SPX reacted pretty much as expected on Friday.  From the members’ section in the initial post:

…the odds of SPX gathering enough momentum to reach the red target have dropped dramatically.  Instead, it looks more likely we’ll get a drop to 2093.55, the intersection of the white channel bottom and the former high.

If that fails, the yellow target at 2087.39 is still very legit. But, of course, that would mean a departure from a very carefully constructed channel.  Given that it’s OPEX, that would probably be a head-fake — with the usual V-shaped rally following close behind.

SPX dipped slightly below the yellow target and appeared to be heading toward the red target price, but only reached 2085.44 before constructing a V-shaped rally into the close.

Late in the afternoon, we advocated taking the profits.

…don’t know which Greek news blurb to believe, so I’d go ahead and take profits here at 2107.  Might well be leaving money on the table, but I’d rather pocket the 20-pt profit than risk giving it back later.

SPX’s bounce was built on a bounce by CL and USDJPY and a crack in VIX — all of which occurred.  But, oil’s bounce has been completely undone over the weekend. It plunged to a 48 handle overnight, nearly reaching the purple .618  that could set up even lower prices.

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Oil bounced where we expected it to.  From yesterday’s post:

CL…has found strong support at: (1) the bottom of the purple channel we suggested several days ago; and, (2) a combination of Fib levels including the white .786, the purple .382 and red .618.  If [it] gets a strong bounce at 50, SPX’s downside could easily be limited to the red 1.272 at 2087.39.

In fact, oil’s bounce was so dramatic, SPX only reached 2090 before getting the boost.

USDJPY also bounced — at the red pennant top.

But, they both settled back down overnight — which is why the S&P futures are currently trading off about 5-6 points.

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Not to sound like a broken record, but it’s all about oil and the USDJPY this morning.

CL broke down overnight, but has found strong support at: (1) the bottom of the purple channel we suggested several days ago; and, (2) a combination of Fib levels including the white .786, the purple .382 and red .618.While, USDJPY has broken up through the pennant’s upper bound yet again — blunting the effects of oil’s slump.

SPX still hasn’t broken out of the red channel.

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The red channel that we were watching yesterday held.  From yesterday’s members’ section:

Note that the nearly horizontal red channel could provide for a quick reversal at present price levels – particularly if CL doesn’t hold at the .618 at 51.72.

CL didn’t hold at 51.72.  In fact it plunged to 50.8 — before a “mysterious” V-shaped  bounce into the close provided the help SPX needed in order to close in the green.

USDJPY got an assist, popping back above the top of the pennant pattern (in red, below) it had more than backtested.  But, it’s hard to ignore the glaring divergence between USDJPY and ES between Feb 11-16.

We’ve placed a downside target at the purple .886 at 2080.71.  But, as we discussed yesterday, it’s not the only target we’ve got our eyes on.

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As we surmised, SPX made a new high on Friday.  By poking through 2093.55, it technically invalidated  all those nifty bearish Fibonacci patterns.  Though, as we pointed out Friday, the last several times SPX eeked out a new high, there was a significant sell off.

First, the rally from 1982 has been fast and furious and fueled by a rapidly shifting news flow. We’re coming up on a holiday weekend, where big ramp jobs are commonplace — especially when it looked like the market was poised for a drop.

On the other hand, the past two new highs have been followed by large drops.  I see no reason in the charts to expect this will be the third, but that will depend on whether CL retreats and/or USDJPY — which is still in retreat mode after tagging that critical .618 at 120.11 — provides its usual ramp.

We got the new high, but we also saw USDJPY continue its retreat…

…and CL continue to slide.

The stage is set, but will CL and USDJPY continue to provide the necessary lift?

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Happy Friday the 13th, folks.  Here’s wishing everyone a blessed day and the very best of luck!

If you took yesterday’s daily forecast to heart, there was good news and bad news.  The good news came in the form of our initial post in the members’ section:

Look for the initial spurt to get SPX up to the purple TL.  It might well require a second wave to reach 2080, if it’s to happen today.

SPX did, indeed, race right on up to 2080 — in two waves, even.  The bad news is that we suggested it might be ripe for a short at 2081.75.

SPX just tagged 2081.75.  I’d want to be short at this point, with initial objectives of 2072 and 2068, but I’m a little nervous about USDJPY’s TL.  A nice bounce here, even if it fails to clear 120, would be problematic for bears.  Perhaps a tight stop — just in case.

USDJPY bounced, of course, meaning those stops came in handy.  Between USDJPY and CL — which is still climbing, up 3% on the day so far — the algo action was too strong.  SPX dropped only to 2077 before inching higher for the remainder of the day.

CL has run into resistance at the bottom of the white channel, so it might not be much help in the short run, at least.

But, SPX has an opportunity to make a new high — now only 5 points away.  And, the eminis are currently up 4 points.

USDJPY has recharged, and could easily take over the algo function all by its lonesome — if that’s what the script calls for.

I will be out for the remainder of the day, so I’ll leave you with this observation.  It’s a good day to exercise caution.  First, the rally from 1982 has been fast and furious and fueled by a rapidly shifting news flow. We’re coming up on a holiday weekend, where big ramp jobs are commonplace — especially when it looked like the market was poised for a drop.

