pebblewriter

Tag: SPX

  • Charts I’m Watching: Aug 12, 2013

    The eminis are flirting with danger this morning, having ducked below a key channel midline (dashed, purple) but bouncing off a smaller channel bottom and another channel midline (dashed, white) near a .786 (1674.15) for a Gartley Pattern completion.

    The dollar is threatening to break out of the falling wedge….

    And, the SPX is set to tag the neckline of the yellow H&S Pattern again.  Holding above 1686 will be key.

    I’ll play the downside on the opening with an eye towards the red .886 at 1679.86 — our target from last week.

    UPDATE:  9:35 AM

    We got a bounce at the pale blue channel midline, but I suspect it’s just to back test the neckline and that 1680 is still on the table.

    The danger for bears is a dip to tag the .886 and complete the H&S Patterns, then a rebound back above the neckline to invalidate the patterns.

    continued for members… (more…)

  • April 2013 Results

    April was the most grueling month I’ve experienced since starting pebblewriter.com. The month started only 6 points below the all-time high of 1576 and ended at the trend line connecting that high with the year 2000 high of 1552. Nearly every session begged the question: will SPX make a new all-time high?

    Seventeen of the 22 sessions in entire month saw trading within 10 points of at least one of the lines. What’s more, the average daily range was 16.5 points. About 60% of the sessions involved a change in direction. If it had been a basketball game, they’d have carried both teams off the court after reaching 180-179 in quadruple overtime.

    It was a blur of whipsaw days, sleepless nights and an almost embarrassing number of trades — about three per day. We had many sizable gains as well as our single biggest loss since inception: 1.59%. By the time all the dust settled, we were up 14.45% for the month versus 2.03% for the S&P 500 — our 3rd best month yet.

    LESSONS LEARNED

    All in all, it was a very instructional month — reinforcing some things I’ve been doing and arguing against others.  Two issues I’ve been studying are interim trades and holding positions overnight.

    The overnight ramp jobs and reversals were deadly.  It was only marginally beneficial to maintain a position overnight or over a weekend. And the whipsawing got so bad that I was a little paranoid by the end of the month.  Performance might have benefited from looser stops and going to cash overnight and over weekends.

    There were also days I should have stayed with the trend and ignored the bounces or “interim trades.” On the 18th, for example, I let a short trade run while playing short-term bounces to offset the losses.  By the time I covered the short on the 23rd, my three winning trades of +2.45% offset the 4 losing trades totaling -1.85%.  But, I could have earned 2.5% by simply switching sides when the short signal faltered.

    GOING FORWARD

    As we discussed last month, the trickiest part of Harmonic Patterns is the .886 – 1.000 range (once a Bat Pattern completes, will there be a new high?)  Now that the question of a new high is settled, we should see more directional moves and less chop in the market — reducing day trading and permitting more swing trades.

    The road ahead continues to look bumpy.  Sentiment is lousy as many market participants seem to feel stocks are overpriced, but are leering of abandoning BTFD. Corporate earnings look fine on an EPS basis, but have mostly missed on revenues and outlook.  The economic picture continues to be worrisome, with weakness across the board.

    All eyes will continue to be on the Fed, which seems to hold the market’s future in its hands.

    GLTA.

  • Charts I’m Watching: May 10, 2013

    The market bounced back a little into the close yesterday, and recovered further overnight.  ES retraced a Fibonacci .886 of the initial plunge, and is hanging in the small channel established over the past week.

    We shorted SPX at 1635 yesterday, but weren’t sure whether or not the upside was completely done. This morning, there’s still some question.

    The dollar, which we remarked yesterday morning looked “ready to rumble” did just that — completing its largest move in the last 16 months.  It retreated just a bit off the .786 before zooming up to tag our .886 target at the purple channel midline.  How it handles this price level will determine whether or not we see any follow-through on equities this morning.

    We would normally see a pull back at the .886 — a Bat Pattern.  But, Bats can and do go on to become Crab Patterns — which would mean a move up through the channel midline to the 1.618 extension at 84.522.

    Daily RSI arrived at a 4-way “stop sign” overnight — three channel midlines and a channel top.  Though it might ultimately push through, this supports the idea of at least a pause and more likely a pull back, meaning stocks should rebound from here.

    The question, of course, is “how much?”  The EURUSD, which we remarked yesterday was “hanging by its fingernails,” wasn’t able to hold the purple channel.  It completed the small scale Bat Pattern we were expecting overnight (purple), and has potential to the red .886/purple 1.618 down around 1.28.

