Rejected at Fib fan line resistance again. 

Spy 327 = .382

Since the Oct 12 high this rate of decline has been unsustainable and led to a reversal  

Thanks Steve.

Here you can see the significance of yesterday’s gap. It represented a break of the .382 Fib fan line from the March lows. Subsequently we encountered the .236 retracement to the March lows and the rising trend line that has been in place since may. The fact that todays bounce appears to be failing, plus the deflationary nature of the rotation that is accompanying it, strongly suggests we are heading for the .50 fan line, which of course would take us down to wipe out the stops below the Sept low, which is always the type of location these moves target. Given next weeks turn window, which coincides with the June high and the August 22 acceleration to the parabolic top and it means that keeping an eye on all options (up and down) is more important than usual. 

Technically this would not be a qualified break; however, I have zero question there is a still a massive amount of money positioning around that number.  So, the fact that it is acting as a pivot is what is most relevant to me. In effect, it is functioning very much like an options strike price with a large amount of open interest the day before expiration. Basically, creating the same effect as a would a very large high gamma position.

Add in all the Fib fan, retracement, regression channel line, etc that all co-exist right here, plus a bunch of cycle turn windows due next week and the chances we stay near 3288 are slim.

MDG...truth be told...3288 is both the Weekly and Monthly (Demark) Bearish Propulsion Momentum levels. So there is an enormous battle going on over that level. If we close Friday below it, fast money needs to be short. Meanwhile, if we appear to be bouncing away from that level they need to be long the bounce. 

Watch the reaction at this Fib level. 

I understand completely Matt. I am old school. I was a student of “sequence trading” ala Kevin Haggerty long before most people were even aware of half of the stuff that I was looking at existed. Pretty much anything I do has a multitude of factors layered into the decisions.  (I was one of the largest Semi traders volume wise on the street in the early 2000s so I had little choice when I was providing 500,000 share instantaneous liquidity on demand to the likes of Stevie Cohen...always in the wrong direction of course.)

All I said was not to ignore it. I could add a whole slew information to support the factors to trade with and against the signal. However, I dont have the time to do that. So I was simply bringing it to the attention of the many members who probably were completely unaware of the use of simple MA crossover systems or not watching longer time frames. 

Given the current price compression in so many asset classes I traded against it this morning. However, once that compression unwinds, especially if it does so via time and not price, I will likely revert to going with it. 

Big Fib time/price balance here. If we cant get out of here fairly quickly, a move down to the .382 price/.618 time balance  is very likely. 

Not really. The reason being, in a double top you usually see extended distribution in the two tops over time. In this case, the moves are much diagonal (quant driven). So it tells me that subsequent to a sell off they could just as easily reverse back up on a dime.

The bigger issue right now is the breakdown in correlation between bonds and equities. Because bonds didnt rally when inflationary assets sold off yesterday most hedge funds were actually unhedged for practical purposes. Add in a rising VIX and that means that their risk monitoring programs force them to sell to reduce exposure regardless of price....thus the huge deflationary trading environment yesterday. 

Most of the major commodities all rolled over today, many at major downtrend lines or overhead resistance levels. 

All of the indications of a huge asset allocation trade, rotating into the deflationary trade with this break higher in the dollar. 

This bearish cross, which will occur on the open tomorrow,  is never something to ignore. 

Damn Kev! Kick it to the curb, and then meet me at farm with a bottle of the finest!

Your welcome. As an FYI, I never post anything like that unless there are multitude of other supporting factors. It is just too much to try to post it all. For example, this is also the .618 extension of presumed Wave A off the last high and where Wave C would equal A. That is why you are seeing all that buying in this range. 

Another likely scenario is the old gap fill and then a bounce off the lower trend line back up into a triangle. 

Given the location of today’s gap, anticipate a trend down day if we fail to hold the early range. 

Just a tip. h&s patterns are primarily reversals patterns at highs and lows. Occasionally continuation patterns. However, in all cases there should  be a trend in place coming into the pattern. In this case, what you indicated as a h&s is not, as it sits alongside other range bound trading to the left of the short period you highlighted.