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What Really Drives Markets: The Law of Vibration As Applied to Amazon, Apple, and the S&P 500

Jan 28, 2013 9:04 am Print Print

After years of patient study I have proven to my entire satisfaction as well as demonstrated to others that vibration explains every possible phase and condition of the market.
-W.D. Gann

Stock price fluctuations are proportional to the square root of the price.
-Sir John Templeton

Rational people acting independently can produce irrational market results.
-Anonymous

Following last weeks report, Apple, It's Not About the Earnings, I received the following comment:

"Not sure if funny or tragic that you are suggesting markets move based on some inherent motives as is alive, and that fundamentals don't control. Closer to tragic, since you claim to be a journalist."

The fact of the matter is that it is proven that earnings are uncorrelated to stock price over any given year -- though over the long haul yes, there is a relationship.

Fundamentals control? The current trailing twelve month price/earnings ratio on Amazon (AMZN) is 535, according to Bloomberg.

The current trailing twelve month price/earnings ratio for Apple (AAPL) is around 10.

In fact, the P/E Ratio on AAPL never got much above 20 from 2009 to present.

So something else must be driving stock prices...

I do believe that there is an underlying numeric structure in the market just as there is in all aspects of nature. I believe that cycles run through the market just as they run through our lives and nature.

I believe that we learn by association and that is why we are all in the pattern recognition business, whether we know it or not and whether we like it or not.

I believe that stock prices are the result of an interplay of their time/price relationships and the great Spiritus Mondi of mass consciousness of market participants -- how current expectations and perceptions affect the stock price and how in turn, the stock price itself affects those presumptions.

These, I think, are the strands of DNA that drives stocks; the twin DNA of stocks' primary and secondary trends.

In recent months, there has been a drastic divergence in the paths of the 'A Team', the aforementioned AAPL and AMZN.

Is it possible AMZN is blowing off into a near-term buying climax while AAPL is plunging into a near-term selling climax?

Let's take a look at AMZN first.

A daily AMZN shows the mid-November low at 218 and the 45-point advance into the December spike that defined a high at 263.

Note that the November low was a picture-perfect test of the 200 dma which was followed by Train Tracks and a Soup Nazi buy signal on the immediate stab back up through the prior October swing low after a new 20-day low.



Following a picture-perfect backtest of the 50 dma, AMZN proceeded to rally strongly again.

A similar measured move of 45 points projected off the 243 low in December targets 288. On Friday, AMZN tagged 284.72.

Note the outside-up signal bar at the 20 dma.

The pullback to the 50 dma basically carved out the handle of a Cup & Handle pattern from September through December. Of course, that wasn't 'proved' until AMZN eclipsed the right side of the Cup.

But this is a game of anticipating pattern recognition.

In my experience, I've noted that buying and selling climaxes often occur in a 3-bar 'whoosh'. One more strong day in AMZN would satisfy 288 and at the same time tag the upper rail of a rising price channel.

Importantly, putting the pieces together, 281 is 360 degrees up from the 218 low while 284 is 360 degrees up from the 220.59 closing low.

You want to measure from intraday and closing lows.

At the same time, 289 is a corner number on the Square of 9 Wheel with 289 being 90 degrees square early February. So, the next week and into early February should be interesting for AMZN.


Click to enlarge

If you have a Wheel, you will note that 273 is 90 degrees down from 289 and that 273-ish is where the last explosive move started from.

For the sake of speculation, let's say that AMZN shows signs of a pullback, then a 180-degree decline from say 289, equals 257/258 which ties to a test of the lower rail of the ascending channel.

Checking a monthly AMZN shows the October 2007 high at 101. Two full revs of 360 degrees down (2 squares) gives 37. The crash low was near 35 on an intraday basis. Remarkably, 101 and 37 square early February (February 3rd to be precise -- but it's typically the 'week of' that you want to watch).

The 289 projection shown above is opposite 37 and 101. These prices all align or vector each other.

From the 35-37 low, 289 = 5 ½ squares up (360 X 5 + a 180-degree overthrow?)

From the 101 peak, 289 =3 ½ squares up (360 X 3 + 180 degrees), an important 540 degrees (a 6 sided true square or cube of 90 hard right angles x 6).



Is it possible AMZN will find resistance around 289? The important thing to understand that it is we must observe the behavior at these time/price and price/price relationships. The market can do anything. In addition, AMZN could 'respect' the harmonics and simply pullvback or it could define a significant top for a period of time.

But forewarned is forearmed. In my experience, given the pattern and the time and price cycles and the surge into these levels, selling longs and potentially looking to exploit a reversal is the proper stance as opposed to being caught up in the frenzy.

This is how the Wheel of Time & Price can help separate your decisions from killer emotions.

We haven't recommended options in this report, but given the setup, we may initiate a put position in AMZN over the next week or so if we see any confirmation of the setup.

This brings us to AAPL.

The blow-off high at 705 ties to 422/423 which is 3 squares down from the all time high.


Click to enlarge

705 aligns/conjuncts with 423.

From the 78/79 price low (November 2008/January 2009) to 705 is a range of 627 points which is 90 degrees square January 29/30.

627 is 90 degrees square January 29/30. So the range from low to high also vibrates off the end of January.



In the last 10 minutes on Friday, AAPL skidded 10 points lower to 434 on real volume.



Interestingly 434 is 6 squares up (540 degrees) from the 78/79 crash low.

