Moment of Truth: Mar 14, 2013

SPX is fast approaching the moment where it must either break down or break out.  As we detailed on Tuesday, there are a limited number of patterns providing resistance at these levels.

The all-time high is just above at 1576.09, but SPX is already bumping up above three Crab Patterns that should smack it back down.

As we discussed in yesterday’s last update, a push above the 1556.77 high was reason enough to play along on the upside, but I can’t see SPX topping 1564 without doing serious damage to the bear case.

I’m going full short again here at 1561, and will wait and see…again.

But, keep in mind that the 161.8 of the latest small pattern and the 261.8 of the red pattern, not to mention the IH&S target of 1565 are all just above, and are easily attainable within the rising wedge.

And, lately, SPX seems intent on bagging every last target within sight.

UPDATE:  10:35 AM

Yesterday I posted a strange concoction of mine that plots time and price Fib levels against a rising wedge.  In my experience, most rising wedges break down somewhere between .618 and .886 of the time and price from inception to apex.

As the wedge is currently drawn, the .886 price Fib is around 1562 and the time Fib is around tomorrow morning.  But, keep in mind the rising wedge itself is subject to wiggle room (primarily, whether to include shadows/tails or not.)

So, the placement of the apex, which is just the intersection of two (hopefully) precisely drawn trend lines, determines just how accurate the grid is.

Wedges that go beyond the .886 Fib in price or time are likely to break out instead of down.  This is not highly unusual.  But, in this case, a break out would mean the trend line from 1994 we discussed the other day has been broken.

It’s broken now intra-day, which doesn’t concern me too much. But, a close, backtest and move higher would likely mean the 1576 high would be taken out.  I’ve switched it to a dashed yellow line to better distinguish it from the RW.

I’ve highlighted the most likely target range if prices are going to reverse.  Included in that circle are:

  • the RW time Fib .886
  • the RW price Fib .886
  • the smallest scale (white) 1.618
  • the red 261.8
  • top of the rising wedge
  • three channel lines
  •  the inverted H&S target.

Aside from those, it is of little consequence (sarc.)

In summary, we’re watching to whether or not SPX closes above the TL from 1994 and the two large Crab Pattern 1.618 Fibs.  It’s okay to poke around in the vicinity, and Crab Patterns don’t always reverse immediately at their 1.618s, but a leg higher would be bullish.


UPDATE:  3:50 PM

After a full day of charting, I have some exciting things to share later this afternoon.

Here’s the updated 15-min chart,  w/ the time and price Fibs and the key chart patterns.  If we get a push through the RW (1565ish, also the IH&S target) by the end of the day, I intend to go long.

Otherwise, I’ll sit short overnight.  Much more to come later, including a revised forecast.

Lots of charts in the morning…




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