Another day of assurances that everything’s going beautifully, just a few loose ends to tie up, etc.  The talking heads are certain it’s a non-event.  I remain, shall we say…uncertain.

In the meantime, ES tagged the .786 retrace (in purple below) from the all-time high overnight and retreated to the neckline of a rather imposing looking IH&S.  In the past hour, prices have slipped below the neckline.  (SPX came within 0.98 of its .786.)

As discussed yesterday afternoon, the .786 is a great place to try a short [always use stops — especially in highly unpredictable situations!] Besides the channel and harmonic indicators, there is a potential analog in play.  Actually, two of them.

continued for members…If one plays out, the downside could be significant.  And, it just so happens to line up with my expectations.  The only hitch is that the market is so obviously being propped up right now.  Can’t tell you who or how… but, TPTB are clearly going out of their way to keep the music playing — the better to drown out the crashing of icebergs against the hull of the USS Alles Swell.

Here’s what I have in mind for the more bearish of the two.  Today would line up with Jun 1, the big red candle following the rise on May 31 that broke the falling purple channel.

If this analog played out, our downside target of 1573 or 1590 would equate to the 1252 low on Jun 16, 2011.  The decline would be followed by a potentially large rebound (1709?) and either subsequent sell-off or rally on to 1837.

Note that the Jun 16, 2011 lows found support at a white channel midline.  This is the big, white channel involved in the current forecast:  its bottom is our Oct 24ish 1590-1596 target, and has been our downside forecast for at least a couple of weeks [see: Sep 30 update.]

The nearly horizontal white channel running through the bulk of 2011, when expanded and extended (shown in red) has come into play many times…

…including the most recent highs, as seen below.

The forecast based on such an analog would look something like this — with two ending scenarios:

1) the scare the crap out of folks version; and,
2) version one with a stick save, leaving the end of the year relatively neutral.

I’ll work on the other analog and, if possible, will post it later this evening or tomorrow morning.  Right now, I’m going to put together a fund update to go out this afternoon.

GLTA.

 

 

 

 

continuing…