pebblewriter

Tag: rising wedge

  • The Best Laid Plans

    The best laid plans of mice and men
    Go often awry,
    And leave us nothing but grief and pain,
    For promised joy!

    Robert Burns, 1785

    ORIGINAL POST:  6:45 AM EDT

    The wedges we’ve been watching on DX and EURUSD are playing out.  EURUSD has broken out…

    …and DX has broken down.

    But, it’s the USDJPY that I’m watching especially closely this morning.  It still hasn’t broken 100 since our Apr 8 observation [USDJPY update] that it was running out of steam:

    “…there is growing risk of a downturn as it approaches 100… it appears the pair might have hit at least interim resistance at today’s high.”

    It topped out 3 sessions later at 99.94, and two weeks later is in danger of a larger pullback.

    Remember, weakening the yen was a critical element of the BOJ’s stimulus program that was supposed to generate inflation, boost Toyota sales and send Japanese investment funds flooding into foreign markets.

    Instead, Japanese investors are repatriating their funds from abroad — a net Y9.5 trillion ($95 billion) since the first of the year.  Why?  As any US investor could tell you, QE might not inflate economies, but it sure as hell inflates markets.

    The Nikkei 225 is up 65% since last October’s lows….

    …and, still hasn’t even recovered 2/3 of its losses from the 2007 crash.  The Dow and the S&P 500, by contrast, have recovered all of them — and, then some.  So, to many, the Nikkei still seems the better value.  It’s hard to argue with success.

    But, I’ll do it anyway.  In reaching 14,020 a few hours ago, NKD tagged the .618 Fibonacci retracement of its 2007-2009 crash from 18,365 to 6990.

    To those not familiar with harmonics, this tends to be a big deal.  When SPX reached the equivalent point in April 2010, it plunged 17%.  The DJIA fell almost 15%.  The USD, represented by DX, soared 9.3%.

    But, the yen positively soared.  USDJPY started a 17-month slide that took the pair down 20% from 94.98 to 75.78.  NKD, which had just reached its .382 Fib, shed 23% over the next 4 months, eventually reaching almost 30% in Nov 2011.

    Could the USDJPY’s failure to break 100 be telling us something?  You better believe it.  I called a top a few weeks ago because the pair had reached several important Fib levels as well as the midline of an important channel (in yellow, below)…

    …that dates back to 1995.

    There’s no guarantee it won’t push through instead of retreating, but the RSI picture supports the danger of a significant retreat.

    Daily RSI has backtested the broken yellow channel twice, but the trend is clearly down — with the latest push being rebuffed by the purple midline.

    And, a close-up reveals that a breakdown has already started.

    Stay tuned.

    UPDATE:  9:25 AM EDT

    With SPX set to open 5-6 points higher, it stands a very good chance of reaching our 1584.23 target. In other words, a pop and drop is very much in the cards.

    If it goes any higher, look for 1590.36 instead.

    UPDATE:  9:40 AM

    That’s good enough for me.  I’m closing my long position and reverting to full short here at 1584.80.  Stops around 1586ish.

    The .25 of the purple channel is right around 1587, so I’d use some discretion around that stop level and look to see if there’s any real strength behind a move higher.

    UPDATE:  10:25

    Getting a push through 1587, so I’ll open an interim long position for what should be only a few points higher to the .886.  Core short remains in place.  Tight trailing stops.

    I wouldn’t start getting nervous about the short position until around 1594 — the trend line (red, dashed) that extends from the 2000 and 2007 peaks.

    UPDATE:  10:50 AM

    I’ll go ahead and close that interim long here at 1590.  While I still think there’s potential to the 2000-2007 trend line, it could easily happen after the correction that should begin in the next hour.

    That way, the Inverted H&S Pattern would feature a neckline that’s roughly the same as the purple channel .25 line, and would target the same price level as the 1.618 extension of the 1597-1536 slide: 1635.

    This is a very artfully crafted scenario to justify (from a technical standpoint) a rally above that red TL — which is one of the last remaining technical impediments to a continuation of the rally from 1343 in November.

    Can they pull it off?

    continued for members… (more…)

  • Chart Patterns and You

    ORIGINAL POST:  9:15 AM

    Last night, the dollar tagged the .786 Fib retracement of its decline from Apr 4.  It subsequently sold off almost to the .618 but, so far, is hanging in a rising wedge.

    The EURUSD re-tested the .500 Fib of its rise from Apr 3, and snapped back into its falling wedge and the (purple) channel that’s guided prices since then.

