I love this old Sherlock Holmes expression (borrowed from Shakespeare’s Henry V.)  It perfectly captures the excitement of seeing a forecast begin to come together.  Although I’ll admit that, on the face of it, it makes just as much sense as “non-stop flights” and “your door is a jar.”

These are the early stages, of course, and things can come unhinged anywhere along the way.  Murphy is patiently awaiting his cue.

We are nearing the lower end of our target range as detailed yesterday [see: A New Old Analog.]  We should get a pause at the new channel mid-line around 1428, but we’re looking for higher than the .382 Fib.

I’m working today on cleaning up the analog charts posted over the past few days.  My trading platform (TOS) seems to be back to normal (haven’t had to reboot anything since starting around 5am — yay!)  So, look for a bunch of charts over the next couple of hours — including currencies and other major indices — that reflect the path I expect for the remainder of the year.

As I’ve posted before, analogs can be extraordinarily profitable when they come together.  But, they require a certain degree of faith (and a well-designed escape hatch for those that fail.)  From time to time, I make myself go back and re-read a post I truly hated writing: Lessons Learned.

In it, I detail the amount of money that second-guessing my own forecast cost me in the summer of 2011.  Don’t get me wrong; June-August was a very profitable period.  But, my returns would have been about twice what I experienced had I been able to ignore those nagging doubts.

continued for members…

The expanded version of the above chart is shown below…

What are very hard to see, though, unless we zoom way out, are the larger channels I think will guide us forward.

UPDATE:  3:30 PM

The market closures on Monday and Tuesday threw a monkey wrench into my charts, and I’ve been trying to figure out whether we’re at the equivalent of day 62 or 69 (from 2011.)

I won’t bore you with too many details…  But, I’ve been constraining everything in the current period to 2.4 – 2.6 X the time involved in 2011.  Suffice it to say there is a legitimate argument to made for each.

If day 62, we could be looking at a reversal up around 1440 — a .618 retrace of the last drop.  If day 69, pretty sure it would come at 1451.  I think the key elements are a back-test of the broken white channel and the time line.  The back-test boils down to how far, how fast (the target increases with each passing day.)  But, we’ll watch this for signs of coming into play.

Note that last year day 162 came at the 1.272 time extension (of the Feb 18 to May 2 time span.)  The equivalent period this year is today.  But, we were delayed by two days thanks to Sandy, and we have an election to consider…so Friday-Tuesday would make perfect sense.

Put it all together, and I think we’re probably looking at 1448 – 1451 either tomorrow or Monday.  That would be followed by a sizable sell-off to 1368-1389 right after the election, and rally back to around 1414-1430 two or three weeks later, and then a big dump to below 1330 by the end of the year (the 1.618 time extension) probably 1288-1310.

I should mention I consider the downside targets conservative.

Not every analog works, of course; so, it’s important to have an exit strategy in case this one blows up.  And, remember that the timing on all these moves is subject to change — as we just experienced with Sandy.

Today’s equities ramp came without any help from currencies.  The EURUSD is actually off for the day.  It will likely back test the broken red channel for the next several days.  I slapped a Point X up there to show the potential (without breaking any channel lines.)

And, the dollar  — up today — will likely move sideways or sell off for the next few days.  I wouldn’t be surprised if it gained some overnight — perhaps to the yellow 1.272 at 80.674 — then sold off in a back test of the red channel during the next few trading sessions.

For now, I’m very comfortable holding long.  Though, we do have a potentially important employment report due out in the morning.  If nothing else, we’ll find out if the folks at Labor like working for Obama.

BTW, the question came up earlier about what happens if the analog busts.  Remember, we dipped down to 1405 as expected — which potentially sets up a Crab Pattern up around 1515-1518.  That’s a tough one.  One issue is that we’d have to retake a number of important channels (and break others) in order to reach that level anytime soon.  The other issue is the economic backdrop to the global economy.

I know we got “great news!” today, with employment, consumer confidence, real estate, retail sales, etc. etc.  Call me a cynic, but I don’t buy any of it.  I think this is a pretty little rest stop on the road to Crashville.  Anyone mention the fiscal cliff today?  Probably not — at least until November 7.

I’ll do a little more fine tuning of the short-term picture and hopefully get to some other indices later this afternoon/evening.

GLTA.