We reached our initial target of 1444 [from Sep 18] yesterday, a nice 30-pt gain since shorting SPX at 1474 on Sep 14.  Those who played the bumps as we saw them worked a little harder, but were rewarded with more than twice the return — hauling in about 75 points for a pretty cool 5.2%.

From yesterday morning’s post:

I thought we would get a bounce there and come back to tag my 1439 target Monday, but the market looks like it just can’t wait. The e-minis are down a few points, and that should drag SPX down to that 1439 level on the opening bell.

We closed our shorts and went long at 1444, which was premature.  Fortunately, we had a very tight stop in at 1443, so lost only one point (aside from the opportunity loss.)  I’ll be looking to go long again this morning after the dust settles — probably around 1438-1439.  But, we’ll see what kind of carry-over we get from yesterday.

Here’s what I’m looking at this morning:

UPDATE:  9:40 AM

There are a few harmonic targets just below the 1439.42 level — the 2.24 at 1438.20 and the .500 at 1435.54.  Looking for it to settle before jumping in.

More in a few.

UPDATE:  9:50 AM

That should just about do it.  I’ll take a stab at going long here at 1437, with tight stops at 1435.  Picked up a couple SPY Sep 144 calls at .50 to play the bounce just for grins.

UPDATE:  10:15 AM

There’s a channel within the big channel that’s easier to see without 20 Fib grids cluttering up the chart.  This morning’s low comes at a key intersection I’ve been watching.

continued…Note that each of the yellow and purple channels looks valid to a point.  That is, the yellow channel looks great until about halfway up; then the purple channel starts looking a little more accurate.

Here’s the close up.

If this runs away from us, the yellow channel is below at about 1412.

 

UPDATE: 10:30 AM

I’m inclined to give my stop a little more leeway, as the 1429 – 1474 .886 is just below at 1434.17.    If we don’t arrest by 1430, however, I’m pulling the plug on the longs.  At that point, the purple channel has probably failed and we’re not going to bounce until 1412.

Watching this white 5-min RSI line for signs of a bottom.

Here’s a better look.

UPDATE:  11:35 AM

Decision time for SPX… follow the channel down or break out.  More in a few…

UPDATE:  11:55 AM

Break out and back test?

12:10 PM

Watching to see if we can break out of this little channel up.  Can also be viewed as a rising wedge on RSI, so we want to hold the lower bound for more upside.  At this rate, we’re back to about 1447 by the EOD.

The channel needs to widen.  It can do so by RSI shooting up to the white TL, turning it into a channel, or by breaking the lower bound and establishing a lower red TL parallel to the upper one.  Either way is fine, as long as we don’t lose the general direction.

UPDATE:  12:55 PM

So far, so good.  The red RSI RW expanded to a channel as discussed above.  The resulting price channel currently targets 1440-1444 by EOD, but that’s just a place holder number for now.

The top of the little channel right now is 1438.82.  The bottom is around 1435.

UPDATE:  1:57 PM

Getting a sell-off here at 1440.  Probably just the channel widening again to match the best upper bound. But, we’ll keep an eye on the last low (1434.57) to make sure the trend remains up.

UPDATE:  2:15 PM

Still getting higher lows as the channel broadens a little more, but we need to score some higher highs in order for the upside to stay intact.

Experience tells me the broken white channel line at 1444, but I need to give it some more thought.

UPDATE:  3:25 PM

On a day when it feels like we’ve been swimming upstream for hours, I think we’re finally going to be rewarded.  Check out the dollar charts.  The channel from July has been a very solid predictor of stock action.   Recall that it completed a Bat Pattern the other day.

It’s now traversed the channel and is due for a reversal — if it doesn’t break out.   Note that it’s also completed a Crab Pattern and retraced the .500 of the decline from the last upper channel bound tag.

It furthermore has completed and is back-testing a rising wedge.

It might not be much of a reversal, but even .20-.30 should mean higher prices for stocks.  I’m going to stay with this long equity position into the close and see what happens.

UPDATE:  3:43 PM

Little falling wedge going on with a Crab Pattern completion for SPX…

And, the same for EURUSD on the 60-min chart.  Finished off a Gartley and a Crab very deep into a falling wedge right at the channel midline. Remember, the currencies are the grown-ups in the room, and are “right” much more often than equities about direction changes.

It could be that the dollar and the euro are going to push on through to the next level, but it feels more like a big shakedown to me — scare the crap out of folks so they can run it back up without anyone making any money.

Of course, maybe that’s my book talking and I’m dead wrong.  It wouldn’t be the first time, and, sadly, it probably won’t be the last.

More after the close.