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S&P Watch: Will It Retrace to 760?


Now is not the time to buy anything that's moving down.

Editor's Note: The following is a free edition of Jeff Cooper's Daily Market Report. For a 2-week trial FREE trial, click here.

Psychic changes are born in your heart entertain
A nervous breakthrough that makes us the same

"Parallel Universe," Red Hot Chili Peppers

As far as the laws of mathematics refer to reality, they are not certain, as far as they are certain, they do not refer to reality.

-Albert Einstein

In the last few months, I've often referred to the 19-year eclipse cycle and the pattern from 1990. To recap, that year saw a peak in January and an intervening decline followed by a significant peak in July prior to a devastating sell off.

The 19-year cycle -- along with the pattern from the rally off the September 2001 low into late January 2002 -- paints the picture of a "final phase."

Remarkably, I hear no one talking about the antecedent of the 5-month rally off the 1929 crash low into the spring of 1930. Apparently, financial apocalypse is now considered off the table. That may very well be the case, but it seems to me that there's so much uncertainty around that no one can bet on it -- at least, not for long.

And that may be the point. No one may be betting on any outcomes for too long. A sense of stability and an economy decreasing at a decreasing rate doesn't mask fragility under the surface.

I suspect that, to a blind man on the Titanic, the sound of violin music meant the coast was clear. Last fall the economy jumped off the Titanic of systemic risk and was thrown a life saver by the Fed. We've had a relief rally, but the cold water of reality is hypothermia could set in before the summer is over.

The big money is made when a shift from over-optimism turns sour and runs to the opposite extreme of over-pessimism. However, what everybody knows often isn't worth knowing -- at least for the moment.

In other words, the reputation of the head-and-shoulders top pattern may have preceded itself, eliciting an expiration upside squeeze.

Be that as it may, as offered yesterday, looking at the open interest in Spyder options, the most people would lose the most money on a move to 900 to 910 S&P.
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No positions in stocks mentioned.

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