Tis the season, turn, turn…
Time window season comes to a close this week and then Christmas is in full bloom. Did the markets bottom early? We reach the 161.8 week marker to the NASDAQ top around December 6-8. Markets turned up last week in the 161 week window but several sessions prior to the meat on the bone. Given the fact we are so close to fresh highs there now exists the possibility prices can top as opposed to find a low as originally thought.
However, if we are higher still by the end of the week, we are likely going a lot higher. But the most interesting aspect of all this is how we came to this point. Most notably, markets refused to drop in the seasonally weak point of September and October. By far, that is the most important stock market story of the year. By late August, banks were leading to the downside and it looked like we were setting up for a repeat of 2008 all over again. But my take all along was even if markets sold off, to get another massive panic so close to the prior one has little precedent in stock market history. There was a panic in 1907 and that created a lot of technical damage to the charts as well as serious confidence issues with the banking system in this country. The situation was not very different than it was in 2007-08. But the damage was done and never repaired until the world was thrown into WWI. Consequently, I haven’t’ been looking for that kind of event even though I know there are segments of the technical community that was. In late August banks turned up and the market traced out one of the better rallies we’ve ever seen for this time of year. That being said, it was already a lower probability a panic could have materialized in November. It’s just not the season for it.
Last week I wrote here that I was looking for at least one more close call news event with Europe. I suppose you could say we had it on Monday. But markets exploded higher by Wednesday and maintained the gains by weeks end. All of which brings us to the most important news story of the week. We had the monthly jobs number event, or whatever you want to call it. I’m out west and the data comes out very early in the morning so I can wake up to it without going anywhere. I’m listening to one expert after another mention figures anywhere from +144,000 to +190,000 on the non farm payrolls number. Then it comes in at +39,000! Are you kidding me? We all know the true U rate is not 9.8%. We all know there are tens of thousands who are not even being counted at this point and as the economy improves gain the confidence to start looking again and will start being counted. That will keep the % rate higher for months if not years to come. But how is it these so called experts can be so far off the mark? I’ll let you draw your own conclusions on that one. So to say it was a lousy number is an absolute understatement.
But markets didn’t stay down. There was a spike in the futures for about an hour and they spent the rest of the day recovering. As you know, we look to time windows and news events just seem to materialize. The corollary to that is we aren’t as concerned about the news event but the reaction to it. If one day they catch Osama Bin Laden and the market doesn’t rally on the news I’d be real concerned. If there ever was a day where markets were looking for an excuse to drop, it was Friday. One of the reasons for the lack of follow through by the bears is the sudden weakness in the Greenback which seems to be manifesting due to underlying strength in the gold market.
Last week we had a sequence in gold where prices were up 61 points in 233 hours. That’s an average of .2618 points per hour. I’ve been doing this work a long time and when we get setups like that one of two things usually happens. The market that traces out that calculation usually reverses sharply or goes significantly higher. Why? It’s a strong pivot due to the excellent calculations. It would require a leg with exceptionally strong underlying strength to take it out. This pivot materialized at 1391, was strong enough to change the direction of the intraday pattern but instead of a reversal spiked straight up on Friday. By Friday night gold was trading at 1417. Keep in mind this calculation materialized on an hourly chart so I don’t expect a runaway bull for gold based on these numbers but we are already seeing the effects with higher gold prices, lower Greenback and a lower Greenback that is starting to break down.
So if gold goes higher and the Dollar goes lower that would mean the crisis in Europe has passed for now and the door is open for equities to stage that Santa Claus rally. On an intermediate scale we’ve already discussed in this space numerous times the time squaring the range aspect of the April 26th high. The fact we’ve taken out that high is fairly significant and if we follow along the same logic, we know the April 26th high is no ordinary pivot and since it was not repelled, this is the market opportunity to make the breakthrough. However, the last chance bears have to make an impact is with this final time window of the year. Thus far, its looking a lot more bullish than bearish as the SPX tests not only the April top but the 610 day top off the March bottom that it traced out last month. If 161.8 weeks can’t do it, I don’t know what can. Then you throw in the seasonal factor and this is one of the most bullish times of the year for the stock market. You have to ask yourself if it couldn’t go down in September and October, why would it drop now?
I’ll play devil’s advocate and say what is usually so obvious doesn’t happen. The Dollar is set up to retest areas just broken and by Sunday night had already reversed back up on a fairly decent reading. But that only insures a test, not a reversal. This will be a week where the major averages retest their November highs and as we know anything can happen. All I know is its late in the 4th quarter, the bears are trailing by a couple of points and they have the ball. If you are Miami, you know the QB threw an interception which allowed the other guys to win. Just because the bears have an opportunity to reverse their fortunes this week does it mean they will. But they have one chance to convert, their last chance. But if we are to judge their chances based on the reaction to the jobs number, their chances are starting to fade.Click charts to enlarge
Today is the last chance you have to take advantage of a discount in our training program for this year. The price will never be this low again because when the New Year comes; there will be a price increase. If you are distracted with the holiday, that’s fine. You can start after the holiday but you need to lock your discount in now.
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.