Jeff Cooper: What, Me Worry?
The market may finally see a change of character after a long, Fed-induced bull run.
There is a notion out there that the bull market has a long way to go since there is no sign of elation, such as in the months leading up to the top in March 2000.
Fear is driving the market, not greed.
Equities are up out of lack of choice, not out of reason.
Ebullience has not been a hallmark of the advance at any point in the last 5.5 years.
Does a grand top require a manic phase?
The top floor can be reached by an escalator just as well as an elevator.
A weekly S&P 500 chart from the November crash low depicts a bull escalator from the August-October 2011 low of 1075. The advance off the major higher 2011 low has been particularly persistent.
This is important because the move from 1075 to this week's 2005 intraday high represents 6 revolutions up of 360 degrees in price. In other words, from 1075 to 2005 represents 6 squares up on the Square of 9 Chart.
This range of 6 squares is the precise workout from the 768 SPX low in 2002 to the 1576 high 5 years later.
As regular readers know, 6 revolutions/squares of 360 degrees is a significant move because a true square is a 6-sided cube.
So in addition to the multiple time/price harmonics walked through earlier this week, we have this smooth, virtually uninterrupted move up since the central bankers buttressed the wall of worry with promises to do "whatever it takes."
Clearly, October 2011 was a major turning point. And not only was it fractal of the undercut low from November 2008/March 2009, but 1070/1074 is 90 degrees square the first week of October when the 2011 undercut low was established.
Does the market have a date with destiny -- one way or the other -- this October?
Why was the escalator switched on in late 2011? T
he break in 2011 looked like the market was rolling over after a typical 2-year cyclical bull within a bear market.
Yesterday, a fellow trader sent me the following note:
"Bernanke said in a speech yesterday that the financial crisis was worse than the Great Depression (as 12 of 13 major banks were on the brink). Yet we corrected the excess of the years (maybe even decades) leading into the crisis in 17 months (14 months using the November '08 crash low when markets around the world made lows) by doing more of what got us there in the first place."
On the above chart, the red trendline connecting the November 2008 crash low and the major higher October 2011 low tie to around 1570-1580, the October 2007 top.
Additionally, the green lower rail of a channel anchored off all major highs and the October 2011 low converges at this same 1570/1580 level.
Is a backtest of the 2007 high in the near future?
While the recent break off the July high snapped a rising trendline on the dailies, a weekly trendline (blue) from the June 2013 low remains intact.
Importantly, this is a period of 14 months. W.D. Gann stated that 7 is the fatal number of time. The 2007 top was 7 years from the 2000 top and we are 7 years from the 2007 top. The January 2014 top was 7 months from the June 2013 low and August is 7 months from this year's January top.
Even in a big picture bull scenario, a break of 1900 (the early August low) suggests a decline to around 1600. This would satisfy a backtest of the 2007 high. Alternatively, a very bearish 'C' wave may have played out over the last 5 years.
For the most part, the typical bearish view on the street allows for a 10% correction while a decline from current levels to the lower rail of the channel from 2009 ties to a 20% decline -- something you don't hear much about.
The advance in the Nasdaq shows a mirror image of emotions on the crash of the 2000 Bubble Top.
Does the current love affair with social media and biotech stocks mirror the tech bubble in 1999/2000?
Elation is as elation does.
Interestingly, right here, a horizontal line drawn from the Nasdaq monthly closing high in February 2000 intersects a Live Angle connecting the highs into the 2007 top.
Moving a decimal point to work with the values on the Square of 9 chart shows that from the intraday and closing daily Nasdaq high in 2000, the trip down to early October encompassed 6 revolutions in price -- just like the 6 squares up from 1074 to this week's 2005 SPX high.
Yesterday the Nasdaq made a new recovery high of 4575.79. Moving a decimal point gives 457, which ties to August 27/28 on the Square of 9 Wheel.
Click to enlarge
Yesterday's report asked whether Monday's N/R 7 Day on the SPX would define a pivot high like July 24.
The SPX turned its dailies down yesterday. On the rip up from the early August low, each daily turn-down has marked a low -- the sign of a runaway move.
There were 3 such daily turn-downs.
This morning, we may be getting a change in character. Of course, the dip could get bought hard before the weekend as bull markets tend to close near highs on Fridays.
Conclusion. Technical paparazzi continue to buzz around celebrity central bankers.
It's not just that the market has taken the biggest leap of faith since Icarus became head of the engineering team at Boeing (BA).
It's not just that the Fed has been the macro mover.
It feels like the Fed has become the fundamentals.
And, ostensibly, since the Fed mandate since its inception has been to prevent panics and protect the value of the dollar, I'm worried.
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