The first round of time windows concludes today. So far we’ve had a very good correlation to the windows. Today concludes this bigger round for November. On a personal note, I’m very sensitive to anniversaries around this time of the year. Today is my 23rd wedding anniversary and since you know what day it is, our first wedding anniversary coincided with the 25th anniversary of the Kennedy assassination. That means we are 2 years away from number 50. But the stock market knows anniversaries as well and yesterday was the 2nd anniversary of the NDX bear market bottom. That date is very important because it was likely the single most important range squaring of time date of our generation.
It was 1108 weeks off the Dow top in 1987 while the Dow crash sequence from high to low was 1108 points. It’s possible the bear market even ended on this date 2 years ago. Before you email anyone reminding them March 2009 was lower, I know it was. That being said we look at tops and bottoms as processes, not singular events. Given that it’s the holiday, let’s get a little introspective over the past 2 years and be a little thankful the system didn’t melt down.
It was 2 years ago right now that the Dollar was in an incredible rally as the stock market was falling off the face of earth. I don’t need to remind you of that.
Click chart to enlarge
But you’ll remember in the same sequence a rumor was floated that the President-Elect was about to nominate Tim Geithner. The market bottomed and Dollar topped within a day or two. But I will remind of this chart because Lucas Wave International is still the only outpost in the world that has this chart. Briefly, the Dollar broke out from a triangle and topped at 163 hours and a 1.27 triangle extension which is taught in our products and services. Thanks for letting me remind you; after all it is my anniversary.
A lot has happened in 2 years. Mostly, we’ve been up in what Andrews would call a classic action reaction sequence as prices have come all the way up to pre crash levels in most cases. We had another excellent price and time square back in April that spawned this year’s selloff and even that was retraced. While we are on the subject of important price and time squares, the late August rally developed out of yet another such sequence. The Dow bear was 14198-6470, a span of 7728 points. At the end of August, markets like the Dow turned up in the 77-78 week mark off the 2009 bottom.
That’s the good. The not so good is a sentiment on Wall Street where they want to continue doing business as usual like nothing ever happened. Any and all attempts to reform the system have been met with stiff opposition. I’m not a politician so I won’t tell you how to think but I will remind you those who fail to learn from the mistakes of the past are doomed to repeat it. If you read this week’s Rolling Stone, our intrepid reporter Matt Taibbi is at it again, this time exposing the sequel to 2008 in the new foreclosure debacle. He describes the problem as being so huge that if we really wanted to shed some light on it we may very well find the whole system is really insolvent. That brings us to our discussion of the Dollar and the bond market. Stocks have been going up for the past 2 years but Americans haven’t been getting richer because it’s on the back of a weaker currency. Stocks are even at new highs but if you’ve noticed housing and banking have not confirmed the rally from July because they are not anywhere near close to the April highs. In fact they are much closer to the July pivot than the April pivot. Friends, that can’t be good.
The Dollar finally bounced but came off that high last week on a very good Gann dynamic level. At the same time the stock market came off a low. This low hit on the exact 161.8 week mark off the Dow/SPX top in 2007. It’s a shaky low and if it doesn’t hold could fall into the next 161.8 mark off the NDX top back in 2007 which kicks in the first week of December. After that, we are done with time windows for a while. But bears had a monumental opportunity to take prices down this year and failed to do it in the traditional seasonally weak September/October period. That’s probably why I don’t think this sell off is going to lead to any disasters, not this year.
But I did tell you last week I’m very concerned with the bond market. If the Fed is the only one expanding the balance sheet and long bond prices can’t get any footing what is likely to happen is a complete break down of prices. The only thing that can prevent that from happening is a stable Dollar as perhaps some of the outflows around the world will make their way back here. You know my take on the Dollar. The longer term pitchfork lines show support around 60 and as long as those lines hold we can avoid the absolute worst case scenario. If those lines ever break, then whatever Matt Taibbi is uncovering in a Jacksonville court room will be front page headlines in the New York Times. If those lines break I’m then looking for a hyperinflationary depression. On the long term chart, the Dollar has a top near 121. How many of you realize price and time square out at 121 months next summer?
How does all of this come together? After 2 years we know the government was able to back stop a Titanic like financial event and bring the country back to life. The patient has been stabilized but doesn’t get a clean bill of health. As you know my take these past 2 years is that I think the low will be retested at some point, but it could take years for it to happen. I think we survived for this year but it speaks nothing of next year. I think that whatever correction is materializing right now doesn’t have the right time to it and as we know in life, timing can be everything. Right now we have a wild sequence in terms of sentiment where in the last 2 weeks traders celebrated the idea of the President supporting Bush tax cuts and then in a short space almost came to despair as Ireland came to the brink of collapse. If it was going to happen, it would have happened last week. We were perfectly set up for it as Wednesday was the 161.8 mark off the top. We know the behavior of the bear only too well. In what was likely another world exclusive, we told you the Lehman BK coincided with trading day 233 off the Dow top and the TARP vote came on day 233 off the NASDAQ top. Both led to acceleration down which may have been a first in stock market history. So if we were going to accelerate down, the 161.8 point would have been it. Instead we woke up to headlines that Ireland was bailed out.
But we are not out of the woods because it was only 2 days later that traders once again celebrated the new GM IPO. If you are a bear you should get nervous when sentiment gets thick enough to think an entity like Ireland could fail. Bulls should get nervous when traders celebrate IPO events like GM. The fact both could happen within the same week suggests a very choppy market. The bottom line is I think we could remain in a choppy complex pattern for the next couple of weeks and then end up in a Santa Claus rally into the end of the year.
So what’s up for this week? There’s a good chance we just saw an A wave down off the high that completed with the 161.8 turn last week. We are likely in a complex B wave. In the NDX I’m looking at the low around November 11 which is 2145 to be the key polarity pivot for the week. It’s a short week with the chance for lighter volume the closer we get to turkey day. I think there’s a good chance for wild swings.
Click chart to enlarge
Our newsletters and training program teach people cutting edge pattern recognition methodologies. We’ve extended our latest sale on the newsletters. If you take a 6 month prepaid subscription, you get the 6th month free. If you take a prepaid annual subscription you get 2 months free. Pay for 10, get 12. Contact me at Fibonacciman@aol.com as this special is not available on the web site. You have to e-mail me before midnight Mountain Time.
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.