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Why the Market Is Going Up


Institutions want to stampede the bears and sidelined retail investors into the market.

Editor's Note: The following is a free edition of Jeff Cooper's Daily Market Report. For a two-week FREE trial of his daily commentary and nightly day and swing trading picks, click here.

What the hell am I doing here?
-"Creep" (Radiohead)

The S&P 500 (^GSPC) went flat on Friday after creeping higher into major resistance into options expiration.

We've walked through this previously. This resistance includes the low of the high bar month from last year: the low of the May monthly bar was 1311.80. The low of the high bar week from last July's pivot high of 1330.92.

In addition, 1311 S&P is opposite last October 4 low for the year.

Click to enlarge

Institutions who study cycles know that their best bet for making money this year is in the first quarter, and they will probably try to stampede the bears and sidelined retail investors into the market.

They will probably go for the breakout. However, patterns suggest that the market may first shakeout down to 1280-ish, squeezing those who buy puts on the break.

This week has a two-day Fed meeting and in the last year, there have been plunges prior to the meeting, followed by a squeeze higher. So this pattern may play out as mid-week also squares (90 degrees in time) the big cycle high from October 27/28.

Remember that high was defined by a 666 trading day count from the March 6, 666 S&P low and a 741 trading count from the November 21, 2008 crash low.

So this time period of 90 degrees that ties to price resistance could be significant with the market being magnetized in stair-step/lock-step fashion to a larger date with destiny:

1576 calendar days from the October 9, 2007 all-time S&P high at 1576 is February 3.

Click to enlarge

The date of February 3/4 aligns with a price of 1333 on The Wheel. Interestingly, this is a vibration off the low being 2X the 666.80 low in March '09.

So the market seems to be creeping inextricably, ineffably to this meeting of a cluster of time and price. It would not be surprising to see an overthrow of the rising wedge traced out by the S&P since its December low, which is interpreted as a major breakout. If it occurs, I would get defensive quickly on any subsequent break back below the lower rail of the rising wedge.

Click to enlarge

Technicals precede fundamentals, so I wouldn't put too much stock in the 'reasons' given for why the market is going higher.

The news breaks with the cycles, not the other way around.

Since early February ties to a 1576 calendar day count, let's take a look at how the 1576 top was called by a cycle of 360.

From the October 2002 low at 768 to the October 2007 high at 1576 is precisely six squares of 360 degrees in 60 months.

Click to enlarge

Since a 360 degree revolution on The Wheel is one full square, my thinking is that a more significant true square or cube is comprised of 6 squares of 360 degrees.

This is what played out in October 2007 -- the market squared out.

From its low at 78 in January 2009, Apple (AAPL) has run up nearly 6 full squares at 433/434. This is playing out in six squared months or 36 months.

So it will be interesting to see if the icon of the bull's eye, Apple, will time a top of significance in the markets.

Form Reading Section

The 50% Principle is playing out in silver (SLV) which declined approximately 50% off its high before leaving Train Tracks on the dailies at the end of last year. Note how the 'undercut' low at the end of last year came 90 degrees in time from the late September low. So this week, which is 90 degrees in time from the late October high in the S&P, shapes up as pivotal.

Mid-February is 180 degrees and opposite last year's highs in SLV and gold (GLD), so this time frame bears watching.

Click to enlarge

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No positions in stocks mentioned.

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