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Multiple Signals Going Into The Gann Cycle
September 6, 2013 09:14 AM
JEFF COOPER'S TECHNICAL ANALYSIS
This week is the second anniversary of the record high in gold. The gold ETF,
SPDR Gold Trust
), pivoted back up on September 3,
but "hooked" back down the following day.
Daily GLD Chart from August:
Although GLD ended up near session highs
, the damage had been done when a gap put a nail in the trade.
The pattern is a mirror image of the upside ‘hook’ on August 8 from what looked like a failure and the beginning of a new leg down a few days earlier. That hook started a powerful extension higher in gold.
Wednesday’s hook/failure resulted in Thursday’s large range decline in GLD, which threatens to test the key 130 level.
130 is the bottom of the lateral shelf that supported GLD from mid-April through mid-June prior to a waterfall decline once the shelf was broken.
Daily GLD Chart from April with its 50 DMA:
We identified the late June low as a selling climax in GLD, which targeted a window of 137-143. GLD satisfied the lower edge of that window going into the second anniversary of GLD's high.
A 50% retrace of the swing up from the low represents a test of the 50 DMA and a possible undercut of the 130 level to around 126.50.
GLD may hunt the stops near 130. The tricky thing for gold bulls here is whether a test of the 50 DMA is a bullish undercut/flush-out of weak hands or a bearish indication implying a fresh leg down.
The reason I mention this 2-year anniversary of gold of 720 degrees (72 degrees being 5 ‘waves’ of a 360 degree cycle or circle) in time from its high is that the
(INDEXSP:.INX) and other popular indices are verging on the 2-year anniversary of the big October 4, 2011 low.
That low was 1074. On the Square of 9 Chart, 1074 is 90 degrees square
, or the Autumnal Equinox. 1074 is straight down and opposite June 21 or the Summer Solstice. Both are considered potential "natural" and seasonal turning points.
We are 60 months from the Lehman crisis. So, October will be 61 months. On the Square of 9 Chart, 60 and 61 are due north on what is referred to as the Cardinal Cross and on the same vector as 1074 (the October 4, 2011 low). 60-61 are 90 degrees square the period from September 21 to October 4. Remember, this late September period ties to the outside edge of the Gann Panic Window counting from the August 2 high.
Click to enlarge
Will the days of late September and early October mark a low or a high? The Gann Panic Window is on the clock. This ties to a time frame of 49-56 days from the high, which in this case was August 2, 2013.
This was the analogue from the crashes in 1929 and 1987. Both crashes saw plumb line drops following vertical phases, which lasted around 90 calendar days. This year, we clearly had a vertical phase from late February to late May. The market plunged off its late May top, 1,000 S&P 500 points up from the low. However, it did not crash but rallied back for a test of the highs in late July and early August. From there, the market started down again.
I can’t help but wonder if the nominal new highs in August of around 20 S&P 500 points over the May S&P 500 high mirrors the roughly 20-point throw-over in October 2007 from that year’s primary July high.
Daily SPX Chart from May 2007 through October 2007:
The key to the market being suspect here is that the S&P 500 knifed back below its May high with authority. So, as long as lower highs are carved out during this period, technically, the market is vulnerable to a sharp decline.
, we enter into the window, but the market is not a fine Swiss watch, so caution is warranted right here.
So, we are in the crosshairs of a potential time pivot. What does price look like?
A daily S&P 500 from the high shows what looks like a text book setup for a bearish retrace and a rollover:
1) Going into this morning’s important NFP (the last one before the Fed delivers its sermon from Mount Taper later this month), the S&P 500 carved out an N/R 7 Day. This is the narrowest range in 7 trading days. These contractions are typically followed by an expansion of volatility. And, volatility is what the cycle doctor is potentially prescribing from here.
SPDR S&P 500 ETF Trust
) tagged its overhead 20 DMA
. In bear phases, a test of the 20 DMA often marks solid resistance, which is why many traders call it the Holy Grail. So, we have a possible Holy Grail sell setup as well.
3) Yesterday, the SPY also backtested a declining trendline off the highs.
Daily SPY Chart:
Yesterday, the SPY and the S&P 500 tailed off from a of its 20 DMA and a Gapfill from August 27. Gapfill occurred at 166. The SPY closed at 165.96.
The market is coiled for today’s NFP, which the Street believes will confirm whether or not the Fed is going to begin to taper this month. As my gnome says, the Fed has done a masterful job of convincing the vast majority on the Street that going from $85 billion a month in purchases to $70 or $75 billion is tightening.
It is remarkable when you think about it.
The market is coiled. Septaper is not the only news on the clock. The market is coiled in front of a "decision" on Syria. It is coiled for a fresh fight on the debt ceiling and a "decision" from policy makers in that regard as well. And, there are 6 Hindenburg Omens (potentially bearish) on the clock, which aren’t mentioned any longer.
The news breaks with the cycles. Yesterday, the important 3-Day Chart also turned back up. IF the market is in a weak position, the turn of the 3-Day Chart should define a high quickly, notwithstanding last ditch dramatics on a possible
There are several "reasons", technically and otherwise, that could tie to a market decline from here. Of course, if the market shrugs these off and if it’s not going down, it may go up, especially if it offsets the key 166 SPY level with authority. Importantly, 166 is opposite May 22, the prior peak, which aligns/vibrates off November 21, the crash low 5 years ago.
Click to enlarge
iShares Russell 2000 Index
) for 2 days shows a hard sell off on Thursday’s runoff.
10-min IWM Chart:
An early backtest of 102.40 that fizzles may be telling for Monday, September 9, which is straight across and opposite March 6 on the calendar (March 6 being the ’09 low). So there is some strong vibration here going into
The 10-year yield made a new high for the move yesterday and is flirting with a spike over 3% going into this potentially sensitive time frame. Often times, market dislocations are associated with spikes in yield. It is not necessarily the absolute level of the yield, but the trajectory and the velocity of where they’ve come from that can disintermediate markets. As Wayne Gretsky, says, “It’s not where the puck has been, but where it’s going.”
Form Reading Section:
Tableau Software (NYSE:DATA) Chart:
No positions in stocks mentioned.
SPDR GOLD TRUST
SQUARE OF 9 CHART
DAILY GLD CHART
GANN PANIC WINDOW
SPDR S&P 500 ETF TRUST
3 DAY CHART
ISHARES RUSSELL 2000 INDEX
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