Reading the employment reports these days reminds me of the story told by William Goldman, celebrated screenwriter of such classics as Butch Cassidy and the Sundance Kid and All the President’s Men. He was waiting for a producer to get off the phone when the man suddenly cupped his hand over the phone and shouted to his assistant: “Bill, Bill! Which lie did I tell?”
When we learn that the government is unable to keep track of the number of its own employees from month to month, how are we supposed to trust that any other number that purports to tell us how many folks are employed in offices, warehouses and saloons across the nation?
In the “bad news is good news” (more QE) and “good news is good news” world in which we’re living, this morning’s jobs report is — surprise! — good news.
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We’re still long from yesterday’s low, but coming up on important resistance. This morning will be about figuring out when to sell. I suspect 1615-1616 would be nice.
The dollar shot up on the news to an important channel line and the .618 retracement of its fall since Apr 24, but is dropping back. How far it falls could be quite telling.
UPDATE: 9:42 AM
There are still a number of higher potential targets:
- the top of the purple channel, currently around 1646
- the IH&S target of 1650 (now that SPX finally crossed the neckline)
- the white 1.618 extension at 1635.25
But, odds are they’ll have to wait for a back test of the lines of important resistance just broken. It’s not that the 1.272 Fib line is that important. There was no meaningful .786 reversal, so this harmonic pattern is much more likely to extend to the 1.618 at 1635.
This was our upside target if SPX was able to break through the resistance it just did. And, we’re at an unusual point on the purple channel — the .625 line. The .75 would be a much more common end point.
UPDATE: 10:29 AM
The red channel is drawn with the best fit on the interior points on the 15-min chart. But, by the time you examine a channel on longer time frames, all those precise reversals at the channel lines pretty much disappear. In other words, there’s always wiggle room.
UPDATE: 10:55 AM
We’ve been talking about 1635 a lot lately. There was Apr 29, when SPX came within one point of making a new high:
On the other hand, if it dips below 1592 in the morning, it has downside risk to the channel bottom at 1576 [it hit 1581] where it would likely catch a bid and start a run to 1635.
That way, the Inverted H&S Pattern would feature a neckline that’s roughly the same as the purple channel .25 line, and would target the same price level as the 1.618 extension of the 1597-1536 slide: 1635.
There was a Santa after all! The Dow soared 205 points, the S&P; 500 over 21. The next two days tacked on 13 more points. At that point, SPX was just 10 lousy points from completing an inverse head & shoulders pattern that might have sent it up 125 points to 1635.
We all know the rest of the story. Suffice it to say there were a lot of hangovers those next few weeks that had nothing to do with New Year celebrations. SPX dropped 120 points in 2 weeks, 230 points in 4 weeks and 750 points by the following Christmas.
There’s no real connection, of course. After topping the 2000 high, SPX had just missed — by 30 points — completing an Inverted Head & Shoulders Pattern (in purple, below) that would have targeted around 1670. Note that 1670 was also the 1.618 extension of the Crab Pattern that was in the works (also in purple.)
But, all was not lost. After peaking at 1576, SPX went on to construct another IH&S that looked promising. If it completed, it would have targeted 1635 — indicated by the dashed yellow horizontal line.
It came within 10 points on Dec 26, but couldn’t quite close the deal. As I wrote in July 2011, the rest was history. That 1635 IH&S target would have to wait…until now.
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BTW, I’ve extended and expanded the current membership offer through the end of the weekend. Charter Annual memberships at $1,200 fix your subscription price for the life of the site. Annual memberships are slated to increase to $1,800 when this deal is done and $2,500 when the upcoming fund is launched. Click HERE to sign up.
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UPDATE: 2:40 PM
So far, 1618.46 has held as the daily high. We’re seeing a little more movement, back down to the 1.272 Fib and below that gray channel line. We’ll take a look at near-term and ultimate targets in a moment.
First, a quick look around at other indices which, for the most part, are flashing at least “interim highs” indicators.
COMP nailed the middle most 1.618 of the three nestled close together between 3343 and 3435. This is the extension of the drop from 3134 to 2726 in Mar – June 2012 — the equivalent of the 1422 – 1266 drop in SPX (which exceeded its 1.618 way back at 1553.)
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