    The daily RSI supports this move, as it fell right through its nearest support overnight.

    All eyes are on Bernanke this morning, as he speaks at the Chicago Fed.  Evans and Plosser’s semi-public debate regarding QE has ratcheted up a notch the past couple of days. It’ll be interesting to see whether Bernanke can reassure the markets that economic conditions remain “just right” for continuing to pump $85 billion monthly into the markets: getting better every day, but not able yet to stand on its own two feet.

    The other big story, of course, is the yen. We discussed yesterday how it was a moment of truth for the USDJPY.  It was threatening an Inverted H&S Pattern, but had run into an important channel line.

    The pair sliced through it like it wasn’t there, completing the IH&S, then reaching the IH&S target and a Crab Pattern near 102 in one fell swoop.  In the process, it reaffirmed the dominance of the rising purple channel from 75.56 in October 2012.

    A quick pullback could reassert the white channel; but, if not, the next stop is 105.57-106.98 as soon as May 21.

    But, the daily RSI suggests a very good chance of a quick pullback.

    The Nikkei 225 has loved the yen implosion, zipping through the .618 retracement of the 2007 crash and a well-defined channel top on May 3 and threatening to top the Dow.

    But, the collapse in JGB (and spike in yields) gives one pause.  This is what Abe wanted, but is he prepared for the currency wars he’s unleashed with neighboring Asian countries?  Sri Lanka, Vietnam, Thailand and South Korea have all either cut rates or are about to.

    I wonder whether Japan, with government debt at 240% of GDP, will survive the cure for its economic malaise.

    UPDATE:  9:30 AM

    I’m taking an interim long position on the opening, but will be watching to see what happens at 1631.  My core short position will remain in place unless we get a push up through the red channel midline. Stops on the long at 1626ish.

    I would have been more than content to close out the short at yesterday’s close, but the low for the day was slightly lower than the previous “bottom” of 1623.30, leading me to believe we might see another leg down.

    We’ll see what Bernanke has to say, then check back in.

    UPDATE:  10:00 AM

    A bit of a snoozefest in Chicago.  Bernanke’s giving a history lesson, not saying anything yet about the topic on everyone’s mind: QE.

    SPX just reached the red channel midline mentioned at 9:30, just shy of the .786, and is deliberating next steps.

    The dollar continues to strengthen, making a series of smaller waves higher while remaining above the .886 Fib discussed above.  And, the EURUSD continues to leak lower — just reaching the .236 of the 1.37 high In Feb.

    UPDATE: 11:5 AM

    I’ll be closing the interim long here at 1626 due to the triangle breaking down. Full short for  1613-1617 (favored target about 1614.) Confirms with a drop through 1623; should get a bounces around 1624 and 1622.

    60 min RSI shows a little room to run.

    Watch out for a possible backtest of the triangle to around 1627.75.  Stops on the short at the top of the triangle, currently about 1629.

    If there’s something that could derail any further downside, it’s the EURUSD.

    It reached the .618 of the 1.2743 to 1.3242 rise this morning (small red pattern), and can be expected to bounce.

    It’s also getting dangerously close to the bottom of the light blue channel that rises from July 2012.

    Technically, the .618 is enough of a retracement for this wave to be finished.  But, it certainly doesn’t look finished.  I think it’s more likely we’ll get an intra-day push down to the red .786 (1.2850) or even .886 (1.28) before all is said and done.

    A sustained break of the channel bottom, needless to say, would be exceedingly bearish for the euro and for equities.

    UPDATE:  1:30 PM

    Based on my best stab at placing the falling white channel, I believe SPX just topped out on the day.

    Next stop should be around 1622 at the midline, but ultimately the green 2.618 should come into play where the white channel bottom and red channel bottom intersect — probably around 1614 on Monday.

    The next major support would be the purple midline — around 1593 on Monday — and then the previous high and purple .25 of 1576.

    If I’m wrong, stops at around 1630 ought to do it.  I have to run out till 3PM ET, but will post more when I return.

    GLTA.

    UPDATE:  3:44 PM

    SPX just moved up past my comfort zone — not to mention out of the channel — so I’m switching sides here at 1630.  Next stop 1641-1642?  It’s the 1.618 extension of the fall from 1635 to 1623 and the approximate level of the IH&S.

    Best of all, it will happen on the 13th, which is when we originally had the interim top scheduled.  All is right in the world again.

    Legible chart coming up…

    I wouldn’t normally stay long over the weekend, but I imagine we’ll gap up to 1641-1642 Monday morning, so it’s worth a shot.

