Life After The Autumnal Equinox.

The closing low for the Dow Jones Industrial Average (DJIA) this year was 6547 on March 9. On September 22, the autumnal equinox, the DJIA closed at 9830 -- which represents a 50% gain from the low -- and stalled out.

The S&P 500 hit a 50% gain off its March intraday low of 666 at 999 in early August. A 50% gain off its closing low of 677 equates to 1015, or approximately a Fibonacci 0.382 retrace of the entire bear market.

Did the market hold up until the DJIA could reach its 50% mark off the low -- until quarter end, until the Autumnal Equinox?

Markets seek equilibrium. The 50% Rule is powerful -- acting as a point of balance in the markets. For example, the decline in the S&P from its 2000 peak found its low precisely 50% off that high in 2002.

The S&P attempted to turn down after hitting its 50% mark off the low with a stall out in early August and a stab down on August 17. There was no follow-through.

This period coincided with the five-month retracement after the crash low in 1929. When the fear of that analogue was broken, prices headed higher. The DJIA had a date with destiny apparently.

Both the DJIA and the S&P had dates with their respective overhead 20-month moving averages. This week, both averages returned to the scene of the crime -- the gap down from October 2008. The market reversal from that gap was dramatic, underscoring that many factors converging at this one-year cycle may very well indicate the high for the year may be in.

In addition, a daily chart of the DJIA shows a “Pinocchio” just above the upper channel of resistance. Such overthrows and subsequent violent reversals often define significant turning points.

It's possible of course that the market is undergoing some shenanigans courtesy of mutual fund gamesmanship, and that following quarter end we'll turn back up.

However, do I think there's a better-than-average likelihood that any turn-up will be a retracement and snapback -- a test toward the high? It's possible that the DJIA and S&P will mimic the pullbacks in early August and then again at the beginning of September, but I doubt it. Why? Too many square outs, the calendar, and there are three drives to the top of a channel -- just as there were prior to the correction into July. That has been the only meaningful correction since the March low. At the very least, I think the market has scored an interim high and the ensuing correction should be on par with the sell-off into July. That was just under 10% on the S&P.

In addition to the three drives to a high, the current reaction is the third knife down in the DJIA and S&P. The market often plays out in threes. With the DJIA perched on a rising trend line just above its 20-day moving average going into the week end, it's do or die for the bull thesis.

Conclusion: With the S&P quickly tagging 90 degrees down from high at 1045, the normal expectation would be for a rally attempt. The key word is attempt. There's a good possibility that we're in a downdraft that breaks 1045 more quickly than the “buy every pullback thesis” is allowing for. The bears have learned to cover all support areas when there's no follow-through.

A weekly close below 1045 puts the market in a weak position. A break below the rising trend line on the DJIA from July suggests a test of the 50-day moving average which coincides with a test of the opening range of the year.

The Weekly Swing Chart on the S&P has not turned down yet. That should be the minimum projection before taking the market's temperature. Today that level is trading under 1035. If we get acceleration after the first hour to the downside, the weekly chart could turn down.

Yesterday's follow-through was the normal expectation after the up open: After large down days, especially prominent reversal days, you don't get a reversal back up with an up open -- you need a down open by definition to carve out an upside reversal in those instances.

At the same time, most stocks pretty much hit low after the first hour and went more or less sideways after the S&P tagged 1045. A down open on Friday's morning that holds a first half hour to hour low suggests an attempt to hold today.

I think the S&P could leave a Doji or topping tail on the monthly bar, trading back to the opening range of 1018. It will be interesting then to see if it rallies then like 1978 after the initial drop into October 8. The bottom line is that the end of the first week of October sets up as a turning point. It's 90 degrees from the July 8 low and the mother of all anniversaries: the 2002 low, the 2007 high, and the October 10, 2008, internal low.