Charts I'm Watching: November 1, 2011

UPDATE:  7:00 PM

I think it's safe to say DX and EUR are right back in their channels.  There's a very long ways to go from here.

 

UPDATE:  11:00 AM

The headline could read something like:

Politicians Threaten to Resign over Prime Minister's Appalling Plan to Allow People to Vote

If that sounds like a joke from the pages of The Onion, guess again.  Here's the actual story.


ORIGINAL POST:  9:15 AM

The Fan Line That Just Won't Quit (now 30 for 172) once again... didn't quit.  This looks every bit like the solid reversal I was looking for last week.  The Greece rescue package has finally been recognized (better late than never, CNBC) as the sham miracle cure it is, with yesterday's 32-point plunge as the exclamation point.  Now, the Greeks themselves will have a chance to show us all just exactly what they think of this deal (as though the riots were somehow ambiguous?)  The market impact of this latest development should be at least yesterday's equal.

I keep coming back to "write downs or riots."  Italians will respond the same when it's their turn to choose between slashing social services or letting banks suffer the consequences of stupid business decisions.   That's oversimplifying it, of course, but do mobs care about the finer points of macroeconomics?  And what about mobs that organize and become potent political forces? 

Will the US be any different when our turn comes?  Remember how Los Angeles erupted when Rodney King was beaten by a bunch of cops?   What kind of reaction will there be when unemployment, welfare, medicare, etc are slashed 30%?   How will the 99% take that lovely bit of news?

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Meanwhile, back at the markets... I've updated my charts from the past week or two.  Our potentially derailed 2011 v 2008 analog has, as we discussed last week, another shot at reaching its original target.  Last Thursday, it looked like this:

At the time, I thought there was still a chance the market would resume its original trajectory, which calls for about 1260 around December 1.  Now, 70 points later (according to the futures) it looks a little more likely.

A plunge to one the targets we identified last week (the white circles below) would establish a lower bound to a much wider rising wedge (that would be mistaken for a channel with greater potential) with the 1260-1265 target.  This forecast is shown below as the solid yellow line.

The equally likely alternative, of course, is that this morning's "news" is suddenly too much to bear, and the market gets on with wave 3 in a big way. This scenario is the purple line below.

Last, there's the dashed yellow line, which is what happens if folks are too slow on the uptake as to just how miserable a mess this Eurozone situation is.

More later.