    The e-minis tacked on a few points overnight — almost reaching the .786, only to give them all back with this morning’s underwhelming Durable Goods report.  The H&S Pattern that was looking pretty good at yesterday’s open is now looking a little ragged, with a right shoulder that’s already 15 points higher than the left.

    UPDATE:  9:45 AM

    SPX continues trudging toward the .786 retracement (1584.23) of its decline from 1597 to 1536.

    After plunging beneath the channel that’s guided it from 1343 to 1597 on Apr 17, SPX rallied and re-joined the channel yesterday.  This was a very bullish development, as long as SPX remained in the channel all the way to the closing bell.

    Despite a five minute thrill ride from 1578 to 1563 (the channel bottom) and back, SPX managed to regain and hold the 2007 high of 1576.09 into the close.

    It now sits perched on the neckline of an Inverted H&S Pattern which has either completed or not, depending on whether a 5-minute plunge qualifies as a shoulder.  Short answer — I have no clue.

    Here’s what we do know:

    1. Prior to Apr 17, SPX had been locked into that purple channel below since 1343 on Nov 16 — an 18.9% gain in five months
    2. SPX barely paused when it completed two big Crab Patterns — the 1.618 extensions of the 1370-1074 decline and the 1474-1343 decline (purple and white below)
    3. Instead, SPX exceeded the Oct 2007 high of 1576.09 (yellow)
    4. SPX reversed at 1597.35, almost precisely at a trend line drawn between the 2000 and 2007 highs
    5. SPX fell 3.8%, making a lower low, dropping out of the channel mentioned above and suggesting a H&S pattern that targets 1474 — the Sep 2012 high (white pattern)
    6. It roared back into the channel, retracing almost 78.6% of its drop
    7. In the process, it topped the 1576.09 high and the 1553 and 1555 Fib levels and almost reaching the 1583 target of an IH&S Pattern
    8. Depending on your interpretation, it might also have completed an IH&S that targets 1621.

    What Does It All Mean?

    When I forecast markets, I look for lines in the sand.  I try to determine price levels that, if crossed, would signal a change in trend.  When that trend switches from bullish to bearish, I want to be short.  When it switches from bearish to bullish, I want to be long.

    A channel is one such method that features boundaries rather than absolute price levels.
    As long as prices remain in a rising (or falling) channel, we can expect prices to continue to rise (or fall.)  It’s rather simplistic, but it usually works.  We can make educated guesses as to future price targets based on where the channels point.

    Of course, even well-formed channels (multiple tags on the top and bottom and over a sufficient time period) can’t go on forever.  I look for moments when prices have to choose whether to remain in or leave the channel.  A tag of a top or bottom bound or midline usually create opportunities, though other lines can as well.

    The Real World

    Recall that we shorted SPX at the 1597 high on the 11th [see: Big Picture], riding down to the channel bottom where I went long at 1554, expecting at least a bounce.  We got one on the 16th with SPX rallying up to 1575 — the channel .25 line.

    We closed our long position, going short the following morning for the trip back to the channel bottom at 1555.  We tried another long position there, but were quickly stopped out as the channel was broken — signalling a bearish trend change.

    So, we shorted again, playing quite a few bounces down to 1540 where we eventually went long in anticipation of establishing a H&S Pattern neckline [see: Dollar Daze.]

    At that point, I expected a back-test of the broken channel.  We got it, reaching 1565 on the 22nd but closing beneath the channel’s lower bound.  Note that this move completed 5/6 of a H&S, but the right shoulder was underdeveloped relative to the left.

    Anticipating an intra-day retracement to 1567 (the .500 Fib) or 1574 (the .618) the next day (yesterday), I stayed long — trying without much success to anticipate the top.  Since SPX topped the .618, the next up on the chart is today’s target: the .786 at 1584.23.

    Going Forward

    With all that as preamble, here’s what I expect going forward.

    continued for members… (more…)

  • The Storm Before the Calm

    I’ve been quite bearish since going short on April 11 at 1597 [Big Picture: 11:30 update.]  Yesterday, though, SPX reached our initial downside target of 1540 and, as expected, paused.

    As we’ve discussed, this was an important points for bulls to take a stand.  It was also the ideal spot from which to launch the right shoulder of a Head & Shoulders Pattern as I posted on the 16th.


    So, we closed our short position late yesterday [Dollar Daze: 3:45 update in members section] and played “catch the falling knife” with a long position at 1541. This morning, we’re being rewarded with a nice bounce that should have legs.