Is it possible that there is some synchronicity between the crash climaxing in 2008/2009 and the current AAPL crash culminating around 7 squared (or 49) months later here in 2013?

The last yearly low is the January low in 2012 at 409. With AAPL a slice away from 409, it is entirely feasible that the stock will be magnetized to a turndown of its Yearly Swing Chart on trade below 409.

Following such a turn, AAPL could always 'settle' at 423 or even 434.

That said, even in the 1987 freefall, the S&P did not turn its Yearly Swing Chart down on trade below the 1986 low. So while there is a compelling likelihood that 409 will be tested, there is no assurance that it will occur. Time is more important than price in the markets. When TIME is up -- not PRICE -- trends turn.

Interestingly, the end of January/early February setup looks pivotal for AAPL as well as AMZN.

Is it possible that those who want and/or need to have AAPL off their books for month-end will establish some kind of a low in the name?

One of the surest bets on Wall Street is the snapback rally after a crash. That's what we saw in the popular indices following the crash low in the broad market in November 2008 into January 2009 followed by the flush into March 2009.

The parabolic blow-off in AAPL started in January 2012 on a breakout above this same 423 level. AAPL has come full circle, literally, in one year. It has completely retraced the last leg of its advance, the parabolic phase.

In addition, a Fibonacci .618 of the 705 high gives 435 which was Friday's low and the low since the high.

The first leg down in AAPL was 705 to 505 for a range of 200 points. Taking the last major swing high of 595 on the week of 12/7/12, a measured move of 200 points projects to 395.

There is noting that says AAPL must satisfy a measured move, but it would be interesting if we got a turndown of the Yearly Swing Chart that flushed out the 400 handle.

We will be following up on the action in AAPL, looking at the possibility of initiating a long 'super swing' position in the name (in other words, a position that will potentially entail more than a 3 to 5 day swing, depending upon how quickly a snapback plays out, if the scenario is correct.

By the way, putting the pieces together, you will note the last turn up of the important 3 Week Chart in the first week of December defined a major pivot high as presumed in this space at the time.

2 squares of 360 degrees below 594/595 gives 416. So, there are a cluster of potential vibrations around and just below current prices in AAPL.

The old traders' cliché that parabolic advances are completely retraced once they are broken may seem like a cliché, but it is true.

Timing and technical analysis, even in the most beloved stock on the planet, pays dividends.

And the Square of 9 Wheel is the single best tool I know of to put you on the right side of price and time. It is the only tool that expresses the Law of Vibration.

If you are serious about the markets, it is a tool that should be in your quiver.

With both AMZN and AAPL potentially setting up, equal and opposite, is it possible that some big players will peel out of AMZN in favor of AAPL in the coming week or so?

Finally, let's walk through some of the big picture relationships in the S&P since the 2009 low.

With a glance of the Square of 9 Wheel below you can see that the 666 low aligns and vibrates off the first major higher low since the 2009 low, which was the 1011 S&P low on July 1st, 2010 roughly 15 to 16 months forward.


Click to enlarge

This same vector ties to 1075, which was the major low in October 2011. This is again, another 15 months from the early July 2010 major higher low.

Note how 1353 ties to this same vector. 1353 was the closing daily low at the significant mid-November 2012 low.

Note that the next square up is 1505. January 2013 is also 15 months from October, 2011.

The behavior at this juncture will be critical to observe. If momentum shows up through 1505 at this time, it may indicate acceleration -- just as occurred in the first quarter of 2000. The takeaway is that if momentum does show up that if it proves short-lived, an ensuing break back below 1500 should indicate an important sell signal.

Are these above relationships happenstance? Can you benefit from suspending a bias against something that appears esoteric?

Most market participants think there are 'rational' reasons and explanations for how the market moves and why it moves. The vast majority of market participants believe there is no underlying natural order dominating stock action. Most market participants think too much.

Speculation is observation, pure and experiential; thinking isn't necessary and usually gets us into trouble.

I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.
-Paul Tudor Jones

When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you?
-Paul Tudor Jones

I'll end with this piece from W.D. Gann:

In going over the history of markets and the great mass of related statistics, it soon becomes apparent that certain laws govern the changes and variations in the value of stocks and there exists a periodic or cyclic law, which is at the back of all these movements. Observation has shown that there are regular periods of intense activity on the Exchange followed by periods of inactivity... the law which I have applied will not only give these long cycles or swings, but the daily and even hourly movements of stocks. By knowing the exact vibration of each individual stock I am able to determine at what point each will receive support and at what point the greatest resistance is to be met.

I have found that the Law of Vibration governs and controls these conditions. I have also found that certain phases of this law govern the rise in a stock and an entirely different rule operates on the decline.

I have found that in the stock itself exists its harmonic or inharmonic relationship to the driving power or force behind it. The secret of all its activity is therefore apparent. By my method I can determine the vibration of each stock and by also taking certain time values into consideration I can in the majority of cases tell exactly what the stock will do under given conditions.

Stocks are like electrons, atoms, and molecules, which hold persistently to their own individuality in response to the fundamental Law of Vibration. Science teaches 'that an original impulse of any kind finally resolves itself into periodic or rhythmical motion,' also, just as the pendulum returns again in its swing, just as the moon returns in its orbit, just as the advancing year ever brings the rose of spring, so do the properties of the elements periodically recur as the weight of the atoms rises.
No positions in stocks mentioned.

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