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Between the Ticks: Bulls Back Against the Ropes


The market turns on a dime most traders can not.

  • The shadow knows - the Street always knows - the late weakness on Tuesday was a tell to stocks getting hit on Wednesday.

  • Bearishly, the 'breakout' on Tuesday was completely offset by Wednesday's price action.

  • It is not a breakout in and of itself that is telling but the ensuing behavior on the breakout.

  • As I like to say, breakouts can be the most dangerous point as fast moves come from failed moves.

  • The market turns on a dime most traders can not.

  • This market turns on a penny, and turns like an 18 wheeler on steroids.

  • Has the S&P completed an A-B-C rally phase and poised for a new wave of selling and a new leg down to new lows?

  • A break of a Necktie of the 200/20 day moving averages would seem to confirm that notion, even if this level holds for a day or so.

  • But, caveat emptor as the last two weeks may have been the eye of the hurricane and the calm before the storm: the current period aligns cyclically with what Gann called a panic zone which is 49 (7 squared) to 55 (Fibonacci) days from a peak.

  • Sept 11 is a solar eclipse which is the most powerful of astronomic/cyclical influences and it will be interesting to see if its power is exerted on the 6th anniversary of 9/11.

  • This is the time frame in which many crashes in history have played out including 1929 an 1987.

  • No matter how cheap socks look if they get hit here the important thing to remember is that the nature of the beast is stocks always get oversold and overbought and go to extremes unimaginable. Panics simply magnify and speed up these conditions. There are no immediate perceptions of value in the middle of a 'panic bubble' until it too is burst.

  • Even if 1460 holds for a day or so this is potentially an extremely vulnerable position for the market over the next few weeks at least.

  • The bulls are back on the ropes and we must observe the behavior.

  • It remains to be seen if yesterday's weakness was front-running ahead of earnings season or September month end liquidation.

  • Yesterday was the 14th trading day from low an reversals ofter occur on fractals of 7.

  • A reversal did play out from where it should have in term of time and price (1484-1490 S&P) and must be respected until proven otherwise.

  • I maintain a bearish bias. Resistance should be up to 1479/1480 cash with a trading stop at 1484/1486.

  • A break of 1432 could start a waterfall decline.
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No positions in stocks mentioned.

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