Mario Draghi opened his press conference with a small joke:
“Don’t read too much into this small delay. It was the elevators. They are not working.”
Perhaps he was speaking metaphorically — referring to the litany of failed “whatever it takes” efforts to date.
Economists will have to sort out whether they think the ECB’s shiny new QE effort will benefit member EU countries. But, the futures like what they see, with e-minis gaining as much as 21 points in the minutes following Draghi’s announcement.
As such, look for SPX to reach our target price range of 2042-2047, with a bias toward the upper end of the range.
Yesterday was a nearly picture-perfect performance by chart standards. We were looking for a drop and pop that would flesh out the rising white channel. From our initial post:
…stocks should open lower today. The rising white channel bottom makes for a convenient initial target…Whatever bounce we get…will have to contend with the SMA10 again. If it can push through, then yesterday’s 2042-2047 target area is very much in play.
The channel tag was on the nose, and SPX did, indeed, push through the SMA10.
2035.29…will be the next test for SPX…should see a reaction here, but hard to say how much. It could be just a small one, backtesting the rising white channel midline around 2030ish. If that doesn’t hold, maybe the .500 at 2026 and then the purple TL at 2019.
SPX reached 2038.29, fell to 2030 — where it loitered for 30 minutes or so — then bottomed out at 2022.77. It rebounded to the falling white channel upper bound and closed there as expected.
UPDATE: 9:35 AM
This morning’s initial thrust came in on target, reaching the middle of our 2042-2047 range at 2045.15.
Look for SPX to back off from the SMAs and backtest the broken white channel, possibly around 2030. TPTB should support it there. Any sustained drop below the rising white channel would be quite a bearish development and definitely not in keeping with today’s script.
UPDATE: 2:35 PM
After tagging this morning’s initial upside target, SPX obliged by reversing to backtest the white channel line as expected. After finding support there, it climbed to our final upside target for the day — the white .618 at 2053.29.
It has leaked slightly higher to the purple .886 at 2055.74, where it might well run out of steam. Not saying one should short it here (though I think that would probably work out.) But, for anyone who’s captured the 53 points in all that we mapped out this morning, it wouldn’t be a terrible spot to take profits.
UPDATE: 3:12 PM
I guess SPX had a few more points in it after all. The algos are obviously firmly in charge at the moment, so it needn’t reverse at all. But, there’s an interesting potential reversal point here at 2063 that makes a lot of sense.
continued for members…Note that the Jan 16 low was slightly lower than the Jan 6 low — setting up a potential IH&S Pattern. If SPX decided to put in a reversal here of more than a few points, — creating a right shoulder to go with the head and left shoulder, it would target the yellow 1.618 at 2138. Just saying…
I also like the fact that USDJPY came to a screeching halt at the top of the falling channel we’ve been tracking for several weeks. A reversal here and continuation of the downturn supports the idea of a drop in stocks.
The caveat, again, is that SPX needn’t reverse at all. There have been countless cases of potential IH&S Patterns never happening over the past 18 months, even though they would support TPTB’s upside targets. I can only guess that they don’t really give a damn about appearances any more. There’s no point in trying to fool the few people who are still paying any attention into thinking there’s any real price discovery still going on.
If it reverses here, I’d be looking for a backtest of the SMA20/50 at 2045ish, and after that the broken white falling channel at around 2026-2028.
GLTA.