Charts I’m Watching: Sep 28, 2012


The dollar’s rising wedge played out perfectly, but after the close.  We got a channel tag as expected, and are lurking in the bottom part of the channel.


EURUSD’s falling wedge, in the meantime, also played out perfectly — but after the close.

SPX is selling off this morning, but should find support at the purple channel bottom around 1435-1436 and rebound.

If the channel does hold — preferably at the .786 or .886 of the pink pattern, look for the Gartley Pattern we discussed yesterday to complete at 1456.21.  Why?  Yesterday’s high was a perfect Fib .618 retracement of the 1463.20 to 1430.53 drop.

UPDATE:  10:25 AM

That should be about it for the downside.  SPX reversed at the .786 of one measure, and the .707 of the larger one.  We didn’t quite reach the purple channel bottom, so there’s the possibility of one more push to 1434.74  — the .786 of the larger harmonic grid.

DX has tagged the red channel and the .786 of the yesterday’s move down.

And, EURUSD has back-tested the recently-broken purple channel, and more importantly, is finding support at the white channel at the .786 retracement of yesterday’s rise.

I’m still long from yesterday, as I believe this is a ploy to shake out loose weak bulls for the next run up.  If SPX bounces off the intersection of the red and purple channels at around 1435, I would be a very aggressive buyer, with stops at 1430 or so.

More in a few…

UPDATE:  12:00 PM

We got the reversal we were expecting, with a low of 1435.60, and started up right at our Point C.  Just completed a little Inverse Head & Shoulder pattern that should help us up to the .382 at 1442 (two of them, actually.)  Moment of truth, for it’s also the red channel midline.  Don’t be surprised if we get a little pause.

UPDATE:  12:25 PM

The IH&S played out nicely, with a tag of the target at the .382, then a little push above the midline before the reaction — which will probably be to 1440-1441.  Assuming we retake the midline, our next resistance is 1448.54 at the .886 of the 1450-1435 decline.

It’s the last point at which the short-term downside harmonic case holds water.  Given that we just reversed at the .500, a Bat Pattern reversal is on the table until we take out the .886 and, more importantly, the 1450.2 high for this small purple pattern.

For now, I’m looking at this smallest pattern as a potential Crab.  Its 1.618 extension is virtually the same level as the .886 of the 1463-1430 decline (1459.22 v 1459.48.)  I look at such correlations as supportive of a forecast.

BTW, if SPX rises in a channel parallel to that of Wed-Thurs, it will only reach this 1448-1450 level today.  If it can break through, it has a good shot at higher.  I don’t know if we’ll reach our 1456-1459 target today, however.  The session is more than half over, and the high for the day (1443.62) was only 8 points off the low.  Another 8 points higher than that would put us at 1452-ish, right around the .500 retracement of the 1474 – 1430 drop.

Charts in a few…

UPDATE:  1:10 PM

Charts for the above paragraph…  So far, we’re replaying the slope of the last rise from 1430-1450.  If we stay in this new version of that same channel, we run out of room by the EOD around 1448-1450.  Remaining below the 1450.2 mark would also keep ambiguity alive — a hallfark of this market.

It’ll be interesting to see whether the any further corrections occur within this channel before we push through the midline, and if they do, whether they give us better guidance as to the eventual channel bounds.

UPDATE:  1:15 PM

Potential flag pattern setting up on the 5-min chart, indicates 1446-ish.

UPDATE:  1:35 PM

The flag pattern played out as expected, and we just broke back up through the midline.  Best of all, the new channel established is much steeper than the last, so SPX should really pick up steam.  If it remains in the channel, it could reach as high as 1454 by the end of the day (1453.11 was our target from yesterday.)

At some point, however, we’ll probably see a rising wedge take shape just to put a damper on things (representing the white channel line above that’s likely going to fail.  We’ll see how it shapes up, but SPX turns positive at 1447.15.

UPDATE:  1:50 PM

Getting a little reversal here at the white channel line mentioned above.  Time for the market to decide between the existing white channel (same slope as Wed-Thursday) or the new yellow one.  Max pull back should be to the broken midline and .50 Fib at 1442.90, but I imagine we’ll stop north of 1442.01 to keep the max bullish wave count alive.

