There were hints something like Friday might happen. September can be a grave yard to stocks. I was concerned when I saw the banks underperforming all summer. At the end of August things turned back up and through the first three weeks of the month, technical conditions were much improved. Still, we had that big equinox to deal with which is one of the most important trading sequences of the year as far as reversal potential go. But potential doesn’t necessarily become reality.
Coming into this period, even as banks and housing attempted to go lower, Copper was not following along. What that meant, even if we went lower, was the market was not unified in a way that it was back in 2008. I’ve told you all year we didn’t necessarily have to have a disaster in September and October. A regular old fashioned shake of the trees was good enough for me. As long as copper stayed up, it would be bullish for the stock market and the economy.
Coming into last week’s equinox, the NQ topped right in the 617th hour of the Lunar cycle for September. Well, that turned out to be exactly one day prior to the 180 Gann day that is the equinox. If that wasn’t enough on Thursday the NQ made an exact double top to the penny of that 617 hour window before it sold off late in the day. However, Thursday was equinox day +1 where it made the actual bottom and by Friday morning the pattern was off to the races.
How could that be?
What appears to be happening here is the bigger Autumnal Equinox has inverted, giving us a low instead of a high and the market appears ready to go higher. This was always one of the possibilities but a lower probability given the seasonal factor. Well, it’s been a strange year as the oil cycle inverted too. In a normal year, oil peaks in the heat of the summer driving season. This year we had a virtual crash.
It’s still early and there are several culprits, most notably the U.S. dollar which is in deep, deep trouble of going back to test the bottom. However, it’s finally at the lower end of the pitchfork and actually in a position where it could and really should bounce. But I think it missed Gann day on the equinox and any turn is likely to be less than what it could have been.
The story here is the bears have missed a gigantic opportunity and unless we had a blow off top on Friday which is not likely, this is a show of strength. Think about it, this is the end of September and we aren’t even setting up to make a big drop. The difficulty here is none of this will be apparent if the dollar reverses. It is still possible the equinox produced a high but two days off the exact timing window. However, in early Sunday night trading the NQ hit yet another new high and now the time window really is fading into the rear view mirror.
But I’ve been at these windows now for almost 12 years and what usually happens is if a window is going to give us some profound turn, a news event usually materializes at just the right time. Last week, we had none of that. At no time did we wake up to find the overnight futures down a bundle.
As you know, last week we put up a chart of the HGX which had dropped below the key mid line on the median channel. By Tuesday it retested and started falling away. On Friday it made a big recovery. So here’s what I really think is going on. By Monday or Tuesday by the latest we’ll know if we dodged a major bullet this year. If the market doesn’t start tanking now, it’s not tanking at all. If its not tanking at all, its doing what few think it can do, which is go higher. That’s right, last week’s window is very strong and markets have shown no real desire to go down, except for selected REITs. There is something going on with developers of office buildings, shopping centers and hotels. Many of those stocks gapped down last week. Representative of these names are stocks like ARE, BXP, SLG, TCO, AHT and others. Hundreds of others started down but on Friday recovered.
But it could’ve been a lot worse. So it’s the NDX that is already safely above Tuesday’s high with the SPX just barely above and the Russell 2000 not yet above it. The NDX is also a lot closer to the April high than any other index. You already know what that means. We have a rally led by technology with the banks not performing too badly but not taking a leadership role either. If you really start breaking down Wall Street, national and regional banks you’ll find they are all over the map. The NDX is likely to continue leading here and unless the banks really throw in the towel nothing really bad is going to happen. I previously told you I thought the high was in for the year. I have to tweak that a little because this new development has opened the door for the NDX to test and actually take out the April 26 high. We are going to reveal some new calculations in our Short Term Update on Tuesday night which tells us why this may happen. But the Range Squaring Time calculation that appeared in the August edition of this magazine which was on the SPX is still in force. I still think we’ve seen the high for the year in the SPX.
Summing all of this up, we have a split market and given the fact we survive Monday/Tuesday the overall picture is a larger degree trading range below April and above July for the foreseeable future. I still believe that banks and housing are leading up and down. The fact that tech continues to do well is very good but if banks get into trouble it will take the whole market down. I also think things are seasonal and if they don’t tank now, do you really think they’ll tank at Christmas time?
What we need to be watching very carefully this week is the U.S. dollar which is coming to an extreme point as far as the median lines go. I want to see how well it can bounce, if it can bounce at all. I also want to see how equities respond to any dollar bounce. We haven’t covered copper in this update. You’ve also seen my long-term copper chart in recent weeks. By Friday prices finally poked above a very long term parallel warning line. As amazing as it seems, the pattern had what it took to get there. Now it has to prove if it has what it takes to stay at these elevated levels.
Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.