Gone for a week, didn't miss anything. Don't expect that to continue. The one thing you can expect from sleeping markets is a very interesting move once they wake up. This may be the week it happens. Coming into our cycles, we are now at 260 weeks off the March 2003 secondary low that really kicked off the bull market. What does that mean? Let's put aside current conditions and go over what can happen at a 260 bar of any trend. Keep in mind, I'm telling you what happens on time scales all the way down to a 5 min chart. We are dealing with universal principles, so what works on intraday charts works exactly the same way on larger time scales.
The easiest interpretation is an absolute top or bottom that leads to a reversal. We can spike or drop on a 260 bar and put in the second half of two bar reversal on 261. We can also do the same thing on bars 261-62. So there's a chance nothing happens this week. But nothing happened last week and I find it hard to believe that nothing happens two weeks in a row. What is more probable this week is we break out of the tug of war that we've been in for the past month.
While I'm talking about the past month, let me suggest that it is a whole month since we've seen the bottom. Remember our discussions about what we learned about the low from last August? That low created such oversold conditions that it took another two months to top. This time a month has passed and we've worked off part of the extreme soup kitchen sentiment that pervaded our thinking at the end of January. We finally did get some of that 'here we go again' sentiment on Friday. Once we get that 'here we go again' feeling, the leg has done its job.
What concerned me on Friday was that we started breaking important Fibonacci support areas in terms of price and time. As you know, the most recent leg up was from February 7-14. On Friday the NQ violated the 61% retracement level of that move. Not only that, we came to a point later in the day where we hit a cluster of 162-5 min bars down from Thursday at the same time we were also 55-15 min bars from the same high and 88-15 min bars off the low from Wednesday. Folks, that should have created a bigger reaction. But what happened was the bounce was muted, we retested that low and actually took it out by 1 NQ point before Gasparino inspired someone to push the buy button. The fact that we got the reaction is a good thing, I guess. The fact the excellent intraday cluster was taken out may not be.
What I'm trying to say is that in a healthy market, Friday's excellent intraday time cluster produces a very healthy bounce without the retest breaking it. The fact we did violate puts me on the alert for a head fake. Getting back to our cycle work, the problem with such a head fake is we may not get the payoff for up to three weeks. What I mean by that is if this is a bigger bear market and if it finally decides to elevate, we can finally see a technical trading bounce for weeks 260, 261 and 262 before this move fails. The only clue we would have of a failure is if we continue to rise on declining average volume. The cycles provide little comfort when we enter them where absolute lows or highs are not materializing.
If the weekly count provides no comfort, what about the daily count? We covered the fact that IBD gave you a follow through day which I doubted because it did not come in on one of our high probability wave rotation days. As you look at the price action off the bottom, you'll see we have not broken out on bars 7,8,13,17,18 or 21. Actually, this rotation looks more bearish than bullish. Why? Go to the high on February 1. You'll see we put in a bearish candle on the 9th bar (I ideally would prefer bar 8), but it was right on the open. That was the NASDAQ. On the NDX, that high was on bar 8 but the bearish candle on day 9 wasn't overwhelming. Thursday was 5 bars down the road and we were forming another bearish rotation until the last hour of the week.
Here we are, with a chart that looks slightly more bearish than bullish. The best analogy I can give you is back at the Super Bowl. The Giants were in the 2 minute drill driving for the winning score. However, at that moment the Patriots were leading. Who would you rather be? The team that is leading or the team that has momentum and could win? As we know now, the ref came very close to blowing the whistle when Eli was almost in the grasp. It took a catch for the ages by Tyree who somehow had enough super glue on his helmet to allow the Giants enough life to get that winning score. The point is, the bears had enough momentum leading into Friday's reversal to blow the market up but the bulls may have one more trick up their sleeve. We enter the new week 23 bars off the bottom and once again an opportunity to create that follow through day on the Fibonacci 23.6 derivative. What I'm saying is the bulls now are starting a new drive. The question is can they score? The rotation off the bottom is in their favor on MONDAY. The Charlie Gasparino event may be the miracle event that gives them life, but they still need that follow through day on the right bar.
Looking at various charts we've been following, it looks like it could happen. We've been following the $HGX housing sector which bottomed on an excellent price and time relationship back in early January. Last week, it held and retested 61% support before accelerating up into the close. Same for the banking sector. Citigroup may have come closer to 78% but it has been working on a healthy positive MACD divergence all week. On the tech side, the SOX seems to have put in the second higher high since the retest of the low on February 7.
To me, this looks like the bulls last chance. I'm not talking about the last chance for a new bull market. Forget that. This is the last chance for even a modest retest of the 62 day high to high cycle back on February 1. You may remember that any chance for a real technical bounce that could retest the upper end of the range first had to violate that 61 day cycle. We are a month down the road and it hasn't happened yet. Lets take that out before we can even think of any bullish aspirations.
This week I'm back in the saddle with the old format. Hopefully, it’s the last week. My web people are almost there. Stay in gear with the evening updates for any announcement. You can always find me at fibonacciman@aol.com.
