The e-minis bounced at an .886 Fib level of a not very well-formed harmonic pattern, so a reaction here is less than certain. A second H&S pattern has also completed and the red channel has broken down, but could be widening as occurred in late July-early August.
SPX needs to tag 1744.46 in order to complete a Bat Pattern. Unlike ES, yesterday’s high didn’t exceed the Oct 30 high. So, this is a normal, legitimate pattern with just a bit of hair on it: a less than perfectly defined Point X of inception.
Yesterday’s close on a negative note clearly stretched SPX’s rising red channel — perhaps more than it can handle. But, today is a bigger than normal day for QE: $4.25-5.25 billion in outright purchases. The last such time led to those Oct highs mentioned above.
USDJPY, which briefly popped up above the pennant pattern yesterday, has reached the .886 time Fib. Something’s gotta give.
UPDATE: 12:30 PM
So far, so good. SPX and ES both just reached the .618 retrace of their drops from yesterday’s highs and are safely back above the H&S necklines. This would be a good spot for a pause if they have loftier ambitions, or a reversal if lower prices are ahead.