What a disaster for Boehner & Co. last night.   Did we really need another warring faction?  What are we — Greece!? Wait, don’t answer that!  The markets will not take kindly to this additional complication.

Today’s theme song: Maureen McGovern’s song from the 1972 Poseidon Adventure.   Don’t laugh, it won an Academy Award!

What sold me were the movie clips that Brendan Thompson matched up to the song on YouTube.  Perfect metaphor for our current situation.

It opens with Larry Kudlow studying the charts: “obviously a buying opportunity!” as the bulls party like it’s 1999 with Bernanke (Hackman) leading the cheering.

0:18 – In a cameo, Yours Truly sounded the warning, but it was left on the cutting room floor.

0:30 – Things are suddenly not on an even keel.  Quick, call the Plunge Protection Team!

0:47 – Boehner’s motion is “tabled.”

1:06 – Things have stabilized; experts encourage investors to “hold on.”

1:12 – Bernanke leaps into action.  It’s a crappy job, but he’s just the man “in the end.”

1:16 – A private conference between Merkel and Draghi:  “I thought we were in trouble!”

1:18 – Harry Reid restrains a screaming Eric Cantor: “This is what they wanted all along!” as Pelosi dives over the cliff.

1:30 Boehner makes another brief appearance.

1:53 – Pelosi caucuses with one of the last remaining moderate Republicans. Together, they hatch a risky plan — find a political middle ground that will preserve the country’s future.

2:16 – Obama is there to announce that disaster has been averted, since…

2:18 – Everything’s fine, now that Helicopter Ben has arrived.

In terms of the current markets, I’d put us somewhere around the 0:35 mark.  Enjoy!

 

Note: has to be opened on YouTube due to copyright considerations.

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All I can say is “thank God for Congress.”  They make life so much more…predictable.  While the PPT swings into action, trying to clean up the mess, Boehner reiterates just how far apart the two (how many?) parties remain.  Thanks to the failed House action last night, we now know just how divided are the Republican ranks.

First test: the channel up from 1343, which coincides with a Crab Pattern completion — not to mention a nauseating diatribe from the MSM as to why this is a buying opportunity.   I remain short from 1447 on the 18th [see: CIW – 1:10PM Update.]

SPX would have tagged the .618 at 1425.68, but that would have been a pretty obvious breakdown of the channel.

DX completed the small Crab Pattern we’ve been tracking.  Expect a pause, but not much more.  The currency markets are harder to control than the equity.

I think it’s safe to say our forecast continues to be on track.  Downside targets coming up.

continued for members…

UPDATE:  11:45 AM

The channel on the 60-min chart broke down as expected.  The bounce came about a point higher than the .618, so the odds of a mere Gartley to the .786 at 1419.61 are diminished.  But, I think there’s a decent chance for another bounce there anyway.  The SMA 20 is currently at 1419.68 and the 100-day is at 1419.09.

If we blow through the .786, the .886 (and a channel line) is at 1416.  Remember, our ultimate target is 1284-1290 by Jan 11.  But, I’ll be working this morning to verify and update that.

UPDATE:  12:45 PM

Stuck here at 1422 — the April 2 high that marked the beginning of this past summer’s swan dive.  The next act of the Kabuki Theater: Pelosi and Reid are scheduled to deliver their rebuttal to Boehner’s comments at 1:00 EST.

Reid on CSPAN:  HERE

Pelosi on CSPAN: HERE

UPDATE:  3:50 PM

In November 2007, SPX dropped from the equivalent point of 1552.76 to 1406.1 in 17 sessions.  This represented a 82% retracement of the 1370-1576 rise, and a 224% extension of the 1489-1552 (Oct 24) rise.  The slope: 146 points (9.4%) in 17 sessions for an average of 8.6 pts/session.

On June 1, 2011, SPX had taken 21 sessions rather than 2007’s 14 to arrive at its equivalent point of 1346.  It then dropped to 1258.07 in 11 sessions, catching up from a time standpoint.  This represented a 92% retracement of the 1249-1370 rise, and a 261.8 extension of the 1311-1348 rise. The 88-pt (6.5%) drop averaged 8.0 pts/session.

Here in 2012, I’m looking for a similar-sized retracement.  A .886 retrace of the 1266-1474 rise would be 1290.43 — which would be just shy of a 161.8 extension of the 1343-1448 rise.  The analog target has been around January 11, which is only 13 sessions away.  To cover 140 points in 13 sessions raises the slope to 10.8 pts/session. To do so in, say, 8.6 pts/session would take 16 sessions — January 16.

But, this top has already proven to have more downside than the last two.  The initial pullback was a .618 retracement of 1266-1474, rather than the 2011 equivalent’s .500 and 2007’s equivalent of just over .382.  So, I’m inclined to believe we’ll continue to get a bigger, faster slide than those first two instances.

I have a lot of charting to do this weekend.  I’d intended to finish it before the close, but frankly am out of gas, having slept a total of about 15 hours since Monday.  One of our members has graciously invited me to lunch, after which I might take a nice, long nap.

I’ll catch up with you all tomorrow.  Have a great weekend.

Cheers~