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G-Spot, Cat Nip, Heavy Metal


Everything has been coming up sevens for Hoofy at the casino while Boo has been crapping out at a cold table. But he's due.


Now I'm a straight-line walker
In a black-out room
I push a shopping cart over
In an Aztec ruin
With my minion fingers
Working for some God
Who could see his own reflection
In a parking lot

Oh it's nausea, oh nausea
And we're gone
No it's nausea, oh nausea
And we're gone


G-spot, Cat Nip and Heavy Metal, these are the three amigos that cut a swath
through my 1475 S&P resistance that I was referring to on Friday. The three amigos I'm referring to are the blow-out earnings on Google (GOOG) and Caterpillar (CAT) and the continuous momentum melt-up in the metals to ad nauseam new highs - specifically I'm referring to Southern Copper (PCU), RTI International Metals (RTI) and Allegheny Technologies (ATI) and naturally US Steel (X).

Although resistance is made to be broken in bull markets, and although 1475 is beaucoup resistance in my work and although the S&P closed convincingly above this level on the important Friday weekly close, it's important to remember that Friday was option expiration. Consequently follow-through will be key. If after expiration, the market continues higher and holds the breakout above 1475 for more than a few days than who knows how high the Bernanke Bid can lift the market.

Why is 1475 a big deal? Well, until we get a Square of Nine Calculator for the Ville (coming soon), you will have to take my word about the following time/price harmonics:

  • 1475 squares out the February 22 high. In other words, 1475 and February 22 resonate off the same diagonal on the Square of Nine Chart.
  • Interestingly, this February 22 date and 1475 are on what I call a Master Square. This is because they're on the same vector as the 1553 S&P all-time high.
  • It is also interesting to note that this 1553 vector cuts through August 25th which was the high day in 1987 twenty years ago. In other words the date of the high - in 1987, August 25, corresponds to the price of the high on the March 24 of the all-time high on March 24, 2000 at 1553. This is one of the ways in which time and price square out. In my view, all market moves are harmonics of each other and following the Law of Vibration, resonate off each other. All significant highs and lows in price and time are related to each other.

Twenty years is an important cycle. It is not happenstance that the waterfall into the summer low in 2002 was twenty years from the historic low in the summer of 1982. You know - when Hoofy was just a squirt, petrified by the color red. The 1982 low of course was the low proceeding the mother of all bull markets.

Coincidently here we are twenty years from 1987. And coincidently we are in opposition, or 180 degrees on the calendar from the crash low in 1987 which fell between October 19 and October 23. Is it possible that the market is making a high on this mirror image twenty-year anniversary? Not only is the twenty-year cycle a factor in the ingredient that could determine a high but, years ending in seven often result in crises or panics. For example:

  • 1887 saw a five-month fourteen percent decline.
  • 1897 saw a two-month twenty percent decline.
  • 1907 was the Rich Man's Panic which saw an eleven-month forty-five percent drop.
  • 1917 saw a six-month thirty-three percent decline.
  • 1927 had a one-month eleven percent decline.
  • 1937 saw a three-month forty percent waterfall.
  • 1947 saw a three-month nine percent decline.
  • 1957 saw a five-month nineteen percent decline.
  • 1967 saw a three-month ten percent decline.
  • 1977 was a bear year, down almost the whole year, down eighteen percent.
  • 1987 saw a twenty percent crash in one month.
  • 1997 saw a two to three month sixteen percent decline.

W. D. Gann stated that seven was the number of panic. This years' February 22 high was seven years from the first quarter high in 2000. Interestingly the first quarter of 2007 is seventy years from the first quarter high in 1937, which as shown above saw a forty percent waterfall that year. This years' February high was also seven months from the prior swing low in July 2006. Currently we are seven weeks from the February 27 smash. So the sixty-four billion dollar question is whether or not the S&P is testing its February high (sometimes tests exceed by one or two percent the prior high). If so this is a fake-out breakout generated by option expiration. Interestingly such a test of the February high would be carving out a test of a test pattern as the S&P is also testing the mid-point of the high bar from March 2000.

Everything has been coming up sevens for Hoofy at the casino while Boo has been crapping out at a cold table. But he's due.

Conclusion: Technically, the market is bullish and closed above key resistance but I don't put a lot of faith in technicals at option expiration especially as April options expiration ended with a blow-off opposite the way it came in with a blow-out low that obliterated all the premium on the planet. This is Wall Street's favorite pastime – Flush and Squeeze. Yep that's the ticket, that's how you get blood out of a turnip. That's how you get ten cents out of a nickel on the Street. But, expiration over it will take more money to squeeze the market immediately higher as new calls are more expensive. I can't remember a time when the Dow Industrials were up fifteen out of the last sixteen days. So, although the point count itself may not feel like a blow-off - the stretch certainly qualifies. Now with option expiration burned-out, we'll get to see if the move over the February highs is real and how much natural buying shows up. Keep in mind that only by off setting Friday's gain quickly and leaving Train Tracks would there be any indication that my set-up is playing out. Only on a break back below 1475 would a caution flag be raised and only on a break back below 1461 would a sell signal be issued and the notion of a test failure and the symmetry and cycles above show an indication that they may come into play.

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Position in PCU and RTI

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