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The Two Bearded Ones

Dec 16, 2013 9:08 am Print Print

You know there's no rhyme or reason for the way you turned out to be.
Haim, "The Wire"

This week will be the last active trading week of the year with Xmas being next week.

This week will be Ben's last meeting as head of the Fed.

What will the Two Bearded Ones gift us with going into what looks like the threshold month of January.

There are a few reasons January looks significant.

On January 11,1973, the DJIA topped at 1051. The strength into the record breakout, which proved to be a false new high, began from an early October 1972 low. The January 11, 1973 peak preceded a vicious bear market of 2 years which saw a 50% decline.

The last-ditch run from October 1972 to January 1973 was 90 degrees in time and around 13%.

There was an initial pivot high in early December at 1036 followed by a quick pullback to 1000 DJIA in mid-December with a last-ditch run to 1051 by January 11, 1973.

So the last fling from mid-December was around 5%.

Is the present market mirroring the false strength in late 1972?

On Thursday and Friday, the SPX tested just shy of satisfying a 90 degree decline from 1812-1813. A 90-degree decline from the high ties to 1770. Thursday's low was 1772.28. Close enough for government work?

The first week of January 2014 will be 90 degrees from the October 9, 2013 pivot low at 1646. From that 1646 low, the SPX has run up 10% to our 1812 square-out, close to the 13% rally into the big January 1973 top. In addition, from 1646 to 1812 is a complete rev of 360 degrees in price, or 1 full square or price cycle.

We're in the Wheelhouse. Will a further 3% rally (emulating the 13% advance to the final high in 1973) over 1812 play out into early January? The market is not a fine Swiss watch, but if perfect symmetry played out, it would tie to around 1867.

But, remember, time is more important than price. And, early-to-mid-January sets up significantly in time.

The major November 2012 SPX low was 1346. 1346 aligns and vectors January 6. This is straight across and opposite a price of 1576 on the Square of 9 Wheel. 1576 was a major high and as such is considered a Master Square or master vibration. Since 1576 is opposite the first week of January, it aligns to the first week of July (the first week of July is 180 degrees from the first week of January). The first week of July is also a major vibration since it was the crash low in 1932, never to be seen again, following the 1929 peak. Could the market move up and hold up into January 6 or so squaring the 1346 low? Remember that time points to price and price points to time at major turns.

IF last week's low WAS a good pivot low and momentum shows up this week it is intriguing that January 6, 2014 is 1872 days from the November 21, 2008 primary low (the crash low). I'll believe it when I see it.

For now, it looks like the SPX has satisfied "something" at 1812, followed by a confirming Key Reversal Week last week. Something that I have heard no mention of.

Weekly SPX Chart:



The RUT is in the weekly Plus-One/Minus-Two buy position and perched on a major weekly trendline from the October 2011 low.

Weekly RUT Chart:



If the market is going to rally, it should do so from here. Alternatively, a break of this major 3-point weekly trendline looms large in early 2014.

In addition, the VIX is carving out higher highs and higher lows since November 15 suggesting an expansion of volatility in 2014.

Daily VIX Chart from November to Present:



Interestingly, from the major March 6, 2009 low to January 6, 2014 is 1767 days. This ties to 90 degrees down in price from the recent 1812-1823 peak. So, it looks like a break with authority of 1770 -- especially if a new high has not been carved out between here and early January -- would send a bearish signal.

January seems pivotal. As a friend pinged me last week, January is 314 months from the October 1987 crash -- 314 as in pi, as in a circle. The number pi is a mathematical constant that is the ratio of a circle's circumference to its diameter.


Click to enlarge

While the market may hold up into early January, I think if new highs are in the cards for early January, it will have to emanate from momentum this week.

For the time being, 1812 was a key level for the reasons noted above. In addition, don't forget that the range of points from SPX 666 to the recent 1812-1813 high (1146 points) is precisely opposite November 29, the record high day so far. So, we have a square out of the range of the last nearly 5 years at the end of November and 1812. 1812 – 1146 = 666 with 1146 being straight across and opposite November 29.

There are several analogues going around that show how the path of the last 2 years has mirrored the last two-year advance into the September 1929 top or how the last 5 years has mirrored the advance into the August 1987 top. Of course, these analogues have been circulating, like bad money, for a while now. That doesn't mean the analogues are counterfeit. Plus or minus a few months or weeks or a few percentage points does not make a big picture analogy bogus.

It seems only fitting that Mr. Market would shrug these comparisons off -- at least early on.

It is intriguing that 2014 is 27 years from 1987. On the Square of 9 Wheel, 27 is 90 degrees square a date of January 9-11. January does look like a rendezvous with destiny from where I sit.


Click to enlarge

The new year will be the eighty-fifth year from 1929. On the Square of 9 Wheel, 85 is 90 degrees square January 3.


Click to enlarge

Maybe something, may be nothing. But I can't help wonder if the market isn't running on empty, like December 2007, coming down to the wire.
No positions in stocks mentioned.

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