The eminis completed a Gartley Pattern based on the Jun 19 high (purple pattern) overnight that saw a second tag of the purple channel bottom (from 1343 in Nov 2012.) This pattern could rule the roost, though with the breakout of the red channel the reaction could be limited to a backtest of that pattern.
With the .500 reversal on the white grid on Jul 1, a Bat Pattern at 1670 remains a possibility down the road. As last night’s tag #2 illustrates, the backtest of a broken rising channel doesn’t always mean lower prices ahead.
The dollar is at a critical point — having reached the top of the purple channel and pushing through to the top of the yellow channel.
UPDATE: 09:32 AM
Note that by topping Monday’s high, SPX just cleared two bearish short-term harmonic patterns from the chart. The prominent patterns left on the red grid (from 1654.19) are the Gartley or Bat Patterns at 1634.1 and 1643.49 respectively.
On the grey grid, Monday’s high already retraced .500 of the drop from 1687 to 1560. So, the next significant target is the .618 at 1638.72.
As we discussed when we went long Wednesday at 1605 [see: Fireworks Ahead]:
That’s why I won’t be surprised if, while no one’s watching on Friday, we reach 1638 — the .618 of the 1687 to 1560 correction.
A close today at 1618 — .618 of the decline since 1626 on Monday and the intersection of the falling red channel top and rising white channel midline — would set up a nice looking right shoulder targeting the downside.
But, it would also set up a Crab Pattern with a 1.618 extension at 1640.23, less than two points from the grey .618. Something to think about…
A push through 1629ish negates the potential H&S pattern setting up (in red) as the right shoulder would exceed the head.
UPDATE: 10:05 AM
I think that’s probably going to do it for the pause. I’ll go long again here at 1621 with stops at 1620ish.
UPDATE: 10:15 AM
All SPX needs to do is loiter here just long enough to make the IH&S obvious. Though, it could also decide to deal with this morning’s gap (1615.17?) while it’s in the neighborhood.
UPDATE: 10:24 AM
The downside risk, BTW, is that the bottom of the rising white channel (currently about 1600) still hasn’t been tested. I’ll raise my stop on the long position to 1614ish.
I’m changing the color of the rising white channel to red, since it exactly matches the slope of the red channel that set up in the big rising purple channel from 1343. It tacked on 151 points between Apr 18 through May 22 — about 10% in one month.
It first established its bottom at 45 points higher than the 1536 bottom after a 16 point pullback from the initial 61 point rise to 1597. This morning’s high was 67 points higher than the 1560 low, and a 16 point pull back would put it at about 1611.
Applied to the current chart patterns, this would probably translate into a backtest of the broken red channel and/or a tag of the bottom of the rising red channel on Monday. If the market simply kills time for the next 3 hours and closes at or near the neckline (1628.45?) of the nearly completed purple IH&S, this is a very reasonable scenario.
The current purple channel, IMO, is a bit of a stretch. It has only held the job for a few days — since multiple predecessors were fired for incompetency. There’s no reason to believe this one will last any longer.
UPDATE: 2:25 PM
SPX just closed the gap from Jun 19. I’ll likely close my long position here and go short on the first sign of serious weakness. But, if it can push through, the red .786 is just ahead at 1634 and the yellow IH&S target at 1632.
I’ll keep an eye on the USDJPY, which at only .50 below the .786 retrace of 103.72 to 93.78, is probably a very good indicator. From the 12:13 PM update to the Jun 28 post:
USDJPY is pushing up toward the .786 retracement of its drop from its May 22 103.72 highs. Conspicuously, the intersection of the white channel midline and the .75 line of the yellow channel I show taking over is at that price (101ish) on about July 4.
UPDATE: 3:15 PM
For anyone who hasn’t yet had the chance, yesterday’s post regarding May 2013 has some interesting data regarding the ramp jobs that have become endemic over the past several months.
I knew they were responsible for much of the market’s upside lately. But, I hadn’t realized they were responsible for all of it — and then some.
The trend continued in June, though I haven’t tallied the total yet. Bottom line, there is a whole lot of manipulation going on. Today’s close and tomorrow morning’s opening will probably play into it.
UPDATE: 3:25 PM
SPX just broke through the bottom of the rising white channel and the red midline at 1626.13. This drop should stop by 1624 or so. Any lower and I’ll probably change sides or at least get some protection going.
Before I do, I want to mention that there are three annual memberships left from the sale earlier this week. I’ll update prices on the website this afternoon, so anyone who’s been thinking about it…here’s your last call to save $800.
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