ORIGINAL POST: 9:15 AM

We began yesterday’s post with a chart of competing patterns in EURUSD.

Many currency traders disregard H&S patterns in currencies, but I believe they play out more often than not.  Mario Draghi’s comments this morning gave EURUSD the boost it needed to reach the neckline and clear the way for further upside.

The RSI shows a probable back test of the neckline, but appears to support our forecast of a bounce to 1.30 or 1.31.  This is consistent with my expectation that the smaller dollar channel would break down, which indeed it has.

This should give SPX the boost it needs to clear its red channel on the opening bell.

UPDATE:  9:40 AM

SPX gapped open, and will likely back-test the red channel it broke up through. As I posted  yesterday, we can expect at least a pause at the last interim high of 1457 and the .886 Fib at 1459.51.

Also at the 1457 level — a line on the largest purple channel that’s guided us up from the June lows.  It’s stopped the market’s advance each of the past two days.

We remain long from 1441 with an initial target of 1461.  There, we run into the white channel top as posted in the last update to yesterday’s post.

UPDATE:  10:12 AM

We just tagged our target from this morning.  I expect a pull back here, so good time for traders to take profits, or at least enter stops.  I’m taking some profits at 1463 and will likely play the retreat on the first sign of weakness.

Note that the dollar just tagged a channel line of support on the downside and should rebound here at 79.54.  It has more potential downside, but I believe it will need to gather some strength for a push lower.

More in a few…

UPDATE:  11:00 AM

I’m playing the short side for a bit, with an objective of 1452.52-1455 around 11:50 this morning.  But, beware of support at the 1457.71 (.618) and 1456.63 (a channel midline.)  Best to use trailing stops on this move.

Although there’s an argument for no higher prices period, SPX could definitely go higher than this morning’s 1463.14.  I just don’t know if it can manage it today.

Charts in a few…

UPDATE:  11:20 AM

A trend line on the 5-min RSI clearly shows the sell signal.. As often happens, it came a good 10 minutes prior to the broken trend line on SPX itself.

continued for subscribers…

We should get a reaction off the purple RSI TL and back test the RSI 50 level.  If we can break back up through the white TL, look for RSI to reverse at the red channel line.  If it does, the downside is probably done.  Otherwise, there’s more to come.

UPDATE:  11:45 AM

We reached the level of support (1457.71 – 1456.63) I mentioned earlier.  Price  is threatening to break out of its channel, but RSI isn’t showing it yet.  RSI is almost always right, so I’ll give it the benefit of the doubt for the moment.

UPDATE:  12:00 PM

UPDATE:  12:39 PM

For any stubborn bears out there hanging on to the short side, 1461.62 is sort of a line in the sand.  It’s the .786 of a Gartley (on this morning’s move down) and the .886 Fib Fan, and the top of the white corrective (?) channel up.

If that doesn’t do it, the .886 and top Fib Fan level is 1462.62. It would greatly aid the bulls’ case if the little white channel holds.

UPDATE:  12:50 PM

Looks like the groundhog saw his shadow.  Should be more downside coming right up.

UPDATE:  1:25 PM

Broke down from that little channel, but came right back in…  Time to adjust the channel.  The rebound targets still hold:  1461.62 and 1462.62.  If those are taken out, breaking this morning’s high is next on the list.

My gut is that there’s still more downside after we tag one of those targets. For anyone who missed the short this morning, shorting at these levels with a stop at 1464 is a viable strategy.

UPDATE:  1:45  PM

Almost there, might get one last push to tag the .886 at 1462.42 according to the RSI.  If so, shouldn’t cross 1460.18 before doing so.

I think this is a corrective move higher, and that it’s likely we’ll see still lower prices. But, if you’re short, or thinking about going short here, please use stops just in case.

UPDATE:  3:00 PM

Very quiet for the past hour.  If it’s going to tag 1462.42, another good window is just ahead: the intersection of the white channel midline with the .886 around 3:10-3:15.  It could do it on negative divergence with an RSI tag of the purple or yellow TL.

UPDATE:  3:17 PM

Just tagged the .886 right at our target.  If it’s going to reverse and head lower, this would be the perfect time.

Channel bottom at 1460.76 and this morning’s low at 1456.79.

UPDATE:  3:35 PM

Got the bounce at the channel bottom…next step is to test this morning’s low at 1456.79.  Don’t be surprised if it closes there, preserving ambiguity into the close.

EURUSD did Fibonacci proud today, reversing on a .618 and a 1.618 right as SPX reached its targets.

And, the dollar broke out of a nice little Falling Wedge.

Remember, just because it did what we expected, it doesn’t mean we can let our guard down.  Stops.