pebblewriter

Tag: Inverse H&S

  • Last Call: Dec 07, 2012

    Feeling pretty jazzed, as things should finally get underway today.  Today’s theme music from the late jazz great Dave Brubeck, the last of his kind.  This track features Brubeck, Paul Desmond, Eugene Wright and Joe Morello doing what they did best — laying down some hot licks.

     

    ORIGINAL POST:   9:15 AM

    Though the jobs numbers will give a boost to the market this morning, it shouldn’t be enough to break to new highs.  SPX should come within a few points of completing an inverted H&S pattern, but ultimately fail near the .786 or, more likely, a little Bat Pattern at the .886 (1420.82)

    For anyone who missed the opportunity to go short when SPX nailed our upside target [see: At Last] on Monday, this could be your last chance.

    The rally from 1343 has felt strong, but it’s no more than a back test of a broken channel. The next major move should be much lower.

    As always, stops are advised in the event the pattern completes.  Though this analog has worked beautifully since last April, they all fail eventually.

    BTW, the jobs numbers from BLS weren’t quite as fab as they would have us think (I know — I’m shocked, too.)  In the last four years, those over 55 have scored decent job growth.  Younger workers and those in their earnings prime — not so much.  From Zerohedge:

    UPDATE:  11:45 AM

    The dollar has been a veritable billboard for harmonics lately.  It completed a Bat Pattern back on Sep 14 (red pattern), retracing .886 of its rally from February to July.  Since then, it’s retraced 50% of the drop (not shown, but a Bat Pattern from Aug 28 channel mid-line break.)

    It then proceeded to complete a Crab Pattern (in yellow), reversing at just beyond the 1.618 of 81.138 in mid-November.  Since then, DX formed a nice falling wedge that saw it complete a Gartley Pattern on the 5th (in white.)

    Some might see the purple and red patterns as having further downside potential.  The red Bat could go on to form a Crab down at 74.335 (which would line up nicely with the purple .886 at 74.158.  If our analog/forecast busts, I’d say that’s a good possibility.

    But, it’s hard to ignore the recently broken channel for EURUSD.

    UPDATE:  1:20 PM

    Stocks reversed nicely from this morning’s high, which came within  48 cents of our 1420.82 target — good enough for government work.

    Lots of excitement about financials the past couple of days.  It was certainly one of the hot sectors today, offsetting generally poor results from services and, of course, AAPL.  When it comes to significant moves, financials often lead the broader markets.

    So, in a period when we’re looking for a sizable sell-off, it would be helpful to have the financials on board.  Fortunately for our forecast, they are only one good pop away from being ready.

    For more, check out today’s Update on Financials.

  • Update on COMP: July 2, 2012

    July 2, 2012

    COMP appears to be following a set of channels within a much larger channel we identified months ago.

    Whether it has the wherewithal to rise up out of the large red channel remains to be seen.  In the meantime, we’ll focus on the short to medium-term picture.

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  • Forecast Revision

    Note:  only six charter memberships are left as of EOD Thursday.  I’ll keep this going until they’re gone.  Congratulations to E.J., P.B. and T.J. for locking in today’s annual rate for the life of the site.

    * * * * * * * *

    Well, we got the rebound we were expecting…although it was a little unnerving.  As I posted at 10:30 yesterday — with SPX down 16 points at 1315:

    We had a similar dip the day before Q1 ended, too.  March 29 opened at 1405, dipped to 1391, and closed at 1403.  Money managers like to end quarters on an up note whenever possible.  This feels like a fake out.

    Sure enough, by late in the day we had rebounded to within 2 points of the opening, just like on March 29.  More importantly, we were right back on track with our forecast (the solid yellow line.)

    Likewise, the dollar caught up to our forecast (solid yellow line) in one fell swoop.  I was getting a little nervous, watching the growing divergence over the past few days.  The previous H&S was in danger of being busted; and, although we kept one foot on the long-term channel line, we were moving further and further away from the presumed right shoulder target.  No more.

     

    The pattern over the past 10 sessions suggests we’ll top out this morning at 1357.28.  That’s a Bat pattern retracement from the June 19 1363 high.  I’m also altering our forecast going forward.