    Looks like we’ll probably close at the .886.  We might get a small reversal just ’cause, but Point B in this case was almost the .786, so that technically rules out a Bat Pattern.  Instead, it’s a Butterfly/Crab that should extend to the 1.272 or 1.618.

    Of course, things don’t always go according to plan; but, I like where the currencies are finishing up.

    More in a few…

    UPDATE: EOD

    The revised view from the treetops:

    And, a little closer in…

    “D?” doesn’t work as a Bat Pattern because “B” is higher than the .618.  We could use the reversal at the .500, but “A” is the lowest low, so that doesn’t work.  That leaves a Crab Pattern with roughly a .707 Point B — if it follows the rules.

     

     

     

     

  • XLF: Playing Catch Up

    On April 2, 2012, SPX completed a Butterfly Pattern at 1421 — the 1.272 extension of the July – October 2011 plunge.  It provided a great entry point for the fledgling pebblewriter.com’s first major short position.

    We scored over 20% in about 2 months [see: All the Pretty Butterflies] trading the 11% decline.

    XLF hadn’t done as well up to that point.   It had only retraced a Fibonacci 78.6% of its 2011 decline from 17.2 to 10.95.  So, no surprise that it sank by a whopping 18%.

    In response to a consulting client who was bottom-fishing for financials, I discovered they were probably bottoming in early June.  I posted my results in the appropriately titled:  So Crazy It Just Might Work.  If anything, my estimates were conservative.  XLF has soared 41% since that low (turns out it was the day before.)

    And, wouldn’t you know it, XLF has gone and formed its own Butterfly Pattern — just like SPX did in Apr 2012.

    continued for members… (more…)

  • Charts I’m Watching: Apr 22, 2013

    Looks like we’re getting some follow-through this morning on Friday’s technical rally.  But, this doesn’t appear to be one worth chasing unless it can push up strongly through 1560.

    I’ll play along on the opening with an interim long position, with tight stops for the fizzle that could come quite quickly.  If 1560 is exceeded, look for 1573 or so.

    The dollar pushed above the TL from the prior highs as well as its .618 Fib of the Apr 4 high.  This bodes well for a run to at least the purple midline — probably at the .786 or .886 (83.258 or 83.446.)

    UPDATE:  9:35 AM

    There’s 1560.10, I’ll close the interim long here and revert to full short unless SPX can push higher.

    UPDATE:  9:39 AM

    Got a pullback to the neckline of the small https://pebblewriter.com/inverted-head-shoulders-pattern/ (in yellow, below) completed on the opening.

    I’ll try another interim long position here at 1554, with very tight stops (1553ish) in the event SPX pushes down through the neckline.

    The IH&S targets 1574 — which is also roughly the .618 retracement of the 1597-1536 decline.

    UPDATE:  9:50 AM

    I’m going to allow a little more wiggle room on the stop, as this setup is too good for the bulls to waste.  Hanging in there for 1574.

    UPDATE:  10:00 AM

    The existing home sales won’t make it any easier for more upside, here.

    Pulling the plug on the interim long unless it can push back up through 1555.

    As we discussed Friday, the right shoulder formed thus far is sufficient for the H&S Pattern proposed on Apr 16 to play out.  All we need now is a drop back to 1535 or so.

    But, getting SPX up to 1474 would be a coup for the bulls.  At that point, it would have formed 2/3 of another larger IH&S that targets 1610.  So, don’t expect them to give up this seemingly insignificant pattern easily.

    UPDATE:  11:55 AM

    SPX just shot through 1555 on weak technicals.  I’ll add an interim long position, but wouldn’t get excited about this move just yet.

    It’s questionable whether can push through 1558.74 — the .886 of this morning’s decline.  I’d have to classify it as corrective unless it can break out of the falling white channel.

    UPDATE:  12:15 PM

    Just reached 1558.53, pushed above the channel upper bound for about 3 1/2 seconds, and retreated.  I’ll hold on to the long, but raise stops to 1556ish.  The bulls really need a breakout here.

    *   *   *

    A quick shout-out to John Lounsbury, Managing Editor over at Global Economic Intersection.  He’s celebrating three years of fine reporting on economics and market analysis.  He’s a darn smart guy and fine writer in his own right, but also features some terrific guest writers on a regular basis (they’ve even been known to post occasional pebblewriter.com stuff when they’re desperate.)  Check it out HERE.

