pebblewriter

Tag: RUT

  • 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…)

  • Brave New World?

    I updated the charts for NDX, NYA, DJIA, RUT and COMP in the past few days.  The picture is mixed at best, with RUT, for instance, looking quite overripe, and COMP looking like it’s seriously considering 3343.  The DJI is happy as a lark making new highs, while NDX is coming up on all kinds of resistance at 2834.

    I suspect they’re all taking their cues from SPX right now.  And, SPX is still intent on joining the new all-time high club at 1576.10.  I see no reason why it can’t reach it, though we went to cash over the 3-day weekend just in case.

    The world didn’t come to an end over the weekend, so I’ll stay cautiously long with tight stops during the trading day and hope SPX doesn’t close at 1576.08.

    UPDATE:  10:03 AM

    The ISM’s Mfg PMI just came out and it’s a stinker.  SPX just backtested the yellow TL and quickly caught itself.

    Employment growing faster, while new orders and production are off?  No problem there.

    The small red Crab Pattern targeting 1576.46 is very much intact, so I see no reason to panic now.  Eye on the prize, eye on the prize…

    UPDATE:  10:40 AM

    Pretty sure this is an effort to shake out the longs, but a drop through 1564 means 1555-1560 is in the cards, so I’m switching sides here.  Charts in a few…

    UPDATE:  10:50 AM

    Here’s the bulls’ short-term problem…though it’s not insurmountable.  Note the loss of momentum (white channel) on the 30-min RSI…

    …and 60-min RSI…

    The daily RSI also lost the purple .75 line and the bottom of the little red channel.  But, the .25 of the yellow channel dating back to the Nov bottom is right here around 1560 and could provide a floor.  If not, the white  midline is just below.

    We obviously have negative divergence on the daily chart, but that’s been going on since Jan 25.  It’s hard to ignore, however, the potential for the purple channel to take over from the yellow, and that could mean increased odds for downside here to the intersecting white/purple midlines at 55ish.

    From a price standpoint, SPX could find support at the white 1.618 of 1559.32, but the stronger support is at the .25 purple channel line at 1555-1556 — also the vicinity of the 1.618 extensions of the much larger Crab Patterns at 1553.39 and 1555.57.

    Bottom line, while the chop that began several weeks ago continues, SPX is growing technically stronger with these tiny little pullbacks that reset RSI.  It doesn’t mean we will top 1576, but it continues the theme of TPTB being very, very careful to lay all the necessary groundwork.

    The alternative, a sloppy, enthusiastic ramp like last September’s 2-day post QE3 rally to 1474, is less sustainable to be sure.

    UPDATE:  3:10 PM

    SPX got as low as the upper end of our target range from earlier, and has since melted back up to just below the 1564 trigger point.

    continued for members… (more…)

  • 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…)

  • Update on Everything: Jan 11, 2013

     

    Around the horn with major indices and currencies…  Like SPX, most are at a threshold where they must either break down or break out (I think “break down,” but we’ll know soon enough.)

    Coming up: VIX, RUT, COMP, NYA, NDX, DJIA, FTSE, SPX, DX, EURUSD, USDJPY, AUDUSD, CL, GC, SI.  And, yes, I’m happy to take requests — first come, first served after the above are done.

    *  *  *  *  *  *  *  *

    VIX

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  • Down the Rabbit Hole

    “In another moment down went Alice after it, never once considering how in the world she was to get out again.”
    ― Lewis Carroll, Alice’s Adventures in Wonderland

    Not quite four months ago, the Fed guaranteed lower interest rates and higher stock prices forever.  At least that was the mainstream media’s take on QE3.  The market shot up about 40 points in a day, then did something rather curious.  It stopped.

    While the rest of the world took advantage of the pause to shift more money in AAPL, those who study harmonics loaded up on shorts in anticipation of the huge Bat Pattern that was completing [see: The World According to Ben.]

    After having reversed at the Fibonacci 61.8% of the 2007 to 2009 crash, SPX had reached the 88.6% level.  Would it be a huge reversal as occurred when the Gartley Pattern completed at the .786 (- 21.6%) or something more modest?

    The fact is, we don’t know yet.  After shedding 131 points (8.9%) from September to November, SPX has retraced 119 points — roughly 88.6% of them.

    This means that SPX has constructed another Bat Pattern over the past 4 months.

    It’s easier to see if we zoom in.

    Like the larger pattern that took place from 2007 to 2012, will this pattern deliver a big reversal or something more modest?  For help, we can examine how SPX reacted the last time it reached a major Fibonacci level — the Gartley Pattern at the .786 in May 2011.

    SPX lost 112 points to 1258.07 before regaining about 88.6% of them to complete a Bat Pattern (the light blue pattern.)  At that point, it did it all over again (the red pattern.)