On the other hand, the past two new highs have been followed by large drops.  I see no reason in the charts to expect this will be the third, but that will depend on whether CL retreats and/or USDJPY — which is still in retreat mode after tagging that critical .618 at 120.11 — provides its usual ramp.

I’ll be back on Tuesday, but have some very cool long-term charts to post over the weekend.

GLTA.

Yesterday went according to plan, with the initial and subsequent moves in SPX tagging both our purple and yellow initial targets. From the initial post (members section):

SPX might limit any initial weakness to 2064 or so — particularly if they’re able to hold the line on CL.  If USDJPY reverses, or CL continues to plummet, then we’re probably looking at 2057 (yellow dot) to flesh out the rising white channel.  In either case, the goal for bulls is to break through the white channel top and reach 2080.70 — the purple .886/1.272 combo.

We added the second purple target as a less likely option after the yellow target was nailed, but set our sights on the red target at 2080.70.  From the 1:30 update:

SPX just tagged our initial yellow target (I had been uncertain as to when it would happen, so drew two yellow targets this morning.)  I’ve moved our upside red target (2080.70) over to tomorrow morning, and added a the purple dot at 2053.54 as a potential downside target. I don’t see it as very likely…

As mentioned above, 2080.70 is the .886 retracement of the drop from 2093 to 1980, as well as the 1.272 extension of the latest, much smaller downturn.  It caught my eye when SPX bottomed at 2040 Monday afternoon — setting up an intersection between the two patterns.CL broke out of the falling red channel overnight — a net positive.

But, USDJPY gave up the critical yellow .618 Fib line at 120.11 — a real headwind for SPX.

Note ES’s behavior the last time USDJPY failed at this Fib line. Today’s targets coming up.  Continued for members...

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Yesterday’s forecast worked out reasonably well.  From the members’ section:

I’m looking for a pop in SPX to the purple .618 at 2060.74, after which we might see it retreat.

Then, after reaching 2060.74:

Just reached our first target at the .618.  I think it’ll keep going, probably up to the .786 at 2065.87 — though it might not be a straight line.

We took a shot at a short position at 2065, but with the understanding that we might be premature:

I’d take a crack at shorting it here at 2065.72…If I’m wrong, we should see the .886 at 2068.92 instead.

SPX topped out at 2070.86 before closing at the .886 at 2068.34.

This morning, we have a battle between the ill effects of tumbling oil prices……and the carry trade magic of a rising USDJPY.  Which will win the hearts and minds of equity investors? Or, more accurately, which will trigger the stronger algos?

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Yesterday’s forecast called for a dip to the 50-day moving average.  From the members’ section in our initial post:

I’m looking for the initial move to take SPX to our 2046.7 target, with a secondary target of the SMA50 at 2043.90. If that should fall, the next strong support isn’t until the white .618 at 2032…

SPX accommodated with fairly accurate tags at our target prices and times.

We finished up the day with some indecision about that lower white target:

Quick update…2nd target hit, and a 50:50 shot on the third.  VIX and bonds suggest it’ll happen tomorrow morning.  But, TPTB might easily hold the line here.  Hold the short only if you can hedge and/or handle the overnight risk.

For the umpteenth time, news (founded or not) out of Greece dominated the overnight sessions.  Zerohedge has been running a story (citing Bloomberg) that — following offers from Russia and/or China to fund its deficits — Greece has obtained a 6-month extension on its debt deal with the ECB.

Predictable, markets have ramped higher.  USDJPY broke through the trend line off the Dec highs — sending ES up over 12 points as we go to press.

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Isn’t it interesting how the exercise of democracy in the very cradle of democracy has the Eurozone scrambling?  No doubt the Troika wishes they could just turn back the clock, go back to the days of dictating economic austerity to member states.  But, central planning/banking has its limitations, and the Greek people have proven that citizens can, indeed, be pushed too far.

In other news, the Baltic Dry Index reached its lowest level ever today.  For those unfamiliar, it’s a measure of the price of moving raw materials by sea and an accurate reflection of global trade.

Friday’s shiny new unemployment report, which sent stocks soaring and bonds dumping, is likely to be forgotten as the Grexit again takes center stage.  Last Thursday afternoon’s forecast [see member section] proved fairly accurate:

Given the volatility and manipulation of the last two days, I wouldn’t be surprised to see SPX slightly exceed 2064 in order to stop out the bears before reversing.

When SPX overshot our target, we set our sites on 2073.28.  SPX reached 2072.4 before reversing on cue — bagging our first and nearly our second downside targets (2049 vs 2046.)

We concluded the day with an observation that there was more downside to come and that aggressive traders might wish to continue playing the downside.

With the futures currently down 11 points, that was the correct call.

USDJPY reversed nicely off the red TL as expected — though it topped out a little higher (119.21) than expected.

USDJPY, having done its job, will certainly retrace a great deal of this morning’s gains.  Look for it to top out around 119.08.

Today’s targets coming up. continued for members…
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