Is A Bear Growling?
The bears are waiting for a bounce to short and the bulls are focused on identify the next buying opportunity.
Major indices peaked in July in concert with our presumed turning point followed by the DJIA and SPX shattering bearish rising wedges.
The timing is not happenstance, the advance from early 1995 to March 2000 was 63 months. It was 63 months from the March '09 low to June/July 2014.
The recent expansion in volatility follows a skein of 62 consecutive trading days without a daily move of 1%---either up or down, the longest streak in almost 20 years.
The record has been shattered with a series of 1% days within weeks.
Volatility preceded price and expansion of volatility underscores the late July/1991 SPX time/price square-out. July 22nd is straight across and opposite a price of 1991 on the Square of 9 Calculator.
The news breaks with the cycles and there have been plenty of anxious headlines. But Mr. Market did a good job of shrugging off all the news convincing players that it may be invincible--- until time was up. When time is up, trend changes---not when price is up.
With the bears waiting for a bounce to short and bulls focused on identify the next buying opportunity, I can't help but wonder if a graceful exit has come and gone.
Today should be interesting.
As you recall, the first week of August was projected to be a turning point week. It aligns with the 3 year cycle and the waterfall low in the first week of August, 2011.
It also aligns with 180 degrees in time from this years low in early February.
Additionally, 1903 is 180 degrees from the recent SPX all time high. So we are 180 degrees from the low of the year and 180 degrees in price down from high. It's a set up.
The thing is that setups often times are acceleration points.
A close on the Friday weekly closing basis below 1903 and certainly 1895ish leaves the SPX vulnerable as shown in the weekly SPX from August 2011 below.
The persistent advance since November 2012 has been defined by each pullback to the 20 week moving average acting as support. The 50 week moving average (which ties to the 200 day m.a.) hasn't been tested since 2012 at 1343.
Interestingly, 1343 closely ties to 2 X off the March '09 low of 666 while the recent 1991 all time high ties to 3 X 666. Markets seek symmetry and equilibrium so the likelihood is that a significant decline, to at least the 50 week moving average will play out.
Moreover, as noted recently, 1991 is 4 revs of 360 degrees in price up from 1343. The reaction off 1991 is not happenstance.
The comments below exemplify the sentiment heard on the financial media on Thursday:
"...3 ½ % off a high is not a bad place to be." However, as Wayne Gretzy says, "it's not where the puck has been but where it's going."
"If you overlook everything, we've got a strong economy. We're going to have a good market...after a correction, whether this is it or not."
"You can't time THIS market." (Maybe another market, but not THIS one?)
"It's too late to sell, but it's not time to buy."
In addition to flirting with violating a rising trendline from 2011, a study from money manager Jon Stephens shows the significance of 1895 SPX.
A Friday close below 1900 could see the market panic.
Click to enlarge
Yesterday's Daily Market Report showed a study of the SPX Quarterly Swing Chart. The quarterlies haven't turned down since 2011. It's been pointing up for 3 years. To say it's stretched is an understatement. The 3rd quarter has a ways to go, but if the quarterlies leave bearish looking Train Tracks, it would not surprise me to see a backtest of the 2000/2007 peaks. This ties to a 20% correction.
The high yield bond ETF JNK was a leading indicator in the 2010 2011 and 2013 broad market corrections as seen in a monthly JNK below. Now, JNK is flirting with a break of a rising trendline from the '09 low.
Click to enlarge
JNK did a good job of telegraphing the recent market weakness.
Overnight the S&P futes traded down to 1890 and are now green trading back above 1903. Notably, August 8th aligns with a price of 1893 on the Square of 9 Chart. While a bounce could play out only recapturing SPX 1947 and this years rising wedge puts the index in a strong position. The first clue to that would be reclaiming 1920.
The DJIA closed below its 200 dma on Thursday and this is a logical place for an attempt at an emotional rescue on an important Friday with the DJIA testing its last swing low---the May low. Offsetting yesterday's outside down day theoretically puts the DJIA (and SPX) in a position to snapback. The central bankers have invested a lot in this baby. They have chartists too.
Also reflecting an inflection point in the markets is the gold mining index, GDXJ.
A 1 year weekly GDXJ shows what looks like an inverse Head & Shoulders (bullish) with a Bull Flag following a breakout 5 weeks ago.
Conclusion. The important 55 day Gann Zone from the July 24th high ties to mid-September, the 6 year anniversary of the Lehman Debacle.
As offered last month, this summer is 1200 months (as in 120 degrees) from the start of WW1 and 900 months (as in 90 degrees) from the start of WW2. The market may know something.
Get Jeff's commentary plus day & swing trading ideas each day with a FREE 14 day trial to Jeff Cooper's Daily Market Report.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter