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Jeff Cooper: 7th Anniversary Of '08 Crash Low Setting Up Turning Point

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The market may be on the verge of a turning point.

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The SPX tailed back up after turning its 3 Day Chart down on Friday. However, bearishly, at least for the short-term, Friday's tail was snapped going a long way to confirm the significance of the November 3/2120 square-out or balance point.

Remember, November 3 and 2120 is a balance of time and price because 2120 is straight across and opposite 2120 on the Square of 9 Wheel.

On November 3. the SPX reached 2116.48.

Close enough.

In snapping Friday's lows, we got a change in character from the runaway move underway since early October and in so doing, stocks got hit hard with the SPX falling 90 degrees from last week's 2116 pivot high.

90 degrees down from 2116 ties to 2071 and the index dropped to 2068 before a rally attempt saw it settle at 2078.



The 3 Day Chart does a good job of defining the intermediate trend.

On the chart above note that the 3 Day Chart turned down on July 23 right after a test of the May high and stayed down.

Notably, no rally following the July 23 turndown was able to satisfy a turnup in the 3 Day Chart signaling internal weakness.

Finally, there was capitulation into the August 24 crash on a stab through the 200 day moving average.

The 3 Day Chart remained pointing down until September 16 when it turned back up.

That turn up defined a high plus 1 day followed by a plunge to the lows.

However, interestingly during the trip down into late September, the index never turned its 3 Day Chart back down -- a potential sign of internal strength which indicated a successful test of the August low -- at least for the moment.

The market took that behavior to heart and ran like a banshee following the October 2 large range upside reversal.

Notably, the first Minus One/Plus Two sell setup since the test played out occurred on October 1. It looked like it would pack a punch on October 2's dismal NFP but the bearish setup was obliterated into the bell as the SPX recaptured its 50 day line on the important Friday weekly closing basis.

Throughout the summer, we flagged the harmonics between 2015 and 1987, which pointed to a September pivot.

1987 is 28 years ago and 28 aligns with late September.

In 1987 the pre-crash high of the year was August 24th/25th. This year it was a crash.

November 4th, 1987 was a pivot high with a closing low on December 4th around 7 weeks following the crash.

This year 7 weeks from the August low ties to mid-October which was also a pivot low -- a test of the 50 day m.a. and resistance which  defined a explosive breakout rally.

As seen in the daily SPX from 1987 below, the pattern in the two years is remarkably similar.



I bring this up because 1987 was not another great crash that heralded a depression as in 1929.

Looking back on historical charts today, it looks like a blip.

1929 was 86 years ago and on the same vector as 28 (years ago for 1987).

So the big question is whether a potential cyclical Rule of Alternation may play out.

In other words, was the August/September break just a washout in an ongoing bull market aggravated by ETF's or was it a shot over the bow warning of issues under the surface?

Either the SPX has carved out a test failure of the highs and we will get a collapse or this pullback will soon define a buying opportunity.

That said this pullback could be deeper even if constructive.

Trade below Monday's lows and violating 2071 with authority along with a Bowtie of the SPX 50/20 day m.a.'s signals a push toward 2050 and the impulse up from 10/22.

That impulse should hold if the posture of the market is still constructive.

That said, 180 degrees down from last weeks 2116 high ties to 2020. This is the high from the important September 17 Fed Day reversal.

This is key support for the bull: prior resistance should act as new support. If 2020 breaks, all bets are off.

Conclusion.

The market came unglued around the 7th anniversary of the '08 debacle. 7 was a key time frame for W.D. Gann. The Weekly Swing Chart turned down on Monday on the 7th week from since the beginning of the rally. W.D. Gann said, "we should look for changes of direction at anniversary dates of major highs and lows in market history. November 21 is the anniversary of the 2008 crash low that year. It was the low around the world and the low in many key names in the US. The March '09 low was an undercut low some 4 months later (120 degrees in time). This November is 120 degrees from this years July pre-crash pivot test failure high.

Interestingly, November 21 aligns with 2017 on the Square of 9...basically right on the important 2020 Fed Reversal on September 17.

Is it possible the SPX will decline to 2020ish into November 21?

Strategy.

If Monday was a minor capitulation in a bullish pullback we should be up from the open today and hold. If not the market has downside work to do.

Form Reading:

ISIS:




BABA:





Twitter: @JeffCooperLive

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No positions in stocks mentioned.

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