When we last met, we just received word of another bad jobs number. As you know it was also the one year anniversary of the TARP event. Had a bad number come in on that infamous Friday the day the House of Representatives signed off on the $700 billion bailout the market might have tanked. If my memory serves me correctly the first and unsuccessful TARP vote was on Friday, Oct. 3, 2008 which was likely a day the jobs number came out. But I remember the NQ rallying into that vote and within an hour of the vote the ship sailed south. If the jobs number came out that morning it did not adversely affect the market.
As important as the monthly figures are, they pale in comparison to a once in a lifetime bailout of our financial system I’m sure you’ll agree.
Anyway, that was a 233-day window off the NDX top from 2007 which contributed to the acceleration. No such condition existed last week and this isn’t last year. Last week at this time, if there was ever a market on the edge, this was it. The initial shot across the bow took us to important support levels and it held. Last year, markets would have gapped down, stayed down and tacked on some more at the end. As I told you last week, that’s how you get days like Dow down 777. This time it appears that professional traders bought that gap down.
See, I’m not the only one who noticed the reaction to the bad jobs number. Last week was a week where traders celebrated the lack of a collapse by buying stocks. They bought across the board until prices got into the upper reaches of the trading range. To be sure, certain stocks traced out new highs but others didn’t. For my part, we had excellent calculations at the September 23rd high so I wanted to see if the overall market would continue south or go sideways.
It certainly wasn’t ready to go down. Now the question is will it go sideways?
First of all, don’t underestimate the power of anniversaries. CNBC incorrectly told you on Friday it was the two-year anniversary to the all time high in the Dow. Oh, it may have been to the CLOSING HIGH, but the all time high was Oct. 11. Since that was yesterday, Monday is the day we could see an impact. Where they were right was Friday was the seven-year anniversary to the old 2002 bear market bottom. But that bear market has turned out to be a baby cub compared to this mess. No wonder nobody brings it up anymore. But I will and the fact this period is an important anniversary to both technical events, it may be enough to stall markets this week.
Of course, we only have half of the equation. The other part is the greenback. Lately, for a couple of days anyway, the dollar and equities have been going in the same direction. I don’t expect that to last. Sentiment on the dollar is really negative, as negative as I’ve ever seen it. Back in June, the last time we had this exercise in seeing the dollar hit a low, it was only the Russian President calling for the world to work with a different reserve currency. Now you have that times four! It was reported last week a secret meeting between the Russians, Chinese, Japanese and French sat down with leaders of Gulf States to do their energy dealings in something other than the dollar.
I suppose the only thing that could be more negative is if they actually follow through on this threat. But it really isn’t such a threat anymore, is it? In my work, the dollar continuation chart starting bouncing on a very interesting price and time square. The move down was 15.38 in 154.5 trading days. That is nearly a 1-1 relationship when we manipulate the decimal point. If you really want to understand how this works, I strongly suggest you take a subscription to one of our newsletters. Anyway, that doesn’t necessarily put us at a bottom, but it could. The SOX maintained a 1-1 relationship for nearly three weeks before pulling back. But in a week from now, the dollar will be at the 161-day window off the March high. My line of thinking is we either bottom in that window or if this spike lasts all week and we somehow invert in the window, maybe our allies and creditors do follow through on their threat. There’s also a chance we just bottomed, but I’ll need technical confirmation of that, thank you very much. All I can tell you at this point are the readings we are getting on the Greenback look like something that is trying to bottom.
Where does that leave the stock market? This leg up has gone just about as far as its going to go if it intends to turn sideways. Here’s an updated NQ chart which shows you some incredible symmetry. When we include the overnight action you’ll see that last week’s low was 161 hours off the Sept. 23 high, Thursday’s high was 261 hours off the Sept. 23 high and Friday’s low was in the 610 hour window off the Sept. 3 low pivot. When we get turns such as these the higher probability outcome is a sideways market because markets seem to be validating every important window.
Other than the fact we reached the limit on upper testing, there is no clear indication and too many possibilities this week. Sometimes the crystal ball has 5% visibility; this is one of those times. But I am on record as looking for a sideways market. We’ll see.
We are less than three weeks from my webinar. By now I’m sure you’ve seen that full page ad in the October issue. It’s an honor as I said last week and not to be taken lightly. We are going to have good information. The title suggests we are unlocking secrets of the Russell. Some of you know I’ve been coming here for a couple of years now and sharing cycles you don’t see anywhere else. I’m best known for that 262-week top that ended the bull market back in 2007. I don’t know if it’s anything to celebrate, but I am on record as the guy who told you in April 2007 the fall would have a pivot that had the potential to be the MOST IMPORTANT of the entire decade. That was six months ahead of time. And you know the Dow topped right in that 262-week window.
Time has proven me right on that one. But a year ago I walked the Traders Expo floor looking for someone who remotely knew what was going on in the greenback last November. I’ve since shared that dollar chart with you in both of my Futures Panel discussions with Dan Collins, first in NY and then in Pasadena. Look at the above chart. Who else really shows you this kind of market symmetry on a regular basis? Maybe the question you should be asking is how many other people are even aware of this stuff? From walking that convention floor I can tell you not many. If for no other reason you should be signing up for the webinar on Oct. 28. The best part is you don’t have to leave the comfort of your living room.
These cycles present unique trading opportunities. If you know this stuff, you can have the courage of your convictions. Just this past month we used this methodology to pinpoint turns in both Nat Gas and Corn.
The concepts are simple, if you know what to look for. I’m going to be sharing this information using the Russell. If you trade the Russell, you don’t want to miss it. If you don’t, you might like it.