My favorite thing about analogs is that they provide a roadmap for rips and dips that would otherwise frustrate the hell out of you.  We went short near the top and have already reached our initial target.

I know some members have done quite nicely over the past few days, but it’s not the 6.8% drop that excites me (though it is fun to be making money when everyone else is running around with their hair on fire!)  It’s the prospect of reaping some of the 23 major swings averaging 298 points and 11.2% that our analog indicates are coming our way.

For those who aren’t active traders, the analog offers an equally important benefit: the ability to hedge in advance of a day like yesterday or the significant move that’s coming.  In a world where money managers are considered a raging success by beating the market by 2-300 bps, avoiding a 7% loss is huge.

Now, on to the markets.  The futures were busy overnight.

continued for members…

The large dip after the cash market closed was a real monkey wrench for our analog. Would SPX follow suit in the morning, tagging its own SMA200?  At the very least, it would have disturbed the forecast of a cycle low on Aug 14.However, we got a nice bounce overnight. So, SPX’s closing price seems to be safe for now.  If the analog holds (you’ll get tired of that conditional clause, but it’s important)  we should see SPX meander sideways through Aug 14, get a nice bounce until the 16th, take another stab lower on the 20th, get an even stronger bounce through Aug 27, then make a new lower low on Sep 10.That’s an awful lot of volatility over the next month, but it should be dwarfed by what comes in October.

I’m torn as to whether SPX should tag its SMA200 on Aug 14 or wait for Sept 10 when it would probably be quite close to our target at the .786 of 2792.83.

If Aug 14 does end up being a cycle low, the .707 Fib at 2816.47 would be a way of accomplishing that and tagging the white channel bottom at the same time.  Then the Sep 11 low would represent a breakdown of the white channel.

Note that DJI has already tagged its SMA200.  Another push lower around Sep 11 would alarm a lot of people.  Speaking of 9/11, is it significant that the analog calls for a 220-pt (7.3%) decline leading into it?  Maybe.

Being 9/11, there’s always the potential for terrorist-related activity.  But, there’s also a lot of economic news due out around then, with PPI and CPI being the most important.As mentioned yesterday, I’ve adjusted all our charts to coincide with the analog’s view of the world and will use it until it fails (all analogs eventually fail.)

On the currency front, we’re seeing decent bounces in USDJPY and DXY…

…while EURUSD backs off after tagging its SMA100.

RB tagged its .886 target overnight and is bouncing a bit — with a test of 1.6625 possible before it bounces and backtests the broken white channel around month-end. I think CL will likely tag its .786 on the 14th, then backtest into the end of the month before declining sharply into Sep 11.  The most likely target, IMO, is 47.55-47.81.  But, we’ll probably make some adjustments over the next week or two.VIX has fallen over 11% from yesterday’s close, but should get another pop higher to test the .618 (26.59) or channel top (28.40ish) next week.I have bond charts to share, but will do so in a separate post.

More later…