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  • There and Back: June 27, 2012

    The market continues to follow our forecast nicely.  Recall we sold our longs and went short at 1330 on Monday’s opening, only to cover and go long later in the day at 1315 [see: Channel Watch].  Now, we’re back to 1332 and still long — as long as the channel holds.

    It’s been a wild couple of days, but we’re net 32 points ahead (yay!) versus just riding it out.  Looking at the bigger picture, I think we’re still well positioned.

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  • 2nd Time a Charm?

    Taking another stab at VIX’s daily chart.   Yesterday’s low of 17.09 was just .03 off the .786 Fib level of 17.12 we mentioned a couple of days ago [see: The VIX is In].

    There are a couple of different interpretations.  Fist: that the smaller (red) pattern is complete at the .886 and should reverse strongly.  Second: that yesterday’s low is just a Point B in a larger pattern such as a Crab.  Third, That we should be looking at the larger scale pattern — which calls for a Point B reversal at the .786 of 16.67.  So, which is it?

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  • Close, but no Cigarro

    Well, the Greek election came and went and, oddly enough, the world is still turning, the price of gas is still too high and (sadly) Mrs Eastwood & Co is still on the boob tube.  The election result was in the middle range of possible outcomes and, as such, has satisfied neither the bulls nor the bears.

    Friday’s initial follow-through after the IH&S completion only slightly exceeded our June 1 forecast target, and this morning’s dip came very close to our downside target [see: Mixed Signals.]  These were adjusted this past Friday to 1342 on the upside and 1334 on the downside, as seen from this chart posted Friday morning:

    So, did this morning’s dip to 1334.46 complete the IHS back test?  Mind you, I don’t object to immediate gratification; but, I think not.

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  • OPEX Games: June 14, 2012

    ORIGINAL POST:  10:30 AM

    With tomorrow being OPEX Friday and the important Greek vote this weekend, the market is in wait and see mode already.  But, we’re on Head & Shoulder watch, meaning the little games that market makers play just prior to options expiration might be a little more predictable.  If you’ll indulge me, we’ll try a little real-time experiment this morning.

    We have a small scale H&S setting up in the right shoulder of a larger scale Inverse H&S.  The smaller pattern targets 1280 while the larger one targets 1403.  With those kinds of moves at stake, speculators will jump on board any seemingly significant trend.

    June 13, 2012 — 60-min EOD

    Market makers, who rake in a lot of their money writing calls and puts to said speculators, have a vested interest (read: house in the Hamptons) in seeing the market go nowhere (unless they’re sadly underwater.)  But, with no volatility at all, speculators would look elsewhere for action.

    So, MM’s engineer moves that look like a break out or break down and write options to suckers speculators who — seeing the move they’ve been hoping for — jump on board.  They’ll let it run a little while, just to make sure they have everyone on board, then let the air out and run the game in the other direction.

    It’s been going on for the past week, and yesterday it indicated further downside when the latest RSI fan line was broken.  Having been long since the last turn at 1307, I played along and went short at 1317.

    I was no doubt one of many who believed the little H&S might either complete or come close to it around the 1304 level.  Personally, I was hoping for a quick 20+ point round trip (10+ each way.)

    9:36 AM

    This morning’s opening was mixed, but what initially looked like a back test to a perfectly good decline quickly developed into something more when the back test turned into a fan line violation to the upside.

    9:59 AM

    I took two points of lumps and got long again.  Sure enough, SPX has started a nice little run to the upside.

    10:24 AM

     

    Now, as we approach the purple channel line on RSI and the previous high on the price chart, the upside target becomes a little more clear — probably a little over 1325.   A 10-pt gain should be enough to get bulls salivating over the H&S (the one with the 1403 target) completing.

    The way this usually works, the move should fizzle and prices slowly settle back.  Call buyers won’t know what to make of it, but many will hang on — maybe even double down as the excitement fades and bears begin to wake up.

    It’s not unusual to see several false breakouts and breakdowns during this period — just so everyone has the opportunity to contribute to the Hamptons summer house fund.  For nimble traders, lots of opportunities to scalp a few points on the churn.

    Stay tuned.

