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Quarter-End Agenda

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Editor's Note: The following is a free edition of Jeff Cooper's Daily Market Report. For a two-week FREE trial of his daily commentary and nightly day and swing trading picks, click here.

The runoff on Wednesday saw the S&P/SPY tail off into the bell, leaving the market up only marginally for the session.

It looks like the promise of a daily Plus One/Minus Two buy setup and a little inverse Head & Shoulders from Wednesday’s intraday have been thwarted given the crimson on the futes as I write this late Wednesday night.

See the 10-minute SPY for the week from this morning’s Daily Market Report here:

Technically, the question seems to be whether we will get a shakeout that pulls the rubber band back prior to a runup to test or slightly overthrow last week's highs into quarter end.

The answer to this question may be two-fold:

First, there is a lot of gamesmanship between the funds as to what stocks will be bought or sold promiscuously into quarter end in the name of performance. If one big fund pushes a stock higher to force others to chase it before pulling the plug and hitting bids without discretion, it can cause damage to the competition. The ‘instigator's’ fund can show relative outperformance for the quarter.

Second, while the bulls may be trying to wait for quarter end to sell, any piece of bad news could stampede the bulls out of the market.

The bulls will try to pay themselves handsomely with a quarter end markup, but it looks like today will be a trend day down with a possible miraculous comeback on Friday for the important weekly close.

That said, my thinking that last Thursday was a probable Bernanke Bounce Misdirection Day (which often occurs on the Thursday the week before quadruple option expiration on the rollout of the new futes), resulting in selling pressure throughout this week, is playing out.

Today, the market looks down for the count with options expiration going either way for Friday.

Backstopping the idea of a trend day to the downside is the fact that the dollar is down on a spike testing Quarterly Swing Chart lows and Gold (NYSE:GLD) and Silver (NYSE:SLV) are up on spikes.

See the daily Dollar Index chart from March with 200 dma:

The dollar stopped going down on Friday and the important 3 Day Chart has turned up this morning.

Pullbacks notwithstanding, the dollar looks like it has eyes for a backtest of its overhead 200 dma.

At the same time, SLV has reached our $34-34.50 projection, calling for a pullback which should correlate to some dollar strength.

See two recent charts on SLV from the Daily Market Report projecting $34-34.50:

(Note: The following chart is actually a weekly chart that was mistakeny labeled as a daily chart.)

Yesterday, we wrote a piece about the significance of the Autumnal Equinox.

1464-1465 is opposite September 20-21, where the S&P tailed off from yesterday.

In addition, as you know, the 1460-1468 range has been a primary outstanding projection for a while.

This window represents a 90-degree overthrow from last April’s 1422 top and a 90-degree overthrow from the key 1430 level which is 6 squares up from the 666 low.

Remember, the advance from the October 2002 low to the October 2007 top was precisely 6 squares or revolutions of 360 degrees.

Is it possible that since the secular bear market high in 2000, the S&P has carved out 2 massive corrective A & B waves of 6 squares each over the last 12 years?

Without making your head hurt or getting your eyes to glaze over, simply said, the above means time and price may have squared out and time may be up squaring the Autumnal Eclipse.

So we don’t want to underestimate any authoritative declines from here, especially one that offsets last Thursday’s lows. I think that would issue a Get Out Of Dodge Sell signal for a probable 10 to 20% correction over time.

The 2002 low to 2007 top was a 6-square advance in 60 months. We are now close to 60 months from the 2007 top and 120 months from the 2002 low.

In addition, we are close to 180 degrees from this years April 2 peak.

There is a lot of vibration here. This may be one of the biggest setups since the 2002 low or the 2007 high or the 2009 low.

Is it possible that the notion of a shakeout here with at least a drive back up into quarter end for a test is a psychological hook, a Bull Trap that fails to play out?
POSITION:  No positions in stocks mentioned.