Reset or Retreat?

Every once in a while the market needs a little reset. The bullish sentiment gets too high, and they need to let just a little air out in order to prevent the balloon from bursting. But, funny thing about these resets: they can get out of hand. Yesterday’s came very close to doing so, and it will take a very strong performance these next couple of days for the bulls to be firmly back in charge.

The E-mini fell through several levels of support, finally bottoming out where it needed to: 1774.50. As it rebounds today, the first real test should come around 1790 where it runs into a couple of channel lines as well as the red .618 and the purple .786.

continued for members…

The euro had a tough time of it yesterday, suffering its 3rd worst loss of the past month since topping at 1.38.

The USDJPY, on the other hand, is back to its July highs and is threatening to break out of a very steep rising channel after having broken out of the pennant we’ve been following.

It has completed a small Crab Pattern that should see it backtest the yellow or purple channel line — then should seek to re-test the purple .786 at 101.59 and go on to test 102.59-103.09 in late November or early December.

UPDATE: 12:15 PM

The reversal came at 1792, should extend to 1786.75 or so.

UPDATE: 3:34 PM

Pretty strong day all around. SPX and ES just reached their .786 fib levels and have formed 2/3 of an IH&S that should tack on 20 points or so if they can form right shoulders (ES 1815 — which is the red 1.618 extension.)

If the right shoulder is, instead, small enough to stay in the red channel — say, 1791 — then the channel can continue on the same glideslope.

Interesting that the little channel extends right on up to 1837 by late Sunday night — right where the larger rising red channel intersects with the 1.272 Fib at ES 1837. Hmmm….

I’ve been wondering for months how we’d reach 1837 on ES but only 1823 on SPX. The obvious way is a Sunday night spike based on something positive in Asia or Europe that doesn’t quite carry through on Monday — the day that SPX’s channel reaches 1823.