    * * *

    UPDATE:  12:40 PM

    SPX just burst through our channel line mentioned above.  This puts the red .786 at 1566.94 on the table — a Gartley Pattern.  Note that this is also roughly the level of the .500 retracement of the 1597 – 1536 decline.

    Assuming SPX will push through 1560 this time (the RSI chart below suggests it will) we’ll look for signs of weakness between 1567 – 1574.

    UPDATE:  2:35 PM

    SPX making nice headway toward our interim target range of 1567-1574.  I’ve had a chance to fine tune some of the charts; and, this move is shaping up pretty much as expected.

    Recall that we shorted at 1597 back on Apr 11, and held went long again at 1541 last Thursday.  SPX is coming up on the .500 retracement (in white, below) of that decline, which is a common enough corrective wave move.

    Note also that the red .786 and light blue 1.618 are very close to that same price level.  While the coincident Fib levels concur on the importance of 1566-1567, it’s the chart patterns that will likely determine the next 100-point move.

    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…)

  • AAPL: Is it Safe?

    Owning AAPL shares these past seven months would have been about as much fun as having your annual cleaning done by Nazi war criminal with a penchant for pain and a disdain for novocaine.

    It might seem like it’s been in a free fall, but AAPL’s tumble from 705 has been very aptly guided by a well-defined channel, a few chart patterns and, to some extent, harmonic patterns.  The channel that’s been eating away at AAPL is shown below, along with two recent Head & Shoulders Patterns that helped it on its way.

    But, it’s the chart patterns and the harmonic patterns that suggest AAPL is due for a substantial bounce.  Whether it turns into something more than that will depend on whether it break free of the falling channel from hell.

    This is the set of major channels I’ve used for the past several months of charting AAPL.  Note that the purple channel broke down a few weeks ago, prompting the latest plunge.

    But, AAPL should find support at the .75 line of the white channel around 380-385.  This is an equally well-defined channel that dates back 20 years.   Because channel placement is as much an art form as science, I like to have confirmation from other sources.

    In this case, the harmonic picture is also quite bullish, at least in the short term.  There are quite a few potential patterns from which to choose.  But, note how the overlapping of several key Fibonacci retracements in the 391-395 range.

    This group, seen better in the close-up below, includes the purple .786, the white .618, the yellow .500 and the red .886.

    AAPL pushed down through them like they weren’t there yesterday, prompting many to wonder if it was heading much lower.  But, the channel lines mentioned above should provide the bounce that will bring them back into focus.

    As to the purple channel, it’s done.  I’ve added a new, red channel that should take over going forward.  If we get the bounce I expect at 380-385, it will have been proven.

    Where does AAPL go from here?  There’s still the not-so-small matter of the large H&S pattern that completed back in December (in white, above).  Recall that it targeted around 305.

    If the large white channel shown above should fail, that’s a distinct possibility.  The falling white channel from 705 has shown remarkable staying power. And, the next lower gathering of key Fib lines is at 307-317.

    But, I suspect the big white channel will provide a significant bounce before any new lows occur.  The top of the falling white channel is currently around 435 (though obviously dropping daily), and at 380, AAPL will have nearly met the price target of the latest H&S Pattern to complete.

    If the overall market rebounds Friday as I expect, look for AAPL to perk up and participate.  A H&S pattern that’s brewing on SPX could easily take prices up to the 430 range.

    If the overall market continues past 1597, AAPL could finally break out of its funk and — more importantly — that falling white channel.  Another backtest of the broken purple channel at 466ish would be a great initial objective.

    Stay tuned.

     

     

     

     

  • Charts I’m Watching: Apr 16, 2013

    We’re set to get a nice bounce here at the bottom of the purple channel — as revised in last night’s last post.

    Based on where the futures are pointing, I’m not sure whether it will have legs or not.  But, I’m inclined to play along on the upside, but with relatively tight stops in case it peters out.

    The EURUSD has rebounded nicely as we anticipated, but has reached a point of resistance at the midline of the rising channel at a price level that’s proven difficult to exceed since early March.

    The daily chart shows a bounce off the bottom of the purple channel as expected, but plenty of overhead resistance in the 1.33-1.34 range if it’s able to break through 1.316 or so.  The .618 is up at 1.3341.

    The dollar continues to tread water.  I’ve drawn a tentative new wider channel that might represent the expected range now that the rising white channel is officially kaput.

    Remember, this decline is a backtest of the broken red .25 channel line.  If the decline continues on track, we could reach that channel line (at about the .red .382) in very short order.  It’s currently at about 81.74.

