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Tesla Leads the Charge Back

Mar 13, 2014 8:43 am Print Print

Yesterday, stocks followed through to the downside from Tuesday's reversal.
 
However, the SPX and RUT rebounded after testing their 20-day moving averages.
 
Appropriately, Tesla (TSLA), the heart and soul, of the current speculation, led the charge back, following a test of its 20 DMA.
 
Daily SPX Chart from January with its 20 DMA:



Daily RUT Chart from January with its 20 DMA:


 
Daily TSLA Chart from January with its 20 DMA:


 
10-min TSLA Chart for Wednesday:


 
As the above 10-min chart shows, TSLA set an opening low and screeched higher out of the gate, seemingly igniting stocks' comeback across the board.
 
Glamour stock zulily (ZU), used as a long idea from an alert on Tuesday, is typical of titles that raced into the green.
 
ZU exploded higher after approaching its 20 DMA with an ORB doing a good job of identifying the move higher.
 
10-min ZU Chart:


 
Daily ZU Chart from February to Present with its 20 DMA:


 
The Late Day Breakouts in several names including ZU inspired a green close in the SPX, albeit marginally so.
 
Recent Hot IPO, Coupons.com (COUP), is another title that roared back from an opening low. COUP is a good example of the Hot IPO 1-2-3 Pullback strategy.
 
10-min COUP Chart:


 
Daily COUP Chart from Inception:


 
Wednesday's test of the rising 20 DMAs by the SPX and the RUT was the first such test since the February low. The first such test of the 20 DMA usually sees a rebound, although I did not see it coming in yesterday's report.
 
Was yesterday morning a textbook Holy Grail (a kiss of the rising 20 DMA) buy setup in TSLA, the SPX, and the RUT?
 
IF the SPX is going to new highs above 1900, it should probably do so from here
 
It's do or die time. In tailing back up on Wednesday, the SPX and the RUT are back testing the body of Tuesday's Lightning Rod reversals, Large Outside Down Days.
 
Was Wednesday a genuine reversal or a dead cat bounce? Remember that 1877-1878 represents formidable, well-tested resistance corresponding to a time-and-price square-out. Trade above that level should elicit an authoritative move, not a squeaky new high. If the SPX extends, it may be in a position to set new highs, but it is questionable as to whether the RUT and the DJIA would be able to do so.
 
Recently, we showed a chart of the 1973 chart. Is another analogue being ignored? Does the pattern into the 1973 top look anything like the pattern into the highs in 2014?
 
Chart of 1966 to 1974 Bear Market:


Click to enlarge

Monthly DJIA from 2000 to Present:


 
Note the five-year period from 1969 to the 1974 low -- another five-year cycle like the five-years from March 2009?
 
In 2000, fundamental valuations were ignored. We were told that those valuations no longer had any meaning because we were in a "new economy." It was no longer the Industrial Age relic but a new age: the Information Age. This time was different. It was different alright. March 2000 essentially set the high for 13 years in the SPX. It wasn't until April 2013 that the SPX was able to convert the 2000 peak (notwithstanding the short-lived nominal new high at 1576 in 2007 above the 1556 peak in 2000).
 
We're coming up on the one-year cycle of that April 2013 breakout.
 
The heart and soul of the current speculative fervor, TSLA, is also coming up on an important anniversary in April. This April will be 360 degrees in time from the beginning of its parabolic ascent.
 
Weekly TSLA Chart:


 
Perhaps you believe anniversaries don't matter and the market doesn't have a memory and doesn't adhere to the Law of Vibration with the rest of the natural world. Would it surprise you to learn that the DJIA closed for the first time above its 1929 peak on November 23, 1954. Remember November 21, 2008? That was 79 years from 1929. On the Square of 9 Wheel, 79 aligns with the last week of November.
 
Mr. Market has a memory, it's just that he loses his mind and his memory at times like the rest of us.

This is the most incredible phase of a bull market. As Gann said, the fastest moves and the most volatility occurs at the end moves of the cycle, both at tops and bottoms. Human nature plays a huge role at this phase of the cycle as it was human nature that drove investors to buy the tops in 1973 and in 2000 (and in 1929 and 2007 as well). Each of those tops were followed by major sell-offs (90% following the 1929 top and 83.5% in the NAZ following the 2000 top).
 
It was human nature that drove investors to sell the bottoms.
 
Since the history of these major tops and bottoms is known, why would anyone want to relive them? But they will.

The question is one of timing. The question is just how irrational can irrational get?
 
A chart of PLUG  reflects the those two questions.
 
Daily PLUG Chart from November Through Present:

No positions in stocks mentioned.

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