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The War Of 1812

Dec 04, 2013 8:29 am Print Print

I don't believe in accidents. There are only encounters in history. There are no accidents.
-Pablo Picasso

No, this is not about Andrew Jackson.

But it may be about Old Stonewall. To wit, 1812 SPX.

This November is a month of synergy as we walked through in this space recently. Intriguingly, the SPX hit a record high of 1813 on the last day of November tailing off to settle at 1805. As you know, 1812 is 360 degrees up from the October 9 low of 1646. It was hit in the window of the so-called Gann Death Zone, 49-to-55 days from low.

From the 666-667 SPX low in March 2009 to 1812-1813 is a range of 1146-1147 points. 1147 is straight across and opposite November 29 on the Square of 9 Wheel.

In addition, 667 is straight across and opposite the first week of December.

This is about as good as it gets when it comes to square outs.

Let's see if we can connect another dot to 1812. THREE revs down from 1812-1813 is 1338. This ties to the major November 2012 low of 1343.

Yesterday, we walked through how the RUT had satisfied a three rev advance.

In my experience, when a stock or an index hits a potential square following a sharp move and is rejected with authority, it underscores the notion of a turning point.

It is too early to say yet that this is playing out -- that the SPX has been rejected from a major high. The SPX has only declined 25 points off its high.

Nevertheless, the major indices have turned their weeklies down quickly, and yesterday, the SPX, RUT and DJIA all challenged their 20 DMAs for the first time since the big October 9 low. The normal expectation would be for a bounce, a rally attempt on the FIRST approach to the 20.

SPX Daily Chart from October with its 20 DMA:

RUT Daily Chart from October with its 20 DMA:

DJIA Daily Chart from Octoberwith its 20 DMA:

On Tuesday, the SPX tagged its 20 DMA and tailed up. The RUT fell shy of testing its 20 DMA while the DJIA undercut its 20 DMA.

Each of these indices is in the Plus-One/Minus-Two buy position. This is because the 3-Day Chart is pointing up and yesterday satisfied two consecutive lower lows in each of these indices. So, we will see if it's another Buy The Dip, or whether we have a change in character. If so, the first turnup (within a day or so) should define a pivot high and the market should falter.

Today and tomorrow, these indices look poised to attempt a turn up in their dailies.

Despite Tuesday's downside follow through, Apple (AAPL) and Tesla (TSLA) ripped dramatically higher. This underscores that you must trade a stock on its own technicals and pattern no matter what you think about the broad market.

At the open, we sent a note on TSLA. See here.

The large pre-opening gap had the whiff of a "hook." It smelled like a jam job…that the hook had been inserted on the shorts -- first with the 1-day undercut of our 119 square-out and then with Monday's retracement -- and that longs waiting for a graceful entry may have to chase. Typically when the hook is in, players are reeled up onto the deck screaming and kicking all the way into the bell.

I was hoping there would be a meaningful pullback for entry, but TSLA screeched right to 139, which is 180 degrees up from the recent 116 low.

10-min TSLA Chart:

Daily TSLA Chart:

Nu Skin Enterprises (NUS) is another example that whatever your opinion on the broad market and no matter how much "juice" you may think is in a stock on stilts, trade from the stocks own particular position.

And, never confuse you own position with your best interests.

10-min NUS Chart:

NUS is a good example of how an ORB at or near new all-time highs can identify an explosive move. In my experience, this pattern can play out in a sneaky way -- when the indices are under pressure. This occurs because many players become focused on those names that are exhibiting superior relative strength that day. Such was the case in NUS on Tuesday. It's relative strength begot more strength.

Conclusion: We covered half the IWM short near short-term support. Look for an intraday update as to reloading.
Position in IWM



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