    In retrospect, the move from 1370 to 1258 was the 1st wave.  The move back up to 1356 was the 2nd, corrective wave.  It was powerful and quick — taking only 14 sessions compared to the 1st wave’s 33.  This fooled a lot of investors into thinking it was a motive wave and was going to establish a new high.

    Note: For those of us following an analog that compared the 2011 top to the 2007 top, it was a fabulously opportune time to start loading up on shorts [see: Why Do Analogs Work?]  Our gains over the next couple of weeks were nothing short of spectacular.

    The same thing happened a second time (the red pattern.)  The wave from 1356 to 1295 took 7 sessions, while the wave back up to 1347 took only 3.  Again, this suggested higher prices, not the powerful reversal that slashed 246 points in only 13 sessions.

    Are there any parallels between the market’s reversal at 1370 and its reversal at 1474?  As regular readers know, I am tracking a new analog [see: A New Old Analog] that suggests there are.  But, there’s a line in the sand at current price levels.

    We can argue all day about whether the pathetic fiscal cliff deal, combined with the latest QE incarnation, should mean higher prices.   But, if the latest Bat Pattern doesn’t hold, and prices ramp up past 1474, I’ll consider the analog broken and start charting upside targets.

    But, it won’t be because the Transportation Index just made a new high.  It simply completed a Crab Pattern (on negative divergence I might add), imbedded in the tail end of a large Bat Pattern that it’s been trying to complete since February.

    And, it won’t be because the Russell 2000 just made a new high — which can also be viewed as a quadruple top (dashed purple TL) that coincides with: (1) a Butterfly Pattern completion (in purple); (2) a Crab Pattern completion (in red); (3) a back-test of a well-formed rising wedge; and, (4) the .786 time fib of the wedge.  All of this, of course, is on negative divergence.

    It would be in spite of a dollar index that just broke out of a channel that dates back to May (red), after testing the bottom of a channel (in white) that dates back to Feb 2011.

    It broke out of and back-tested the latest channel on the hourly chart, too.

    I’ve always wondered what would happen when The Powers That Be threw everything they had at the market and it yawned.  Might that be a rabbit hole from which there is no easy escape?

    Between QE3, ESM, Congressional Kumbaya singing…the market should be hitting new highs.  So, why is it mired at the same point (metaphorically, at least) that preceded the last big correction?

    The market is currently frozen in headlights, wondering whether to respect the latest Bat Pattern or not.  So, I’m going to take the opportunity to review our analog and general forecast.

    To be continued…

  • Update on RUT: July 25, 2012

    Like the rest of the market, RUT is exhibiting either a pretty deep retracement in the midst of a triangle wave higher or something more onerous —  the early stages of a wave 3.  While the jury is still out, I believe the charts favor the former.

    RUT finished a Bat Pattern (in red below) yesterday — this on the tail end of another Bat pattern that I posted just the other day.

    Yesterday’s low also registers as a .618 retracement of the AD leg of the first Bat pattern (.618 of 729.75 to 820.44.) which is a typical payoff to a Bat pattern completion.

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  • Update on RUT: July 5, 2012

    RUT is again nearing its previous highs of 856 (July ’07) and 868 (May 2011.)  It’s already exceeded the .886 of each of those, and is rapidly approaching the .886 retracement of its most recent dip from 848 to 730 (March 27 – June 4, 2012).

    As charted back on June 15 [see: Forecasts, Darts and Ouija Boards] we completed an Inverse H&S pattern that reversed the traditional H&S completed on May 8.

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  • Charts I’m Watching: March 22, 2012

    ORIGINAL POST: We’re finally seeing reactions on the harmonic pattern completions we’ve been watching for what seems like forever [see: Everything’s Coming Up Crabs.]RUT completed a Crab Pattern (in red) within the last leg of a Bat Pattern (purple) off the 2011 highs.  It never has cleared the TL off the May and July highs.  The May 2011 high was a double-top to 2007’s.

    COMP completed a tiny Crab within a little Butterfly pattern and tagged a key trend line off the 2007 highs.

    I call it a trend line because it’s exactly parallel to the line connecting the 2002 and 2009 lows.  A reversal here would make for four touches — i.e. a channel.  But, COMP could continue bucking its bearish divergence and go up to complete the larger Butterfly pattern (purple) at 3250-3295.

    DJIA still hasn’t made a new high since completing a Crab Pattern a stone’s throw away from a Butterfly Pattern (purple) completion at 13,338.64.  We’re still watching for a clean break of the rising wedge in the price chart and the trend line in the RSI chart.

     

    Though, it’s important to note that, at these prices, we came within 28 points of completing a Bat pattern (yellow) at the .886 (13,317) in the weekly chart.  That would make for a logical back test if/when the rising wedge finally breaks.  It might also be the 5th and final wave target if today’s move stays within the wedge itself — which is just as likely.

    Coming up….SPX.