NOTE TO MEMBERS:

It can be challenging to satisfy the desires of both long-term investors and short-term traders with respect to forecasts.  And, investors of all stripes have expressed an interest in being able to tell at a glance what the current forecast is.  So, I am trying out a new format for posting market expectations.

I will post major channels and harmonic patterns on the market pages (such as https://pebblewriter.com/markets/spx/ ) for those who want a quick snapshot of the longer-term picture.  It will also include brief commentary about major trends, general expectations and key price levels.

The daily posts will focus on shorter-term information generally geared to swing trading, economic commentary, market interactions, etc.  Any new ideas or forecasts such as our analog work will also be introduced here.

I’ve also been exploring various ways of passing along information on when I make a trade.  Note that my personal trading style is fairly active.  I don’t usually day trade.  But, if I see an opportunity to capture 10-15 points when a harmonic pattern completes, I will usually do so.

My approach is simple: if I can make 1%+ per week on average, I’ll have a decent year.  As of mid-October, we’re averaging closer to 3% per week.  Sometimes trades take several days to work out, and sometimes several minutes.

This past Friday was a great example. We reached the middle of our target range indicated by the analog we’re following.  I thought there was a possibility we’d move even higher into the range, but saw a bearish H&S pattern completing.  I posted:

The little H&S played out, so we could see a sell-off down to around 1412 or so.  I’m closing my long position at 1423.50 and playing along on the downside, with the expectation of going long again either later today or tomorrow…There’s a high potential for being whipsawed here.  Longer-term investors might want to hang in there.

Less than two hours later, we had reached our target:

We just reached 1412.91 — close enough to my 1412 target.  Divergence is mixed, with positive on 5, negative on 30, even on 60, 4-hr and daily.  My gut feeling is we’ll rebound here, but I have nothing to hang my hat on other than a couple of hazy RSI channel lines and a cynical attitude regarding TPTB.  I’m closing out my shorts here and will stay in cash over the weekend.

Between the run-up we enjoyed from 1405 to 1423 and the move back down, we made a little over 2% — a nice trade for an unleveraged account with no exposure to specific names in less than a week.  But, it could just as easily have taken several weeks.

Bottom line — it’s up to all members to decide whether to play along or not.  Just know that if you do, there is always the possibility that my position may not be held for very long. Long-term buy-and-hold investors might wish to focus on the forecasts and big-picture harmonics.

Short-term traders, on the other hand, might want to keep an eye out for the blue boxes in the daily posts highlighting my position changes during the day.  I’m also exploring sending out Twitter messages to highlight trades.  It’s simple, fast and cheap for both of us.  And, you can set Twitter to text you or email you messages.  Please let me know your thoughts.

And, please let me know your thoughts on the format below.  Again, this is the overview from the page:  https://pebblewriter.com/markets/spx/   I’ll continue with the daily post shortly.

Thanks.

 

ORIGINAL POST:  9:25 AM

major channels:

major harmonic patterns:

3-year

1-year

close-up

 

forecast:

We’re currently following an analog that has been very accurate since March 2012.  SPX reached our target range of 1428-1451 on Friday, then dropped out of a rising channel.

continued for members…

Having met the analog target, the upside could be done — meaning the next stop is 1368-1389 if the previous low of 1403 doesn’t hold.

If 1474 is exceeded, the next upside target is a trio of harmonic targets at 1515-1518 (see above.)  The red line illustrates the top scenario drawn on Nov 1, with alternative turning points (A & B) shown in purple.

close-up:

As I mentioned on Friday, it’s tough to say whether the analog move up was done at A, or whether we might see higher prices (up to 1451.)  A break of 1403, though, means we’ll likely visit 1368-1389 very quickly.

We’ve already reached the H&S target of 1412, so that’s of little help in discerning the near-term future.  There’s Fib support at the .886 of 1406.81.

With the elections tomorrow, I’m very hesitant to predict either outcome.  My gut is that the Plunge Protection Team will keep things together through at least Tuesday EOD.  But, I’m not willing to put money on it unless we break down or out.  For now, I’m happy in cash.

UPDATE:  10:10 AM

If 1403 holds, analog targets B and C are still on the table.  Note that B is the .618 retracement of the 1464 to 1403 decline (and a channel line) and C is roughly the .786 retracement — and the top of the channel.

Note that Friday’s reversal at the .500 Fib line hints at a Bat Pattern, which complete at their .886 (1457.10 in this case.)

UPDATE:  10:45 AM

The US dollar is at a bit of a crossroads. Under our analog scenario, the next major move should be up.  My early 2013 target has been 87.07 for quite some time.

The medium-term picture shows a rising channel which mirrors that of the move up from early September.  DX has pushed above the mid-line of the channel, but appears to be straining to rise above the larger white channel line.

I do expect it to break higher, but will probably require a pull back first.

The EURUSD, on the other hand, is flirting with danger.  It’s daily RSI has lost a channel held since June and is dangling beneath the larger white channel mid-line.

The latest upside harmonic pattern (in white below) is officially kaput.  It’s safe to say the back test of the red channel is probably over.

Here’s the more likely picture for the immediate future — a reaction at the 1.272/.382 (also near the red channel mid-line) and perhaps bouncing up to back test the purple mid-line before heading down to test the purple mid-line.

I’ve also update some long-term charts at the EURUSD page under the “markets” tab.

EURUSD

 

UPDATE:  1:45 PM

It’s worth pointing out another potential H&S setting up.  A dip below 1409 would complete a pattern with potential to 1382.

But, of course, any dip below 1403 would complete the much larger H&S pattern that targets 1328.

It’s interesting that the smaller H&S pattern’s target of 1382 is in the vicinity of our next downside targets A & B.  The analog calls for a rally from that level to 1412-1440 before another larger leg down.  So, the nesting H&S patterns more or less fit with our analog pattern.

More later…