    Whether it will form the right shoulder we’ve been expecting, or resume its QE-fueled race to the moon is open to debate.  But, for now, the trend is higher.

    Note that SPX formed a nice little falling wedge (in yellow above) that, if it plays out, supports the idea of a return to the idealized right shoulder height represented by the dashed yellow TL.

    The falling white channel I’ve slapped on the chart, as regular readers know, probably won’t last.  It’s rare for the initial slope of a decline to be maintained through the series of rallies and sell-offs that comprise a major move.  But, it’s a good initial fit, so it will do for now.

    UPDATE:  10:30 AM

    The ideal right shoulder in a H&S Pattern is the same height as the left.  But, it needn’t be in order for the pattern to play out.  The high so far for the day is 1549.63, which represents a 14 point bounce off the neckline — compared to the left shoulder’s 33 points.

    UPDATE:  12:15 PM

    SPX has reached the important Fib levels of 1553 and 1555 (the Crab Patterns from 1370-1074 and 1474-1343.)  This would be a natural place for prices to reverse, so I’ll close my long position here at 1554 and go short.

    This constitutes a 20-pt rise off the neckline, so it’s technically enough of a right shoulder for the pattern to play out.  And, the bears could really use a H&S Pattern completion to keep the downward momentum going.

    A good reversal here – or, at least by 1574 – and we can write off the 1576-1597 rally as a prank, a juvenile burst of irrational exuberance.

    Bulls, on the other hand, would greatly benefit from a push through the Fib lines that they completely dissed the first time around.  And, they should have mattered.  Take a look at yesterday’s Dollar Daze for a discussion of how the dollar confirmed the sell signal that a few good overnight ramp jobs were able to beat.

    There are other logical turning points as well.  This could quite likely be a short term trade to score a quick 10 points or so — unless 1535 is taken out and the H&S completes.

    Choices, choices.  We’ll take a look at different scenarios below.

    continued for members… (more…)

  • Charts I’m Watching: Mar 25, 2013

    With Cyprus saved, the sanctity of the EU intact, and a US budget deal passed, we can all go back to watching the market ratchet up 10 points/day, right?

    Here’s the fundamental problem.

    continued for members… (more…)

  • Charts I’m Watching: Mar 20, 2012

    The ECB will do “whatever it takes”, which I guess now translates into strong-arming the Russians into bailing out Cyprus.  Still no break out on the EURUSD, though.

    It makes sense to play along with the upside, but keep stops close.  It’s questionable whether this rally will have any legs. The dollar looks like it’s finding support here.

    UPDATE:  09:33 AM

    Looks like a pop and drop by SPX standards.  That was the .786 of the move down from 1563.62 (purple) and the .886 of our proposed path to 1576 (white.)  Full short again, stops at 1561ish.  Revised charts in a few minutes…

    UPDATE:  09:55 AM

    The daily chart tells the picture well.  I need to redraw some channels, but the prominent features are:

    • large 1474-1343 Crab Pattern completion at 1555.57 (yellow)
    • large 1370-1074 Crab Pattern completion at 1553.39 (red)
    • small 1530-1485 Crab Pattern completion at 1559.32 (white)
    • small rising wedge broken at 1563 top
    • long-term TL and channel top at 1560

    UPDATE:  11:10 AM

    SPX continues to position itself for a run at 1576.  The 5-min chart shows a small potential Crab Pattern with a 1.618 at 1577 and a Flag Pattern targeting 1576.

    It has broken back above and backtested the purple channel midline and retraced nearly .886 of its drop from 1562 and a little more than .786 of the drop from 1563.62.

    While it’s positioned for 1576, there is no more certainty than when we first broke 1555 on the Mar 14 overnight ramp job.  The large, bearish patterns listed above have still not produced the kind of sell-off they normally do.

    And, it’s all because of the cheerleaders’ determination to be able to tout a new all-time high for the S&P 500.

    In addition to the little Crab Pattern (purple) that targets 1577 and the flag pattern targeting 1576, there’s an obvious effort to construct an IH&S pattern targeting 1580.  It could benefit from a lower right shoulder, but bulls must beware of crossing back beneath the purple channel midline.

    The S2 shoulder isn’t quite legit, BTW, as the neckline doesn’t quite connect on the left side.  But, the S1 shoulder is quite a ways down there.  So, if the pattern plays out, be prepared for some serious chop.

