SPX poked up past our 1770.97 target in the last 3 minutes of trading yesterday.
While, the e-minis reached our 1767.63 target around 3:59:30. It’s clinging to a 1.5 pt gain at the moment. Can it hold?
There are two ways to play a leak past a natural turning point:
- dig your heels in, argue that it shouldn’t go higher and short like crazy;
- listen to what the market is saying and play along (with trailing stops in case it’s a trap.)
Those who have followed this site for any length of time know how I feel about such things.
continued for members…
Our forecast has been ES 1837/SPX 1823 by as early as Nov 6-8 based on the following chart:
That timing would require the latest red channel to continue holding through the end of next week or so. If it occurred on Nov 8, it would mean a 197-pt rally in only 22 sessions: about 9 points per day. In percentage terms: 12%.
If it occurred further out in the red channel, say Nov 13-15, then we’re looking at 25-27 sessions for an average of 7.3 – 7.8 points per day.
The insanely steep rally from Apr 18 to May 22 took 24 sessions to go 155 points — about 6.5 points per day. In percentage terms: 10%.
There’s every reason in the world why the channel should flesh out a bit before continuing higher — not the least of which we’re at some important Fib levels and channel tops. But, I see no reason that it must.
The most typical reversals would have been ES 1750-1755, followed by a backtest of the broken falling purple channel at 1712.
I wondered, also, whether it would drop further and establish a 4th falling channel that would set up a 5th rising red channel to the final target.
At this point, that would probably mean a drop to 1670 or so, in order that the 1.618 extension of the drop would reach the 1737 mark. Is it very likely, with a Fed statement coming out in a few hours that wis more likely to reassure the markets than let the air out?
So far, ES hasn’t even dipped below the red channel channel midline, let alone its bottom. TPTB seem intent on reaching 1837 with no bathroom breaks nor stops to admire the scenery.
It’s a high-stakes maneuver that could work, but would probably result in more pain after the target is reached. It would be like running Pamplona naked in order to be that much lighter on your feet.
The 60-min RSI suggests there’s plenty of support for another spurt higher, albeit in the face of a consolidation.
And, the top of the big purple falling channel on the daily RSI looks like it could use a tag in a week or so.
My best guess at this point is a small sell-off to, say, 1754 or so — followed by a post-FOMC spike as described above. If the red channel can’t hold, then 1670 is the level that interests me most.
More later.
UPDATE: 2:10 PM
Fed statement out…no change. ES is selling off a bit more, just backtested the broken midline.
How deep it goes depends on how fast — if it is targeting the bottom of the red channel. The channel bottom is currently around 1739, but that would mean a straight drop.
UPDATE: 2:38 PM
ES just tagged the purple .886, closing in on the .786 target drawn earlier. Note that this represents a tag of the rising red channel .236 line, so a good place for a bounce here at 1752.
UPDATE: 3:57 PM
