That should be it.  Remember yesterday [see: Dueling Bancos] we talked about the little channel being established while the market searched for a Point C.  The lower bound of the channel was 1304…

I think the exact price is going to be hard to pinpoint, and will likely depend on the nature and timing of news from across the pond.   But, leading candidates are the afore-mentioned channel bottom around 1304 and the .707 Fib/red fan line (from Oct 2007) that intersect around 1309-1310.  A push any lower should find strong support at 1300.

We’ve likely just bottomed out just below 1300 (1298.90) and should head back up now.  The RSI hit the channel midline, which should be its low point, too.

Nervous types should keep a tight rein on this, with stops in the 1295 range.  Steady hands should be good with a 1292 equivalent.  The .886 of the most recent climb is 1296.88.

The dollar and the euro are mostly in limbo today.  The EURUSD has ranged from 1.2335 to 1.2427, but is essentially flat at the moment, tracing out a spinning top for the day.  We covered it in detail a few days ago [see: A Most Lenticular Market].

While I don’t expect a huge rebound in value, I can easily imagine some sideways chop with a possible tag of 1.2290 somewhere in the near future.  That’s an important .886 (red pattern) and is very close to a smaller scale 1.618 (the purple pattern.)

The fan line we’re currently hugging gets to 1.2290 around the middle of July.  Just remember there is ample risk to the downside.  The current channel bottom is at 1.20 — one or two nasty headlines away.   Speaking of hugging, check out the daily RSI on the chart below.

The dollar, meanwhile, is also putting in a spinning top.  As we discussed the other day, it should take a breather if equities are to have a chance for more upside, and that’s what we’re seeing so far — a breather, and not much more.  The daily chart shows DX has stalled just beyond the .618 — not to mention that important channel line (purple.)

The fib levels and channel are better seen here on a long-term weekly chart.

In other words, a sustained push out of the purple channel would be a very big deal — as in “the destruction of the euro” big.  A year from now, we’ll either look back and say “of course that’s where the dollar had to turn around and start falling again” or “of course that’s where it was going to break out” based on that channel.

And, that pretty well sums up the binary nature of the euro mess — which, for the moment at least — has completely shifted attention away from America’s equally dire debt problem.

If the currencies hold, or just go sideways for a bit, stocks can get on with their move — whatever that’s going to be.  But, if we’ve seen the worst of this little decline, we’ve established a very serviceable Point C for the next harmonic move higher.

Upside alternatives are shown on the following chart, with matching key points (and potential Points D) color coded to match the Fib patterns.

I have to run out for a meeting, but will post more after the close.