    UPDATE:  1:00 PM

    With the FOMC announcement a little over an hour away, let’s resume our chat about the big picture.  If it seems like we’re “lost in the reeds” as one reader so aptly put it, it’s because we are.

    The large Crab Pattern completions promised a good-sized dump last week at 1553/1555.  Instead we’ve inched higher.  Why?  These patterns completed in the middle of harmonic no-man’s land: the gap between an .886 retracement and a double-top.

    The .886 retracement (of the 1576-666 crash) produced a 9% reversal back on Sep 14.  Since then, SPX came screaming back to retake the 1576 all-time high — but slammed into the Crab Patterns and a very important channel line along the way.

    Now, it doesn’t know what to do.

    Double tops usually produce reversals, too — sometimes meaningful ones as we found out on October 11, 2007, when SPX scooted up past the 1552 top from 2000 by a whopping 24 points before dropping 58%.

    The 2000 top itself shows just how “messy” tops can be.  Here’s the finished picture in perfect hind-sight.  It’s a very crowded chart, but every pattern on there had a say in how the top unfolded.

    Once SPX broke out of the falling purple channel, it had “permission” to pursue several harmonic patterns in the works.  SPX shot up 66 points in that one day — blowing through every Fib level between .618 and 1.000.

    It finally came to rest at 1458, completing a Bat Pattern at the purple .886.  But, the small white 1.272 was just above at 1477, as was the rising purple channel midline and the 1.272 from a much larger pattern seen below.  An IH&S target waited at 1497 – tantalizingly close to a nice round number of 1500.  The all-time high of 1478 from two months earlier beckoned.

    SPX got up to 1477.33 before reacting, falling to 1466 over the next two days.  Close, but not quite.  Someone watching closely might have noticed the Flag Pattern it constructed, targeting 1562.  Someone else probably pointed out the biggest Crab Pattern target of all — the 1.618 extension of the 13% correction from 1420 to 1233 from Jul-Oct 1999.

    I don’t know what the catalyst was, but on Mar 21, 2000 (that date sounds awfully familiar) SPX shot up through the channel midline, the cluster of Fibs around 1477 and, importantly, the 1478 high and raced up toward those higher targets.

    On Mar 24, it reached 1552.87, which cleared the IH&S target at 1497, the purple 1.272 at 1519 and the last remaining Crab Pattern at 1535.  What ultimately stopped it?  The .75 line from the big purple channel dating back to Jul 1999 — almost to the penny.

    Total move: 17% and 227 points in 20 sessions.  Could it happen again?

    continued for members… (more…)

  • Picking up Pennies

    Just about every other index has reached an important harmonic and/or chart pattern target. Given the NFP print, this could be the day SPX finally reaches 1553-1555.  Best to be long on the opening, and ready to re-short fairly quickly.

    The dollar isn’t waiting, surging nearly 1% on the day and resolving the question as to which channel to watch.

    DX is very near a tag of the red .786 (83.064) and the purple 1.618 (83.179).  But, more importantly, it is coming up to the intersection of the midlines of two important channels.

    Look for heavy resistance at these levels — until the equity sell-off begins in earnest.

    Likewise, the EURUSD is off over 1% and approaching the white .786/yellow .500 — also the scene of an important channel line.

    Will the currencies react first to the equity strength, or are they positioning ahead of what they know will be an equity pop and drop?  As the grown-ups in the room, I believe currencies are doing the latter.

    Our premise called for a back test of the channel line or TL off the July 2011 & Sep 2012 highs, but the market is eager to go ahead and get there.  Who am I to stand in the way?

    UPDATE:  9:35 AM

    Got to 1551.65, only 1.74 away from the white 1.618 – which is close enough for me.   I have nothing against staying in until the actual tag; just watch your stops in the event it turns quickly.

    I’ll pick it back up if we get a second push through 1551, as it would not be unusual to see a bit of an overshoot — somewhere between 1553 and 1560.  Likewise, a drop through the yellow TL down around 1535.50 probably signals “game over.”

    Remember, this completes a Crab Pattern from the 2011 crash from 1370 to 1074.  Are we guaranteed a big sell-off here?  Of course not.  But, odds are it will be substantial.

    UPDATE:  10:08 AM

    If SPX is going to bounce higher, it should do so by 1543 — the 1.272 Fib on the small white harmonic grid and the bottom of the tiny channel SPX hung out in for the past several days.  For anyone who missed the last six points because of the gap open, this is your second chance.