     

    UPDATE:  12:55 PM

    One of the no-so-fun quirks of WordPress versus the old site’s Blogger is that I’m occasionally logged off for no good reason, without warning.  I might have been logged in all night, with no activity whatever.  But, right in the middle of writing a new post WordPress can kick me off.

    It means, say, if I hit the “publish” button and run off to get my daughter to camp on time, I might come back to a page asking me to log in.  Fortunately, the post wasn’t lost.  But, it also didn’t get posted when intended. My apologies.

    12:58 PM

    SPX slightly exceed our 1325 target, hitting 1326.66 just a few minutes ago.  I’m going to go ahead and take profits here and see if we don’t get a return trip back down.  If we break through the red dashed TL, I’ll jump back in for a trip to 1335 — but with tight trailing stops.

    If you’re wondering where this is all going, my inclination at this point is to go into the weekend in cash.  While the outcome of the Greek election is fairly predictable, I don’t like the idea of twisting in the wind while the investing public decides whether it’s good news or bad.

    UPDATE:  3:08 PM

    No interest in playing these whisper rumors.   I’d be really surprised if it holds.  Staying in cash — probably through the weekend at this point.

     

  • Charts I’m Watching: June 13, 2012

    ORIGINAL POST:  10:00 AM

    As Reeodd pointed out yesterday, there is a potential H&S setting up on the 60-min chart.  I’ve been a little leery of it, as its completion would certainly alter the timing of the forecast currently in place.  It’s highlighted below, and it targets somewhere around 1280.

    As we saw with the last major H&S top at 1422, when H&S patterns don’t complete, it’s sometimes with a bounce just above the neckline, rather than going through the neckline and playing out.  Here, a bounce at the neckline is what would keep us on track with our current forecast.  But, it’s not at all assured.

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  • VIX Forecast: June 12, 2012

    ORIGINAL POST:  11:00 AM

    With all the volatility these past few days, VIX has put on a spectacular show — gaining 3.69 yesterday alone (18.6%).  The weeks ahead promise to be just as exciting, but not for the reasons most expect.

    As discussed back on June 2 [see: Channeling VIX] the “fear index” was on track to complete a Crab Pattern (in purple below) and fulfill its Inverse Head & Shoulder pattern target.  These were targets originally set back on April 18 [see: VIX at a Crossroads.]  With VIX at 18.70, we forecast a high of 27.13.

    It topped out at a nearly perfect 27.73 on the 4th and has been sliding ever since — with yesterday being the notable exception.  Now, as many investors are wondering which way is up anymore, we’ll plot out what appears to be a very clear path forward.

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  • Big Picture: June 11, 2012

    This morning’s hunch to fade the futures’ ramp was a good one [see: Mixed Signals.]

    “There’s a channel line just overhead at 1337.30 or so that should limit the current rally.  Given the way the futures behaved overnight in equities, the dollar and the euro, I’m going to fade this ramped up opening and see if it settles back down.”

    The market not only reversed within minutes of the open, but it got all the way back down to our target range of 1303.47-1308.88, putting in a low of 1307.73 and closing at 1308.93.  Mind you, I hadn’t expected it to happen only six hours later, but I’ll take it thank-you-very-much.

    Although we got to the right trade in time, it was the result of a great deal of brain-racking and teeth-gnashing.  Had I bothered to look at the emini’s, the decision would have taken all of five seconds.

    All-together, SPX reversed over 28 points.  But, that was dwarfed by the e-minis reversal from +19 points to -23 points — a daily range of 42.25 points.  This was the single biggest red candle since 2011’s crash.

    As noted in last night’s update on the dollar [The Dollar: Currents, See?]:

    “I suspect the euphoria over the Spanish bailout will be relatively short-lived.   Putting the rest of the eurozone in harm’s way seems like a better way to get them downgraded than it does Spain upgraded.”

    Sure enough, there was plenty of talk about downgrades today — as doomers got the upper hand for a change.  The argument — a good one — is that there simply isn’t enough firepower in the ES, ESFS and IMF to bolster the creditworthiness of all the countries currently circling the drain — let alone those that aren’t yet in the headlines (Italy and France are on deck.)

    In the end, it will be up to Germany, the US and China to decide how much to contribute — a matter for another post.  Returning to the markets, there are several important take-aways from the ES chart above.

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