pullback to the previous high of 1409 /channel line likely.

Our forecast remains on track, with the current leg up due to complete any time now.  We’ll take a look at the forecast, the analog, and any potential bumps in the road.

continued for members…

UPDATE:  11:45 AM

First, I’m closing my short-term short from 1418 this morning here at 1410 and will leave my core long in place.  We’ve completed a back-test of the current little Crab Pattern that completes at 1423. Could leak down to 1403, but any more than that and I’ll look to reshort.  Charts in a couple of minutes.

BTW: shorting from here on can be viewed as either a trading opportunity or a hedge for core longs.  I still see the target of this leg as higher, but if things fall apart in a hurry there’s nothing wrong with a little downside protection.

I also wouldn’t argue with anyone who sees 1419 as “close enough” to our goal of 1424 and switches sides here — though I think it’s probably leaving money on the table.

* * * * * * * *

Back to the forecast…

Here’s the original chart posted back on October 31 [see: A New Old Analog.]

And, here’s the price action since then, overlaid on that original forecast:

Obviously, the big picture has done very well.  The difficulty has been in trying to:

1. set up trades to best take into account the dual targets for each leg
2. get the shorter-term swings within each leg right
3. sticking to the forecast and not being swayed by the “noise”

At no time has this been more evident than the past ten days.  In 2011, there was a deep retrace fairly close to the bottom (the equivalent of Nov 16.)  This time, a lousy 10 points at the .500 retrace and a decent-sized one that broke some usually reliable rules.

I saw a channel that convinced me it would occur at 1404.  It was logical assumption — good fit in general, intersected with Fib resistance at the .500 of the 1464-1343 drop, the .886 of the 1266-1422 rally, and would set up the next harmonic target nicely.

Unfortunately, 1404 fell on a holiday-shortened, low-volume day and fell victim to a ramp job.  We zoomed past the channel, then proceeded to get a “back-test” that was much deeper than they normally are.

Prices dipped back into the channel rather than stopping at it.  But, it fits with the general bullish scenario anyway, and this morning we’re off to the races again.

TPTB’s intent, of course, is to present the most bullish picture possible.  We had a pretty clear 5 waves up to 1409, followed by an acceptable (not too scary!) corrective wave that amounted to a .382 retrace.

This morning’s rally will be viewed by most as the first wave in a wave 3 up.  Waves 3’s are supposed to be the largest, most powerful waves in a trend.  So, the assumption will be that we’re due for a huge run-up from here.

Remember, our interim target is the .618 retrace of the 1474 to 1343 drop at 1424.41.  Bulls understand that a pull-back there is quite normal.  It sets up several higher targets:

• Gartley Pattern at the .786 of 1446.44
• Bat Pattern at the .886 of 1459.56
• Butterfly Pattern at the 1.272 of 1510.19
• Crab Pattern at the 1.618 of 1555.57

If the market deviates from the analog I’ve been following, we could easily get 1446 or 1459.  Obama, Bernanke or Hilsenrath can do a 20 or 30-pt ramp job in their sleep.

If the analog fails completely, I’m sure 1510 or 1555 would be perfectly doable. But, a new high in the midst of the fiscal cliff mess would be a neater trick.

 

 

continued…