Last December I slapped a couple of upside targets as well as a downside target on the NYSE index and pretty much forgot about it [see: Update on NYSE Dec 29, 2015.]  I’m not a fan, as it regularly ignores chart and harmonic patterns.

But, at the time, a large H&S Pattern promised significant downside if NYA wasn’t able to break out.

If… it can’t break out of the red channel, then the bottom of the rising white channel could be called upon to support it a third time in only 4 months (about 9940) with the neckline of a huge H&S Pattern (in yellow) waiting below at about 9640.  The H&S targets 7800, but the more likely target is…9040.  It would allow NYA to put in a higher low that’s in line with the falling red channel bottom.

Five sessions later, NYA plunged through the white channel bottom, followed in short succession by the yellow neckline.  By the time the dust had settled, NYA had reached 9040, and even overshot it a bit.  All in all, it was a 21% correction from the May 2015 highs.

What next?

continued for members…

1. Note that the big, rising white channel broke down — though the rebound off of 8937 is trying very hard to climb back on top.  It’s a charting no-no, but it’s become commonplace.
2. We don’t have to look far for an example of the above.  NYA just popped above the midline of the gently rising red channel that broke down in January.  It’s as though nothing ever happened.
3. The H&S never came close to the 7800 target and is obviously back above the neckline — again, as though nothing ever happened.
4. NYA just broke out of the falling purple channel that broke down in the final stages of the correction.

All the above is basic stuff that we have learned to accept as normal in this, the era of central banks propping up stocks.

What’s kind of interesting is that they just haven’t been able to regain the rising white channel.  So, they’ve done the next best thing: established a rising channel that’s slightly less steep, but will still provide for higher prices.  You can see it below in red.If we take that red channel and expand it to fit the 2007 highs and 2009 lows, we get something like the chart below.  Note that I’ve added in the best fitting falling channel (in purple) that captured the decline from Dec 2014 through Mar 2016.  Isn’t it interesting that it intersects the expanded red channel right at 7800?Instead, of course, NYA broke out — along with every other equity index I chart — when CL began its eventual double from the Feb 11 lows.  In other words, NYA followed the same path as everything else: ignoring the apparent chart patterns when driven higher by algos.

Two more channels that are really interesting to me..  Connecting the 2007 and 2016 tops yields a huge, rising channel — shown below in white — that looks really legit in many ways.  The January plunge backtested its .786 line pretty convincingly.

And, if we connect the 1998, 2002 and 2009 bottoms, we get a nice falling channel, shown below in yellow, that was also backtested by the Jan 2016 plunge.  In other words, NYA has darned good support there.The implications of all the above are that NYSE’s bounce is for real.  It might have broken down from the rising white channel, but it keeps trying to barge back in — even as its internals continue to weaken.

Note that it has had very little in the way of a retracement since its Feb liftoff other than the June post-Brexit dump.  That retracement was from above the .618 but not quite to the .786 Fib level — no man’s land in harmonics terms.  Like SPX’s, it featured a close below the SMA200, sending TPTB into a panic.

The subsequent bounce has, in my opinion, been overdone.  NYSE has criss-crossed the .786 at 10759 15 of the past 30 sessions — not a great sign for the bulls.  I think it’s more likely to break down from here and (at least) backtest the .618 at 10369.

It wouldn’t be a big move, but it would jibe with my views on SPX of mostly sideways action through the election as its SMA200 approaches.  Note that the SMA200 should continue trending higher, arriving at the .618 (also, proximate to the 2007 highs) around election time — providing additional support in case it does break down.

Stay tuned.