Another ugly Friday failed to elicit downside continuation and a manic Monday.
Remarkably, with 3 lower highs on the S&P, the market halted in its tracks after Friday’s sharp selloff.
But then everything is political, isn’t it?
This isn’t our mother’s free market.
This is the market of mice and Ben.
With the Gann Crash Cycle on the clock, Monday seemed set for downside follow through but there are so many crosscurrents with the election today and hedges being put on that you never know.
The normal expectation would be that the S&P
is poised to test its 200 dma even if a good low for a rally phase is going to play out.
So defense is still warranted throughout the week in the short-term.
The market creeped up into the election and will likely remain relatively flat today, followed by a few volatile days as put and call hedges are removed.
On the Square of 9 Wheel, today ties to the important 1370 level shown in yesterday’s report. November 6 vectors 1370.
Click to enlarge
Is it possible that 1370 and the 200 dma are tested (plus or minus 1 day to the ‘squareout’) on a plunge following the election?
The other numbers (which are all corner numbers on the Wheel) that come into play today/tomorrow are 1407 and 1445.
If the S&P should spike to 1445 and begin to roll over, that should offer a good risk-to-reward short.
Technically, the market remains in a downtrend and is in limbo short-term.
There are two ways to look at the picture here.
With the crash zone culminating this week if the key 1400 level on the S&P holds with the index testing the previous breakout pivot from August, a rally phase into 2013 could be in the cards.
This is what occurred in the 1980 election cycle when Reagan won in a landslide. This is what happened in 1972 with the market rallying up for a false breakout in January 1973 prior to a 2 year devastating bear market. It will be interesting if Romney wins in a landslide like Reagan in 1980 when no one expected it.
The other side of the coin is that the S&P is bouncing short-term, carving out the right shoulder of a Head and Shoulders topping pattern.
Either way, a trip below the current shelf would be a bearish development.
Recently, we noted that the 1987 high was equidistant from the 1962 low and the end of October/early November 2012 time frame.
This is the 25-year cycle, which is working out.
The 40-year cycle extends into late 2012/early 2013 as noted above with the false post-election breakout in 1973.
The 50 and 100-year cycles are also on the clock as discussed in this space.
Ditto the 12-year cycle which was the September 2000 test failure of the spring highs that year. Like 2012?
So, with the crash window closing, the market is teasing up with an intriguing picture of risk: with AAPL
bouncing off the Quarterly Swing low at 570 pre-open on Monday does this indicate short-term cycles suggest a bounce with the S&P also hitting horizontal support around 1400?
At the same time, stepping into the fray here before the 55-day Gann count is conclusively over around Thursday (since the market was closed for 2 days) may mean buying into the fray in the midst of what is just another 1 to 2 day bounce before a swift plunge.
No positions in stocks mentioned.