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Connecting 1937, 1962, 1987, and 2013
February 7, 2013 09:37 AM
JEFF COOPER TALKS TECHNICALS
The doctor wants to give me more injections
“What is this, a magic trick?”
-Hang Over 2
In the 4th quarter of last year, we walked through the convergence of the 25-year cycle, the 50-year cycle and the 75-year cycle.
25 years is 300 months.
75 years is 900 months.
The 300 and 900-month cycle are harmonics of the 600 month or Biblical 50-year cycle
The first week of March 1937 was a high following a long rally off the 1932 Depression low.
The economy remained in The Great Depression although there seemed to be a Great Disconnect between what the market was saying and how the economy was doing.
I suspect that for the vast majority of analysts and economists, the hope was that the economy would follow the market, that the market was pointing to and discounting a genuine recovery.
It was not.
If you connect the number of days from March 5, 1937 (which is 3 days and 0.40% of a point off the high) to the next 25-year cycle low on June 26, 1962, you get 9244 calendar days.
If you add 9244 calendar days to the June 1962 low you get October 17, 1987. Since October 17, 1987 fell on a Saturday, the next trading day was Monday, October 19 -- the largest crash in a generation.
I can hear you asking, what’s the point?
Well, if you take 9244 days and add it to October 17, 1987, it brings you to February 6, 2013.
Check out these
Dow Jones Industrial Average
) charts from 1937, 1962, and 1987:
Click to enlarge
Click to enlarge
Last week, I said there were more things pointing to a major turning point than my work had shown than at the tops in 2000 or 2007.
And I hadn’t drilled down to this precise day count of the 25-year cycle, which as the crow flies, was ‘due’ in the fall. Well the markets did genuflect from a September/October top.
Those of you Gann students who have purchased a Square of 9 Wheel are able to at a glance, glean the significance of 9244.
Dropping one digit in order to ‘work’ with the number gives 924/925.
925 aligns with February 17.
Click to enlarge
This ties to our mid-February idealized date to look for a change in trend as February 13 is 90 degrees from the November 16 , 2012 low.
In addition, counting from the primary crash low on November 21, 2008 to this idealized February 13, 2013 zone gives 1545 calendar days.
Yesterday, I showed a chart of the daily
(INDEXSP:.INX) chart and how an Inverse H&S pattern projected to 1553.
1555 of course was the high at the primary top in July 2007. It was followed by a drop to 1370 within a MONTH.
Can you imagine what market participants would be saying if the market dropped nearly 200 S&P points from here? Hoofy would be running around the floor with his hair on fire. Boo would kick back with a cognac and a cigar, licking his chops in anticipation of the massacre that was sure to follow.
However, they changed places by October. The market disconnected with the handwriting on the wall that was the crisis to come.
Such is the nature of timing.
Mr. Time is a funny guy. Funny, like a clown.
In keeping with the idea of a return rally and the Principle of Tests, the S&P ripped to a new high following the 200-point one-month smash.
Surely, the message of the market was that all was fine, that as we were told by the best and the brightest, that ‘all was contained’.
The ‘container’ kicked those who bought into that notion down the road.
So illusive time keeps pointing to a major turning point while the vast majority of the analysts and economists tell us that Sequestration is ‘contained’ and that the Debt Ceiling Debate is ‘contained’.
Surely, the market is discounting that idea. Right?
Just like in 1937, when the belief was that the economy was strong enough to get some fiscal tightening.
Can you say ‘austerity’, higher taxes, and Obamacare in one breath?
Recently, we noted how the 13-year cycle (roughly ½ of the 25 year cycle) found a high in early February. (We are 13 years from the 2000 top just as the 2000 top was 13 years from the February 1994 top).
Is it possible that the market sees a multi-day shakeout from here and a fling back up around mid-February toward 1550-ish, satisfying the Inverse H&S and a big square-out from the November 2008 low?
Interestingly, April is the 49th month from the March 2009 low. This 7th squared, or 49th month could define a panicky plunge as 7 is the number of panic.
Checking a monthly S&P from 2002 shows the 49-55 Gann Zone and how it has played out in months.
Note how the topping pattern in 2007 looks like a possible fractal of the current pattern.
So the question is whether the sharp drop last fall from 1474 to 1343 ties to the July-August decline in 2007, and whether the current rally is an return rally with an nominal overthrow which will prove to be a test failure like October 2007.
Editor's Note: This article 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,
No positions in stocks mentioned.
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