ORIGINAL POST:  9:15 AM EST

Friday we reversed right on target, tagging our trio of tightly-packed downside targets (1344-1348) before heading up.  This morning, we’re seeing the continuation of the next leg of our forecast.

The dollar, which broke down from its rising wedge earlier in the week, came back and tagged its apex before reversing.  The next move should be to test the channel bottom.

The EURUSD is a little ahead of the game, testing the bounds of the little channel it’s been in for about a month after breaking out of its falling wedge last Wednesday.

Stocks appear well on their way to our first upside target of about 1380.  Look for SPX to at least pause around 1379-1383.   This was the chart Friday morning.

And, here we are today, having reached our IH&S target in the first hour of trading.

UPDATE:  11:00 AM

As we discussed Friday, 1381.50 was perhaps the most significant level in our target range mentioned above.

Those who’ve been paying close attention will remember 1381.50 as the .786 of the 1576-666 crash.  So, there’s an extremely good chance we’ll get some sort of reaction there.  It’s also the .786 of the last wave down from 1391 to 1343.

But, a reaction at 1381.50 has even greater implications.

….786 reversals…frequently lead to Butterfly Patterns that extend to the 1.272 or 1.618 Fib level — 1404 and 1421 respectively.

The implications for the market if/when we reach those levels are huge.  I spent the weekend revising my primary forecast, and will devote the balance of today’s post to what I expect over the next six weeks — which should usher in the most dramatic moves since the summer of 2011.

Quick membership note.

Not long ago, I added a monthly membership option.  I understand its popularity with members, but it’s been a losing proposition for me — and ultimately to the membership.  Every new membership means time devoted to site administration (setting up the account, emails, etc.) and time away from charting.

I intended monthly membership as a means of allowing folks to spread their costs out over time.  While most have used it in this way, a number of members have signed up for it, gathered good information for 30 days, then cancelled their memberships — only to reappear a couple of months later requesting a new membership. Like I said, too much admin time for me — which detracts from the site.

I have decided not to offer new monthly memberships after Nov 21.  Existing auto-renew members may continue their current $105/mo pricing for another six months if they like.  But, those who purchase one month at a time will no longer be able to do so.

For those who have recently signed up, please consider a quarterly, semi-annual or annual membership.  For anyone who converts from a monthly to an annual membership, I will rebate your last monthly payment and start your new annual membership at your next expiration date.  In other words, your past month is free.

I will also extend the Red Cross promotion through Nov 21– meaning a 25% savings ($200) on an annual membership if you make a $100 or greater contribution to the Red Cross (see details on the membership page.)  Obviously, this is a better deal than paying $105/month for the next six months.  I will also delay the scheduled membership price increase until the end of November.  Thanks for your time.

 

UPDATE:  11:30 AM

Okay, let’s get on to the forecast.

continued for members…As we discussed Friday, an Inverse H&S pattern targeting 1420ish is in the cards if we establish a right shoulder beginning with today’s high at 1382.

If we react there, it would also make a very serviceable neckline for yet another IH&S pattern that happens to target 1420.  Note that 1420 is in the vicinity of [drum roll please…] a ridiculous number of important price levels:

• the .618 of the Crab Pattern that took us down to 1348 (white)
• the .618 of the 1474 to 1353 (purple)
• the .236 of the 1266 to 1474 rally (also purple)
• the April 2 high at 1422
• the .886 of the 1433 to 1343 plunge (red)
• the 1.618 of the 1391 to 1343 drop (smallest purple pattern)

So, I take it as very significant that this morning’s rally is running out of steam at these levels.  We likely just finished a subwave 3 of whatever degree wave up we’re in the midst of, and the corrective wave 4 could extend as low as 1361.50 (the .500 Fib is at 1362.69.)

But, it’s worth noting the neckline we just broke through is already up to 1365.  It’s fairly common for H&S patterns to back test a broken neckline, though it’s more of a guideline than a rule.

Obviously, there are a lot of Fib levels between here and there.  First, a tag of the white .886 at 1383.63 obviously completes a little Bat Pattern.  But, it also sets up a potential Crab Pattern.   Remember, Crabs complete at the 1.618, which in this case is 1416.90.

As a short-term trade only, I’m taking some profits here at 1383 and riding the wave 4 down.  We tagged the red TL and should see some weakness develop shortly.  If you’re a buy and hold investor, this trade is not a great idea, as we’re likely going higher in the next few days.  Probable target = 1366-1373.  Tight stops are in order — say, 1387.

Right there with the white pattern is the little purple one, that started at 1391 versus 1388.  This morning’s high was right between the purple .786 and .886 — again a potential Crab, this one targeting 1421.08.

And, a reversal here would set up a potential Bat Pattern completion on the red grid .886 of 1423.12.  Suffice it to say, we have plenty of targets up around the 1417 – 1423 level.

I have to be away for a few minutes, will return asap.

UPDATE:  2:35 PM

My apologies for the delay.  I’m out of town today, and thought I had a decent wifi connection where I’m hanging out.  Two coffee shops later, I think I’ve found one that is passable.  Fortunately, it looks like not much has happened in the past hour.

I have 45 minutes before I have to run out to a lunch meeting, so I’ll type fast.  SPX is leaking higher, so the purple pattern will likely take precedence over the white.  The purple .886 is at 1385.91.  And, its 1.618 is much closer to the red .886 — 1423.12 v 1421.08.

I’m going to clear out some of the smaller Fib patterns for ease of viewing, and place numbers 1, 2 and 3 for the current price, my anticipated pullback and the 1420 target as described. [note: the speed of my new wifi connection is not much better; taking several minutes to refresh charts — ughh…]

A reminder of the channels in which we’re operating…

The rising yellow channel midline has been the pivotal level around which the market has oscillated the past several years.  We fell beneath it on Oct 19, and have been working our way lower ever since.

If there’s life for the bull after 1420, it’s likely up at the .786 or .886 of the larger purple pattern at 1446 or 1459 respectively.  But, to understand whether that’s likely, we have to go back to the big picture channels.

And, now I’m going to have to bail for a lunch.  To be continued after the close…

UPDATE:  2:00 AM

The good news is I’m back home with a reliably fast internet connection.  The bad news is I’ve been laid out by a nasty gastrointestinal malaise.  I hope it wasn’t the delicious clam chowder from the oldest restaurant in California.

In any case, I’m crashing early tonight and will tackle the revised forecast in the morning.  GLTA.