    But, there’s no reason DX must retrace all the way to that line.  It has already back tested the purple .618 — a reasonable pullback after the Bat Pattern that completed at our 83.616 target back on Apr 4.

    The daily RSI, in fact, shows strong support from the bottom of the rising purple channel and the .25 of the rising white channel.

    The yellow midline on the RSI chart represents that dashed white channel midline cutting across the middle of the price chart above.  A thrust up through it should accompany the next big equities dump.  And, to my eyes, that’s the next major move.

    Though SPX is safely back in the purple channel, it can’t go on forever — right?  Even if our most bullish scenario plays out, there would need to be pauses of more consequence than the past two sessions.

    In that pullback, SPX reached the .786 of the 1539 – 1597 rally between Apr 5-11 (1552.36 vs 1551.88.)  The bullish case will consider that reversal as the full extent of the pause — a proper corrective wave that reversed at the bottom of a very well-defined channel dating back 5 months and 230 points.

    If so, SPX should head up and push through the trend line extending from the 2000 and 2007 tops — currently around 1593.50 — on the way to its 1823 target.

    The bearish case suggests we slap a Point B on that reversal and call it a Butterfly Pattern that targets 1523 or 1503.

    So, which is it going to be?

    continued for members…

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  • Charts I’m Watching: Apr 15, 2013

    The big story this morning is the meltdown taking place in the commodities complex.  Gold is especially taking it on the chin, continuing the plunge that started on Friday with the critical loss of the LT channel we discussed last week, the horizontal support at 1520-1535, and the psychologically important 1500 level.

    Recall gold had a nice bounce on Apr 4 at 1539, the bottom of the channel and the horizontal support of several prior bounces.  In a dramatic demonstration of what happens when channel support is lost, it has since shed 205/oz.

    The next best available channel is well below the current one, but supports the idea of a bounce at 1379 or 1359 — the Bat Pattern and Crab Pattern completions shown in the first chart above.

    If those levels should fail to hold, the next major support levels are 1309 and 1155.

    We’ll discuss oil and other commodities later, but first let’s catch up with equities.  Recall that we shorted at 1597 last Thursday [CIW Apr 11 – 11:30 update] after tagging the TL connecting the 2000 and 2007 highs.  As we discussed Friday, we were expecting a bounce at the 2007 previous high of 1576.09 in order to maintain the bullish case.

    The technical elephant in the room is the previous 1576.09 high — now just 5 points below… Unless 1576 is taken out, any correction will be viewed as a backtest of an important, previously exceeded level of resistance.

    This morning, we came very close — reaching 1576.87 so far.

    I’ll take a long position here at 1576 just to see where it takes us.   Tight stops (1573ish) are in order, as the next support is down between 1553-1561.

    We discussed last week about core versus interim positions.  I see this as a make or break moment for SPX, as a plunge below 1576 really damages the bullish case.  A plunge below 1553 does very serious damage.

    So, I’m comfortable in closing out my short position from 1597.  That doesn’t mean I believe the market will go up from here.  The jury is out.  But, by placing tight stops below my long position, I can manage the risk of being wrong.

    SPX doesn’t have to reverse strongly for a hold here to be effective.  The bottom of the big purple channel (from 1343) isn’t far below at 1564.  But, it’s rising quickly.  It’ll be up to1576 by Apr 22.  So, if SPX can merely go sideways for a week or so, it’ll have a channel bottom bounce available to drive it higher.

    UPDATE:  11:40 AM

    Gold just reached the bottom of our target range from this morning: the Crab Pattern completion at 1359.  It should reverse here.  But, again, a failure to hold could easily send prices down to 1309.

    It’s interesting to see what the US dollar has done during this sell-off.  Instead of reflecting a risk-off posture and rallying strongly, it has continued to drift mostly sideways to lower.

    UPDATE:  11:55 AM

    SPX just broke down through 1576, so I’ll play along on the downside here with an objective of 1564 — the bottom of the purple channel.  But, a push down to 1561.60 — the .618 of the 1539-1597 rally — looks very doable given the current downside momentum.

    UPDATE:  1:10 PM

    SPX just hit our 1564 objective.  I’ll take profits here and try a long position, but I think there’s at least a 50:50 shot at a (probably) intra-day push lower to 1559-1561.  I’ll leave stops pretty tight here and be happy to go along if it plays out that way.

