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4 Glamours in the Wheelhouse of the Square of 9

Apr 28, 2014 9:12 am Print Print

Did the NDX carve out a right shoulder as indicated in the last report, or has the index put in an important double bottom (early February to mid-April)?

Seven is the number of completion in the Bible.

Thursday was the seventh day up from low on the NDX following, which it turned down sharply from a Gap & Go trend day on Friday from a backtest of its 50 DMA.

Was that the right shoulder speculated in the last report?

Daily NDX Chart:

This will be an interesting week because the character of the market is revealed when it reacts against the trend.

In other words, either one of the following will occur:

1. The NDX sets an important double bottom in mid-April, and we will soon see what the market is made of following this first pullback from the initial rebound off the mid-April test of the early February low.,

2. The rebound off the mid-April low was in keeping with the Principal of Reflexivity after a big wheel of time turns. In this case, the Quarterly Swing Chart turned down in April on trade below the February low. The normal expectation would be for a give-back on an approach to the overhead 50 DMA, which we got on Friday.

If the market is bullish and the NDX carved out an important double bottom approximately SEVENTY days apart, then this pullback should hold at and above the level of the April 15 large range Bottoming Tail.

The high of the low bar day from that session is 3505 with a close of 3487. Those are important levels to watch.

Alternatively, a Failed Tail would occur snapping the mid-April low. This closely coincides with the 200-day moving average. Additionally, a break of the February and April lows will break a Neckline of a possible Head & Shoulders topping pattern, giving a projection to around 3100.

The old saw is that broken trends often retrace to their point of origin. In this case, that would be the early October low at 3117.

180 degrees in time from early October was the first week of April when the NDX set a major pivot high and accelerated lower.

The notion of a 180 degree low to high cycle exerted a powerful downside influence.

The best hope for the market is that a low plays out into early May. This ties to 90 degrees in time from the early February low and would be a time of possible completion being SEVEN months from the October low.

Often these seven bar completions on whatever timeframe -- be it daily or monthly -- are climatic.

Alternatively, if the NDX (and the other major indices) rally into the first week of May, it should set up another bearish pivot.

Let's take a look at two former leading high-flier, "proxy" stocks, Workday (WDAY) and FireEye (FEYE), which have declined significantly more than the NDX. These two charts underscore the maxim that it is a market of stocks and not a stock market.

Both names saw growth phases marked by climatic exhaustion action at their highs.

WDAY Chart:

WDAY left large TrainTracks in late February. Note the Spike Volume Top. While the high day was 116.50, February 27 is 90 degrees square 118 -- close enough for government work in a blow off. Moreover, the prior swing low at the November 20 low before the breakout was 70.84. 71 is 90 degrees square November 20 for a time-and-price square-out.

Notably, 70.75 aligns and vectors with February 27.

You can't make this stuff up.

180 degrees off the high is 97. Note the right shoulder at 97. 360 degrees down from high is 78. WDAY sent a bearish signal when it smashed through 78.

One-and-a-half revs off high, or 540 degrees, ties to 62. Two full revs of 360 degrees off high is 46.

180 degrees in time from the November low ties to around May 20.

That said, Monday and Tuesday align with 66, and WDAY shows three large range sell days (as it did into April 7). It will be interesting to see if WDAY "respects" 66 early this week and sees a counter-trend reaction.

Click to enlarge

The above chart on WDAY exemplifies the notion that support is a bull market phenomena. WDAY crashed through the prior breakout point as prior resistance failed to act as new support on the way down. Likewise, WDAY cut through the 200 DMA like a knife through, butter when the presumption would have been that the first time down to the 200 DMA would have perpetuated at least a meaningful bounce. It did not.

FEYE carved out a 50%-plus decline in less than two months, carving out a round trip from January 3's Runaway Gap. FEYE left bearish Tracks in early March at 97 that marked a buying climax. 97 is 90 degrees square March 5, the high day followed by Train Tracks on March 6 and an Island Top on March 7. The technicals confirmed the March 5 time-and-price square-out.

FEYE Daily Chart:

62 is 360 degrees down from high. FEYE traced out a Bear Flag at 62 and accelerated when it would not hold. 35 is 720 degreed down from high, but 41 aligns with March 5. Given that the three large-range decliners into Friday. FEYE should be in a position to see a counter-trend reaction from here.

Click to enlarge

In early January, we identified a time-and-price square-out in Amazon (AMZN) at 408 in this space. Recently, we flagged another square-out at 313/April 7. On Friday, AMZN smashed through 313 closing out 303.83. April 29 is 90 degrees square 303 for a possible "balance point" between time and price. Additionally, 408 (the high) aligns with April 7.

Click to enlarge

AMZN Chart:

In November, we identified the 119 square-out low in Tesla (TSLA) and went on to project a move to 220ish, which is 720 degrees up from low (the intraday 116 low in November). The exhaustion high in late February occurred at 265, which is 90 degrees square 116. Note that the Exhaustion Gap in late February occurred 90 degrees in time from the late November low. Mid-May is 180 degrees in time from the November low and a time to watch for a possible turning point.

Click to enlarge

Putting the technical pieces in TSLA together shows a large range Rule of 4 Breakout in January, which led to a runaway move. In mid-April, TSLA left a Bottoming Tail connecting prior lows. So, now there is a three-point trendline defining possible support. However, if this trendline is broken, giving an equal and opposite Rule of 4 Sell signal, TSLA could see downside acceleration. Since 184 (the mid-April low) is 90 degrees square May 2, this may indicate a test or pivot at that time. This would be roughly 90 degrees in time from early February and TSLA's and the beginning of TSLA's blow-off.

TSLA Chart:

Conclusion: Early this week is the end of the Gann Panic Zone counting from March 6. If a further decline is going to hit, it should do so almost immediately. Otherwise, the resumption would be for a rally attempt into the first week of May, 90 degrees from the February low.

Interestingly, the 3-Day Chart turned back down on the NDX on Friday following three consecutive lower daily lows (intraday, not closing).

Strategy: So today sets up as very pivotal. If the NDX is going to see an extension lower and a possible break of its 200 DMA, we should see a failure following the turn down in the 3-Day Chart. If the NDX can hold and turn up following the turn down in the 3-Day Chart, the expectation is for another rally attempt. The behavior after the first hour should be telling. As you know, following liquidating sessions, up opens are typically not the stuff of upside reversals.
No positions in stocks mentioned.



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