Be that as it may, last Friday's close (B) squeezed the sh*t out of the shorts, until it's oozing out from the ears!Even though it was only an inside day, it felt like another barn burner, didn't it? Wow! But, if the close could talks, Monday's open (C)swore a blue streak. How so? As anticipated, there was a better than average likelihood that given Thursday's large range reversal(A) or Lightening Rod (LROD, large range outside day down) that Friday was just a pause day(B), before continuation in the direction of Thursday's(A) thrust down.
The S&P was shouting and swearing for a short to be initiated on Monday morning. Why? Well, the daily swing chart turned down on Thursday's key reversal(A). When the daily swing chart turned back up on Monday morning(C) on trade above Friday's high(B), the market turned limp and rolled over. This is one of the best tools I know of for determining the trend on any time frame. If the daily trend was still powerfully up in runaway takeoff mode, the S&P would not have buckled on Monday(C) morning's turn up. If Thursday's reversal(A) from my 1576 pivot was in fact significant, a daily swing chart turn up on Monday(C) should have defined a high if a turning point was at hand. This is exactly what occurred. In fact not only did the turn up of the daily chart define a high but downside acceleration ensued! Hak!
If the trend were strongly up I suspect the S&P would not have continued to accelerate lower once the Weekly Swing Chart turned down on trade below last week's low of 1546.70.
As you know, Thursday's reversal occurred at an important level, a very important level. The 1576 high is a key six 'squares' of 360 degrees up from the bear market low of 768. Lai...!!Interestingly, rounding off the square root of that bear market low is 28 or the moon cycle of 28 days. The ancients told time by the moon or month while we use the sun.
In addition, 1576 was tagged in the vicinity of the anniversary of some important highs and lows such as the 2002 low, the 1989 low and the 1990 low. Could it be that the market has peaked on the week of the 20th anniversary of the 1987 low when counter-intuitively many, including myself, were expecting some kind of low in this time frame when selling erupted this past July?
Wouldn't it be ironic if a test failure was playing out in October just when the Street had sailed through the worst market month, September, a credit crisis, exploding oil and an imploding dollar, just when the majority on the Street were convinced that the worst was behind us, that we were out of the woods? Just askin'.
So, although it is certainly too early to say the bullet has hit the bone, two real bad-boys distribution days out of the last three sessions have occurred since the S&P hit 1576. Coincidence? Perhaps.
Unless the old levels, 1555/1556, is recaptured/reclaimed, I would be cautious about chasing the longside here as October has a nasty reputation as a cruel bad-boy and a penchant for busting parabolic piñatas!
Misty mountain top.mp3. http://www.40calgames.com/music/Led%20Zepplin%20-%20Misty%20mountain%20Top.mp3
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