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Powerful Market Cocktail

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it is a Friday in a bull market in the summer at record headline-etching levels. That's a powerful cocktail. Especially in a vertical market.

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Jokerman dance to the nightingale tune,
Bird fly high by the light of the moon,
Oh, oh, oh, oh, Jokerman
-Bob Dylan (Jokerman)



Recently I mentioned one way how time and price square out, using the example of how the S&P hit a new intra-day high for the move at 1532.45 on May 23rd, which was 1,532 days from where it all started on March 12, 2003.

Using the same analysis the level to watch for today as "natural resistance" works out to 1541. This is a natural level of resistance for Friday if the bulls jump on the jobs report. Either way the numbers hit, the bulls will probably try to spin it to their narrative, to their advantage.

Even though month's end has come and gone and many times the markets find short term turning points at/around the end/beginning of the month, it is a Friday in a bull market in the summer at record headline-etching levels. That's a powerful cocktail. Especially in a vertical market.

But the market loves to throw a curve ball. On Thursday morning on the Buzz & Banter, I penned that Thursday's full moon underscores the current emotionalism reflected in the price action, and suggests another go-go up day or a complete retracement of Wednesday's range. Nothing in between the luna-ticks. So what happened? Naturally the indices were as flat as a pancake as the S&P scored a NR 7 Volatility Signal, the narrowest range in seven days.

Whether Thursday was a pause day, or caution ahead of the important job report, Friday looks like more fireworks. Why? Because Thursday was a reversal of a reversal, in that the S&P offset the reversal down from May 24th, indicating a better than average likelihood that Friday will see a continuation of a move higher after yesterday's pause.

That being said, there is some action in some of the leadership names worth mentioning. For example:

  • Apple (AAPL), the Soul of Sentiment, at 122 is at an important level being 720 degrees up on the square of nine calculator from last July's 50 low. 360 degrees up from 50 was 81, which was also an important level "proving" the geometry.

  • Another Go-Go stock, Mastercard (MA), tagged 151 for the first time on Thursday. Why is this level worth watching? 151 is three squares of 360 degrees up from the all time low of 40. MA sold off strongly in the last hour, shedding nearly four points from the high of the day to close at 149.53 after hitting 153.30. The 151 level may be exerting its influence.

  • G-spot, Google (GOOG), also tailed off leaving a Lizard sell signal on a substantial increase in volume. The stock hit a high of 508.78 before reversing to close at 497.76. Be that as it may, GOOG was entitled to a rest after virtually a straight line run from 460. It is not unusual for a stock to pull back after a point of recognition, in this case the breakout on Wednesday (Buzzed on the Buzz as GOOG crossed 492ish). This breakout pivot is a point to watch.


Wednesday seemed to be an inflection point for the broad market as well. It was a Lightning Rod, or a large range outside day up (L-Rod) which importantly offset the stab down from a week ago Thursday. This is important because many times fast moves come from reversals of reversals. So the run for the roses for a new intra-day high on the S&P and the mother of all short squeezes may have commenced as the bears capitulated when the barking dog in China did not wag the American tail on Wednesday.

Clearly the market has entered that phase where a vertical cherry bomb could explode on top of the current parabolic ascent. Names such as AAPL, Crocs (CROX), Cleveland-Cliffs (CLF), Potash Corp. (POT), and Marathon Oil (MRO) to mention a few, have already exhibited these characteristics.

Remember that the analog of the final runs from 1942 to '46 and 1982 to '87 that I showed recently, project a last-ditch window anywhere from the first week of June to the first week of July.

It's not just the price action, it's the visceral feel of this phase that indicates a final fling is at hand – at least in the interim regardless of what your opinion may be as to the long term prospects for the market.

It's a Dorfman kinda market – whispers, rumors, and innuendos send the stocks soaring. An appearance by a CEO or CFO on the financial news is a catalyst to send the stock ratcheting up four or five points in anticipation of the appearance - and then tack on an additional four or five points for good measure the next day. Such was the case with Baidu.com (BIDU). 'Axlerod' is photographed wearing a pair of True Religion (TRLG) jeans and the stock explodes 20%. You think it's the first time he's worn the jeans? All I need to see is Donald and Rosie kiss and make up and announce they are starting a steel company, and I'll know the top is in. Stranger things have happened – even Jobs and Gates are holding hands this week. The bonfire of the vanities, the weenie-roast of the equities is red-hot.

But, it may be worth asking the question, "Is it an inflection point when old Wall Street sells?" On Thursday, 120-year old AG Edwards (AGE) agreed to be bought. Just askin'.

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Positions in AAPL, MA

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