For those of you waiting for fund documentation, it should go out this evening or tomorrow.  I underestimated the amount of time necessary to get all the accounts open (bank, administration, brokerage, etc.)  Thanks for your patience!

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ES tagged yesterday’s target pretty precisely, bottoming out at 1663.25 and bouncing as high as 1677.50 before soccer moms began attacking the Capitol.

A dip below 1666.75 might normally be expected to open up a small Crab Pattern to 1650.99.  But, the larger pattern .618 is at 1663.71 (below in yellow), only a slight breech of the purple channel bottom.  It could prove to be strong support — depending on what sound bytes are being delivered by CNBC at the moment.

The positive sound byte at the time was Boehner saying something conciliatory.  Even after the “new face of terrorism” was revealed, ES managed to close above the purple channel bottom and remains there this morning.

The dollar is also rebounding a bit, backtesting the channel midline — and probably at least the purple .786/red 1.272 at 80.217.

continued for members…

Although DX has come very close to the .886 at 79.605, it hasn’t quite tagged it yet.  So, there’s a very good chance that it still will — and that the tag will accompany another sell-off in equities.

Though ES reversed at the yellow .618, the bigger reversal was at 1666 — just shy of the .618.  To me, this implies either:

• a much bigger bounce from yesterday’s 1663 lows (either to new highs or to form a Point B in a Gartley, Bat, or Crab pointing to 1646, 1636 or 1561), OR
• the 1666 bounce was our Point B and the Bat Pattern to 1636 is coming.

The key is what ES does if/when it reaches the top of the falling white channel (currently around 1679.50.)  If it breaks out, it should have legs — at least to 1687-1700.  If it reverses or stalls there, then the downside case is still a good possibility.

I would treat any dip below 1670 as a signal to get short, and generally remain long above 1670.  SPX’s .618 (retrace from 1627) is at 1666.58, so don’t be surprised if any sudden dips find their footing there.

The USDJPY has nearly completed a halfway decent looking Gartley Pattern (the .786 is at 96.82.)  A reversal there would greatly help stocks.

But, like ES and SPX, there are lots of nasty looking H&S Patterns that suggest the worst is yet to come.  Remember, the dollar is in sync with equities at present, but the next big surge upward in DX is more likely to be a result of fear in the markets.

I’ll be in San Francisco today for a handful of meetings.  I’ll try to check in throughout the day, but can’t say for sure it’ll happen.  In any case, I would be in cash over the weekend until some of these critical issues sort themselves out.

Trade safe.