UPDATE:  2:30 PM

It was too good to be true.  We’re back to the original white channel — now colored yellow to reduce confusion.  As I was typing this, we just got a big spike down below that channel, 1 pt in 10 seconds or so.  Check out the 1-min RSI — reaching this morning’s low TL (bottom yellow, dashed.)

There are two possibilities here: the rally is fizzling, or the market makers are trying to take out the weak hands.  For anyone holding long, it scares the crap out of you (from personal experience) and has you reaching for the sell button.

The intentions of MM’s aside, it certainly resets the technical picture, eliminating overbought conditions and providing room for the upside.  Charts in a few…

Here’s the 60-min RSI…

The upside is perhaps limited by the top red TL, but there’s ample support for another run up (even with negative divergence) at the dashed yellow line if the market can hold it.

The push down a few minutes ago back-tested the top of the flag pattern, and that held.  But, there’s a continuation H&S pattern setting up — completes at 1440.80.  If that plays out, we could lose any gains for the day.  It isn’t as high probability, as it doesn’t occur at a natural top, but it’s worth watching.

If, on the other hand, we can get back above that midline by 3:15, I’ll feel a lot better about the upside being intact for today.

UPDATE:  3:40 PM

That should be it for the downside (famous last words.)  We just retraced .786 of this morning’s run up, a few pennies from the purple channel bottom.  It would take a miracle to get back up to 1450 today.

But, it’s the end of the quarter (never underestimate window dressing), there’s a falling wedge completing, and the channel just held again.  Maybe if we all close our eyes and repeat “I do believe in fairies…”


UPDATE:  6:20 PM

Wow, what a finish!  One minute after posting the above chart — while all of you were no doubt repeating the magic words — SPX spiked 5 points in 8 minutes, tagging the underside of the broken channel.

Unfortunately for bulls, it ended there and reversed to 1440.  But, it was fun while it lasted; and, it gives me some interesting ideas about the power of group meditation.  Today, the stock market; tomorrow, the world!

* * * * * * * * *

I have a full weekend planned.  At long last, I will be changing the way membership fees are collected so that the site no longer needs to be SSL protected.  This will be great for Disqus users, who will now be able to attach charts and edit their posts more easily.  And, hopefully, it’ll cut down on log-in problems.

Also, we had another great quarter.  Preliminary results indicate about 27.6% for a total since inception (March 22) of 66.57%.   We came very close to last quarter’s 29.1%, and IMHO did it in a much more difficult environment without the benefit of an analog.

To celebrate, we’re having a membership special this weekend.  I announced a price increase over a month ago, but never got around to getting it set up (the market kept me busy enough.)  It won’t be quite as cheap as last go round, but it will be a nice discount.  I’m also introducing a monthly subscription option for those who don’t want to manually renewing every month.

I also have my eye on a new commenting system that operates more like a chat room.  I don’t know if I’ll get to it this weekend, but it’s on my to do list.  I continue to look for ways to improve the site and make myself more efficient.  One way is to make intra-day information available in real time for those who want that level of service.  More on that later.

And, last, some of you have asked about the analog study I’ve been working on for the past several weeks.  I am close to wrapping up my research, and should be able to post it this weekend.

As always, thanks for your support.  I don’t say it nearly often enough, but I appreciate the faith you place in me to do this every day.




Charts I’m Watching: Sep 28, 2012 — 7 Comments

  1. PW – I’ve been studying the progression of your Gartley pattern and want to see if I’m getting your calculations using info from your learn section.

    What has happened:

    X = 1463.2
    A = 1430.53
    AB = 1450.72
    BC = 1434(.828 of AB)

    What you expect to happen:

    CD = 1456.2 target – could go higher (ie 1461 which is 1.618 of BC)

    Once this completes you would expect a .618 retrace of AD where AD = .786 of XA which would target 1440 that just happens to be major support right now.

    Did I get it?

  2. Couldn’t edit…sorry to post again.
    UPDATE:  All SPXU is gone, definitely dinner money.  Picked up SSO near 1443 on a reload.  Let’s go visit the 1450’s again!

  3. Those white channel lines made me some lunch money around 2 pm with a great scalp of SPXU.  It was a rental, and if we can revisit 1443, it’ll be dinner money.  Thanks PW.  🙂  Have a great weekend.