Just in case there was anyone left out there who still believed the game wasn’t rigged, the FOMC comes along and confirms that certain people are more eligible than others to receive potentially market-shaking information in advance.
Not to worry, though, as it was only politicians, their staffers, the lobbyists, their organizations and employers, relatives, friends, neighbors, household staff, the folks at the next table over at Minibar, the valet parking guys…
In any case, the minutes confirm what we could have surmised based on the governors many speeches, CNBC appearances, etc. There is dissension in the ranks about tapering or ending QE, but it’s still a minority. They’re still worried about unemployment, etc. etc. Nothing new here.
A few moments ago, a Fed spokesman opined that they weren’t aware of anyone on the early distribution list having traded on the information. Riiiiight…..
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In the biggest development of the last 24 hours, the channel the US dollar’s been in since Jan 11 officially broke down. Recall that DX completed a Bat Pattern on Apr 4, signalling a reversal that is playing out nicely.
This gave SPX the go-ahead to make a new all-time high, which it did this morning — finally exceeding the Oct 2011 1576.09 high.
We remain long from 1539.86 [CIW: Apr 5, 9:33 update] and are now looking ahead to several potential turning points — the first of which are coming up between 1579-1583.
The most significant appears to be 1582.95 — a Butterfly Pattern 1.272 extension of the drop from 1573.66 to 1539.50 last week. It happens to intersect this morning with the former H&S neckline (red, dashed) and a TL connecting the 1994 low with the scheduled May 2011 high of 1381.50 (yellow, dashed.)
UPDATE: 10:15 AM
Just tagged the low end of our target range — the 1.618 extension of the 1563-1538 drop at 1579.10 (in purple, below.) This also represents a tag of the white channel that’s guided the swings of the past 3 weeks.
We could get a pause here, as SPX has broken out of its ridiculously steep red channel. Traders might wish to take a crack at what could be a pullback to 1573 (channel midline) or 1570 (channel bottom.)
But, the interim goal remains 1582.95. Of course, the question then becomes “now what?”
A quick check of the daily RSI shows that the game could be over at any point now. This marks the 5th distinct point of divergence and a tag of the yellow channel top and white midline.
The yellow channel is the same slope as the falling channel from 1474 to 1343 last Fall and the falling channel from 1422 to 1266 in the Spring. Can it put an end to this rally?
continued for members…
Even now, daily RSI is poking up above the yellow channel top. But, remember, intra-day pushes are forgotten at the end of the day when the daily data point is set.
UPDATE: 11:00 AM
SPX just tagged the 1.272 Fib level and the TL’s we charted earlier. I’m taking profits here at 1584.10 and will play what should be a downturn of at least a few points. Very tight stops, though, as SPX could easily ignore a minor Fib in its boyish enthusiasm.
More charts in a few…
UPDATE: 11:07 AM
False alarm…stopped out. Looks like we’re heading to the purple midline at 1588-1589. Back to full long at 1584.10.
more in a few…
UPDATE: 11:44 AM
A couple of interesting charts I’ve been meaning to post for the past two days…
The Wilshire 5000 joins the list of indices that are done going up for a while. Today, it finally tagged the 1.618 of its May 2 to Oct 4, 2011 plunge from 14,562 to 11,208, completing a beautiful Crab Pattern that reversed at the .707 Fib.
Remember, for SPX this was back on Mar 11 at 1553 — but, that was still shy of the all-time high that many other indices had made.
It has also tagged the TL connecting the 2000 and 2007 highs (red, dashed line) and the top of the well-formed purple channel.
The other is the McClellan Oscillator, which has reached a potential turning point here at the midline of the yellow channel and the top of the red channel.
UPDATE: 12:45 PM
Getting close… Note the red, dashed trend line at 1593ish — extended from the 2000 and 2007 tops. Same situation as the Wilshire 5000 above.
The grey line at 1587.89 is the 2.24 of the 1530 – 1485 decline in February. It’s not a huge milestone, but it might influence some.
The more interesting targets are that red TL and the purple 1.618 Fib at 1594.77. I show the red TL and the purple channel midline intersecting late tomorrow, but I can’t imagine TPTB taking a chance on being able to maintain the rally another day.
Looking at the purple channel on the 60-min chart, it appears to be way off. I’ve played with this thing a million times since last November, and this is actually the best fit. That doesn’t mean it won’t change any further, or that others will see it that way.
If you captured all of the tails and shadows, you could argue we just tagged the purple midline. So, we’re definitely well into the danger zone here. As always, keep your stops where you’re comfortable.
more later…
UPDATE: 1:53 PM
Thinking about a protective short position here, but the downside potential of the latest little channel (purple) is its bottom at 1581ish. Better to just raise stops. The top of the purple channel crosses the red TL around 2:15pm.
UPDATE: 2:33 PM
I like to keep an eye on the 5-min RSI when in the final stages of a move. It often provides a good early indicator of trend changes. Here’s the current view.
Focusing only on the white channels (everything else is from another time frame) we can see continued downside potential at least to the bottom of the rising white channel, and maybe to the bottom of the falling channel.
Keep in mind that many of the closes these past two weeks have ramped 5-7 points in the last 5 minutes.
UPDATE: 3:15 PM
Time for SPX to make its move if it’s going to hit 1594 today. the 5-min RSI just tagged the bottom of the rising white channel and could produce an 8-10 point rally into the close if it wishes.
UPDATE: 3:30 PM
Quick update on AAPL, which is up the past few days after falling from 1470 to 1420 between Mar 25 and Apr 4.
I hate to sound like a broken record, but AAPL remains in the very same channel it’s haunted since the 705 high (white, below.)
I’ve tentatively slapped on a bigger channel (grey) that has some good fits around the midline, but that’s a bit speculative.
Remember, AAPL broke down below the big white channel midline and a rising wedge lower bound on Jan 25 and, after backtesting each, has had trouble breaking out.
We’ve been pretty fortunate in hitting our past targets, so I’ll take another stab at some here.
The light blue 1.618 at 409.15 would complete a Crab Pattern created by the 522-705 rally. The red .886 is nearby at 402.28.
And, the purple .886 at 355.48 would complete a Bat Pattern set up by the 310 – 705 rally. Lots of good horizontal support there, too.
A more severe downturn would get us to the 307-317 level including the yellow .618 and the white .786 (307.50.) As it turns out, 307 is the target of the fateful H&S pattern that completed back in January.
Daily RSI shows a pretty decent chance of a reversal at today’s high, though there’s room in the white channel for upside to approximately 450.
The stock’s biggest immediate challenge is the little H&S pattern brewing. If completed, it targets 369.
UPDATE: 3:55PM
I intend to close my long position and go to cash just before the close today — hopefully around 1588-1590.
I’m probably leaving money on the table. But, staying long overnight at an all-time high only 3-4 points away from our target when so many other indices are close to calling it quits makes no sense to me.
We can always pick up a few more points if we get follow through in the morning. But, I wouldn’t want to wake up in the morning to a gap down.
Other indices I’m watching this afternoon:
RUT is 1.33 from completing a Bat Pattern and RW backtest at 948.32.
COMP completed a Butterfly Pattern today — the 1.272 extension of its 56% drop from its 2007 highs of 2861 to 1265.
GLTA.