    UPDATE:  10:27 AM

    SPX getting the bounce here at 1543… will take another crack at 1553-1560.

    In the meantime, let’s take a look at how we got here.  If you had asked me at the end of 2011 which upside scenario looked most likely, I would have suggested the Crab Pattern that started at 1370 in May 2011 and put in a bottom at 1074 in October (in white, below.)

    There were three potential Point X’s in a row: 1370.58 on May 2 (in white above), 1347 on July 21 (in red) and 1356.48 on Jul 7 (not shown.)  And, 1370.58, the high following the 1576 to 666 sell off from 2007 to 2009, was the most prominent.

    My reservation was that it reversed at the .707 Fib level rather than the more common .618, .786 or .886.  The .707 is the red-headed stepchild of the Fibonacci ratios.  It’s the square root of .500, which itself doesn’t get much respect as a Fib ratio.  Geeks and wannabe’s CLICK HERE for details…

    When SPX finally pushed above 1370 in March 2012 and started approaching the 1.272 Fib levels between 1422 and 1451, we had to choose from among the three possibilities for a Butterfly Pattern completion [see: All the Pretty Butterflies.]

    I went with the red pattern because of its more precise tag on the .786 and was rewarded with 20%+ gains from a perfectly-timed short.  And, I assumed the red pattern would continue to drive future harmonic swings.

    As we approached the red 1.618 at 1515.24, I noted that it intersected with the purple 1.618 (1518.57) and the yellow 1.272 (1510.19) — not to mention the yellow trend line running very precisely through the July 2011, April 2012 and Sept 2012 highs.  To me, this was a very solid conclusion based on very reliable patterns.

    We got the sell-off.  In fact, we got three sell-offs, one from each of those Fib levels.  On the final tag at 1518.57, we got a little overshoot to 1530 (a smaller harmonic pattern completion) before beginning a correction all the way to…1485.  Yep, not even a lousy 3%.

    In harmonics, it’s not usually the tops that bother me, it’s the 2nd waves.  The rebound from 1485 went to 1525 (a healthy .886 retracement) and even sold off nicely — before zipping back up to complete an IH&S, take out the 1530 high and…well, here we are.

    Harmonics are great.  They offer concrete turning points at which the market usually reverses.  If it doesn’t, you’ve either picked the wrong Point X (1347 instead of 1370) or the wrong pattern.  In other words, there’s a solid decision matrix; you know when it’s time to go to Plan B.

    Fundamental analysis isn’t anywhere near as precise — especially in the short to medium term.  And, as we’ve seen this past year, there’s plenty of money to be made by going long at bottoms and short at tops.  You just have to be prepared to switch gears when your assumption — no matter how well thought out — turns out to be wrong.

    If SPX exceeds the Fibs at 1553/1555 and/or the IH&S target at 1465, there’s not much more in the way of targets other than the previous high of 1576 (October 2007.)  Many other indices have made new highs, so maybe TPTB will feel it necessary for SPX to do so as well.

    more later…

    UPDATE:  1:55 PM

    The bounce off 1543 still going strong.  15-min RSI just broke out of a falling channel from this morning’s rally.  A move back to the white RSI channel midline might permit 1553/1555 or slightly higher.

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  • Update on Bonds: Mar 07, 2013

    If rates really are heading back up in the near future, we’d expect to see bonds take a hit (and stocks, too, but that’s a different post.)  Back on Jan 21, we focused on the 10-year treasury (ZN.)

    We observed that ZN had just completed a large Crab Pattern and broken down from a rising wedge, and appeared to be due for a “significant retreat.”

    The chart below shows a big Crab (grey), followed by another Crab (red), a Bat (white) and another Crab (purple.)  Each previous Crab Pattern completion has been followed by a significant retreat, so we might suspect one here with the purple pattern completion.

    Since then, both the purple and white channel lines have broken down, suggesting more downside ahead. The intersection of the white channel bottom and purple channel midline is coming up in early April, and prices have fallen from 132’160 on Jan 21.  But, where’s the “significant retreat?”

    Shifting focus to the 20-year as represented by TLT (just for grins), the charts show continued weakness over the next couple of months — provided TLT can push through some important support.

    The harmonic picture is negative enough – given the potential Gartley or Bat Pattern in play. But, the white and red channels have both recently surrendered a support line.  Backtests are complete, and the next support is down around the .786 at 114.5 — though I suspect the .886 at 112.26 will get the nod.

    Note that it intersects with the falling white channel midline, the falling red channel bottom and the large white rising channel midline — all around late May-June.

