100 Years Later, Is the S&P 500 Set to Reenact the Sinking of the Titanic?

By Jeffrey Cooper  APR 13, 2012 10:30 AM

The market could be at a breaking point on the centennial of the sinking of the Titanic.


You were the moon and sun, you’re just a loaded gun now
-- "Change of Heart" (Tom Petty)

A big buy program was put on yesterday all around the world in front of the weekend and earnings season.

It looks good and tastes great, but is likely going to prove less filling as the odds are that a C wave of an upward A B C correction on the hourlies is nearly over.

The S&P 500 (^GSPC) may bleed back into yesterday’s range before trying for slightly higher prices over Thursday’s highs, or it could roll over immediately having satisfied a near-50% retracement of the decline off the early April highs.

It does not OWE us a second consecutive higher high on trade over Thursday’s high, but if the S&P can carve out somewhat higher prices on this rally, it would put the index in the first daily Minus One/Plus Two sell position in 2012.

Why? The 3 Day Chart is now pointing down (for the first time this year if you can believe that; there have not been three consecutive lower daily lows all year), and a subsequent two consecutive daily higher highs will satisfy the pattern.

The normal expectation would be for the market to pull back soon. Even in the most bullish of scenarios, the expectation would be for a downside A B C corrective wave on the dailies to play out, which would see a decline below Tuesday’s lows toward a 1340 handle.

Following weekly signal reversal bars, this would satisfy a test/undercut of the monthly wheel of time. The monthly S&P will turn down in April on a single tick below 1340.03.

The caveat is that a turn down in the monthlies this month will leave a bearish outside down month.

Is it possible that a bearish monthly signal bar could be a mirror image of the bullish outside-up month from last October, and that the S&P is set for a round trip back to past?

If history is simply a consensus of hallucinations, the answer may be yes.

A 50% retracement of the leg down is 1389.50-ish, while Thursday’s high was 1388.13. While somewhat higher prices may play out, with the S&P rebounding fully into the Gap Window from Monday, coincident with the level where the Weekly Swing Chart turned down near 1392.90 (last weeks lows), this level also ties to a backtest of the lower rail of a channel that connects the 3 drives to the key 1321 master square.

So a down open this morning could pull back the rubber band, enabling the S&P to satisfy our Minus One/Plus Two daily sell setup. I would be surprised if this set up did not gain traction given it will be the first such setup this year.

As offered above, even the most bullish scenario suggests 1347-ish is tested/undercut. Why? The S&P broke 1384, which is 90 degrees in price down from 1421/1422, with authority, the implication being then that the next price harmonic of 180 degrees down at 1347 will be tested. This is usually, not always, the way the wheels of price work.

That being said, it is obvious that a big buy program was put on around the world. If that big buyer was the Fed, we could see prices squeeze all the way up toward a backtest of the 20 dma near 1399. If yesterday’s rally was a new bullish impulse wave, we should see two more dramatic days of follow-through, knifing back up through 1400.

Even in the most bullish of scenarios, I would expect that a corrective phase takes a few more weeks of consolidation.

If yesterday’s big buy program was investment bankers trying to protect the baby in front of the Facebook IPO (is it only politically correct to say The Facebook if you are amongst the ‘Dufi’?), the agenda will be to keep everyone in the water and try to heat things up until early May when the IPO is expected.

If the buy program was part of the portfolio to come to market getting ready for sale, getting set up with shorts being executed and puts being bought in its wake, then the market should roll over by Friday/Monday.

Apple (AAPL) may hold the key. Apple has traced out another Plus One/Minus Two buy setup as it has done on 5 previous occasions this year (label A on the chart).

A failure of Apple to gain traction here off the setup on the important Friday weekly closing basis could be a chink in the market's armor, representing a significant change in behavior.

This change could be underscored by the 3 Topping Tails over the last three sessions, leaving a Charlie’s Angels sell signal (three adjacent ‘tails’).

This suggests a possible failure here and a weekly Topping Tail. A large decline today in the stock would leave weekly Train Tracks (bearish).

The 20 dma in Apple just below looms large. Is it possible Apple will close the week below its 20 dma if the Applemegans sit one out in front of the weekend?

If so, the market may take its cue from this.


This weekend is the 100-year anniversary of the sinking of the Titanic -- the ship that was unsinkable.

Like the US?

Like Rome?

Like Communist Soviet Union and so many other empires of illusion?

Was the crisis in 2008 the ship of state hitting an iceberg with everyone continuing to party when the danger seemed to subside, sipping AAPLtini's and oblivious to the water level rising… until the hull broke in two?

I suspect that to a blind man on the Titanic, the sound of violins playing meant everything was fine.

If this is not a bullish correction, but the beginning of something more pernicious on the downside, bearish behavior following a possible turn down of the monthlies will indicate it is time to jump into a life boat, even if it’s already been lowered into the water.

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