    The view from 30,000 feet coming up…

    UPDATE:  2:03 PM

    Just got stopped out at 1564, so it’s back to the short side.  Lots of near-term targets, starting with 1561.60, coming up in a few…

    continued for members… (more…)

  • The Big Picture: Apr 11, 2013

    The chart of the day:

    We closed our longs (from 1539) yesterday, but are still a few points south of the market’s upside potential.  While yesterday’s 1589.07 might end up being the top, I rather suspect we’ll move just a little higher.

    Recall that we anticipated being in this situation a week ago [Charts I’m Watching: Apr 4 – 1:20 update.]

    I strongly suspect that any move that’s much higher than 1576 will terminate at the purple midline… On April 11, the midline of the purple channel intersects with the TL connecting the 2000 and 2007 highs (red circle below.)  Also on Apr 11, the .25 line of the same channel crosses 1576 (yellow circle.)  So, take your pick.

    So, we can’t very well ignore it now that we’re here, can we?

    I’ll take a shot at a long position this morning — with tight stops of course.  The bottom of the smallest purple channel (from 1539.50) is currently around 1582 and rising about 2.10 per hour.

    The dollar reached the next lower line on the falling red channel and will likely backtest the broken white channel as seen on the 60-min chart below.

    But, take a look at a daily chart, and it’s obvious that the push lower would be relegated to tail status and the channel would remain unbroken if DX climbs back to 82.515 or so.  Not a terribly difficult feat if equities top out this morning…

    UPDATE:  10:15 AM

    Just tagged the midline of the purple channel that’s guided SPX since 1343 on November 16.  I never dreamed when we went long that morning [CIW: Nov 16 – 10:05 update] that we’d tack on nearly 250 points in the next five months.

    SPX also reached the IH&S target (1591.66) from the small pattern completed on Tuesday.  It wasn’t a very well-formed pattern, but here we are.

    We’ve discussed it many times in many contexts, but completing a tag on even a 13-year old channel top doesn’t guarantee a bear market.  But, the odds of at least a correction are pretty good.

    If anyone’s wondering about the dashed yellow line that intersects with our smallest channel around 1597.68, it’s the TL shown on the first chart up above.  It connects the 1994 low and the 2002-2003 lows. If we exceed the TL connecting the 2000 and 2007 tops, this is also a great target.

    UPDATE:  11:30 AM

    SPX just topped 1597, which is good enough for me.  I’m switching sides here and opening a short position.  Stops around 1605 should work.

    My only hesitation is that we’re sooo close to 1600.  Do we leave a milestone like that for another day or go ahead and add it to the QE trophy case.  Hmmm…

    If 1600 is in the cards, expect a bounce at the red TL (1593.25) which bulls will, quite legitimately, interpret as a backtest of an important broken TL of resistance.  BTW, a bounce there would also be a backtest of the large purple channel midline.

    If we fall back through both, however, this excursion to 1597 will appear as a shooting star at the top of a nice little Crab Pattern (the 1.618 extension of the drop from 1573 to 1539.)

    Next key level below the red TL is the bottom of the little purple channel from 1539 — currently around 1589.  And, of course, the 2007 1576.09 high is awaiting its own backtest.

    UPDATE:  1:40 PM

    SPX has retraced .886 of its drop from this morning’s 1597.35 high.  If it’s going to try for 1600, now’s the time.  For the bears, a drop through the channel bottom at 1589.40 would really help get the downside going.

    UPDATE:  2:15 PM

    Got the reversal almost to the penny at the .886 retracement, completing a nifty little Bat Pattern.  The bottom of the small channel is coming up at about 1590.

    Since we’re dropped back through the red TL and the purple channel midline, the next backtest will be from below.

    I’ll update our forecast if/when SPX drops through the channel bottom.

    UPDATE:  3:25 PM

    Such a simple thing: breaking through a channel bottom.  SPX doesn’t even have to chase it.  The channel is rising up to meet the index.  But, no breakdown yet.  Instead, two well-engineered bounces that came at just the right time and place to prevent more serious damage to the bullish case.

    And, now we’re entering into the last-minute ramp zone — the last 30 minutes of the session where markets are only allowed to go up.  Good thing it’s an efficient market, randomly walking down a present-value path to future cash flows and not some trillion-dollar casino manipulated by rich and powerful interests with unlimited funding.  That would suck, right?

    If the little H&S is permitted to complete, it targets all the way down to 1585 — the neckline of the last H&S that completed but didn’t pay off thanks to a ramp job in the futures overnight.

    The way this market has been going, it’ll close at the neckline — forcing us to choose whether or not to play ramp job roulette with an overnight position.

    continued for members… (more…)