    A slight overshoot would tag the .500 at 110.18 on a larger harmonic grid (purple) and establish a Point B for a pattern that might lead prices back down below the white midline.

    The fly in the ointment?  Check out the dashed red trend line cutting across the middle of the chart. It has influenced a few turns, and is just below current prices at around 115.60.

    Stay tuned…

  • Interest Rates: Breaking Out?

    With the usual caveat that I’m not a bond guy (seriously, what’s the point?) I took a fresh look at interest rates on the 10-year note.

    The obvious downtrend over the past 15 years is well-captured by the purple channel below.  It has been marked, however, by a series of rising white channels, some of which I have charted.

    When rates fell below the channel bottom last May, it might have ushered in a new, steeper decline suggested by the falling red channel.

    However, since bottoming in July, TNX regained the purple channel bottom, backtested it, and has put in a series of higher highs and higher lows that precisely echoes the slope of the previous channels.

    Its latest feat is pushing up through and backtesting both the red channel .75 line and the purple channel .25 line.  In the process, it has climbed back above the white channel midline and faces the psychologically important 2% mark yet again (the red, dashed TL.)

    From a harmonic standpoint, TNX looks well-positioned to test 2.28% in the next month.  Note that the July lows completed a Butterfly Pattern at the 1.272 on the purple grid and a Crab Pattern on the 1.618 on the white grid.

    Note the precise turn at the .500 Fib level, hinting at a Bat Pattern completion at the .886 of 22.83.  The .886 intersects with the purple channel line late next week — though the precise placement of such a long-term channel is always subject to some interpretation.

    To get there, however, TNX will have to push back through 20, the .618 Fib line at 20.14, and the top of the red channel – currently around 21.34.

    The RSI picture is promising.  The weekly chart shows the positive trend, regardless of whether you subscribe to the pessimistic (yellow channel) or optimistic (purple channel) view.

    A close-up of the above chart shows steadily improving relative strength since April 2011 and an important reversal at the midline.  The intersection of the white and yellow channel tops looms out there around April 3.

    The daily RSI, in addition to showing a steadfast refusal to become overbought, shows the recent break above the yellow channel’s 25% line.  Provided RSI can push through the dashed red trend line (corresponding with the .618 and 2% price levels discussed above), there is plenty of room to run.

    The intersection of the yellow midline and the purple channel top is around March 20.

    Like many markets, TNX is at a critical juncture.  It’s put up or shut up time.  A push through 2% would likely usher in 2.28% in short order, followed by a backtest of the red channel and subsequent push higher.

    If we expand the white channel (yellow, above) we get a glimpse of what the upside case looks like.  A turn at the red .886 would intersect with the .382 Fib of a harmonic grid drawn from the Feb 2011 highs.  The .618 of that pattern — not all that distant from the red 1.618 — would intersect with the midline of the yellow channel at 28.46 around the middle of August.

    A return to the top of the purple channel, currently around 3.4%, could come as early as July, but a more moderate case would be between Oct 2013 and Jan 2014.

    GLTA.

  • RUT: End of the Line?

    RUT has reached the upper bound of a well-defined channel that dates back to 1998.

    It could leak slightly higher in reaching for the top of the large rising wedge and some key Fib levels, but I suspect RUT has reached a turning point.

    continued for members… (more…)

  • The Big Picture: Feb 27, 2013

    ORIGINAL POST:  6:00 AM

    SPX ended yesterday just below our 1497 trigger point at the neckline.  I know the bulls would love to blow through this level and negate the H&S, but I think they’ve really got their work cut out for them, especially given the political mess in Italy and the looming US sequester.

    Bernanke isn’t likely to say anything new today.  And, judging from AAPL’s price action, the market isn’t looking to Cupertino for salvation.  The durable goods data?  Ho hum…  Saying it was a good number if you ignore defense and aircraft is like saying a shark attack was fine except for those pointy things in their mouths.

    Defense is due to get a lot worse starting next Monday.

    I’d put slightly greater odds on a breakdown of the purple channel.  As for targets, I’ve mentioned the 1474.51 level a lot – the Sep 2012 high and roughly where the SMA 50 was at the EOD (hat tip to Mike for the question.)

    I still think this area has potential, as a retracement to the .886 of the 1576-666 decline would set up a move to 1576 itself.  Why?  Think of stair-steps, where each major Fib tag or break is followed by a back test to a significant lower Fibonacci level.

    continued for members… (more…)