Welcome to 2011. It came roaring out of the chute with more important technical symmetries than most people realize. As far as our work is concerned, the hits we had were huge while there were a couple that didn’t fire off. To top things off, a couple of conditions materialized that could not have been predicted. One thing is for sure, it was one of the wildest and most interesting weeks I can ever remember.
First of all, let’s get to what didn’t work. The SPX initially attempted to validate a 666 day range off the 666 bottom on Monday and eventually during the week that high was taken out. It’s very significant and may be as significant as the fact the NDX hit a new post 2007 high. Come to think of it, the NDX has completely retraced the bear market. With apologies to the perma bears this is an incredibly bullish condition. Why? There is no more 262 week window to knock it down like we had the first time in 2007. Remember at the time I told you it was likely to be the most important pivot of the decade? Since its 2011, it’s a new decade. Now we can say the NDX is up 8 straight years. Sounds strange, doesn’t it? The bear market in technology ended on November 21, 2008 as far as I’m concerned and this week was the technical confirmation of it. I know we are light years from the Internet bubble top but I’m not going to wait until tech gets to 5000 to proclaim this a bull market.
The problem is other areas of the market are not even close to 2007 highs, let along April of 2010 highs. I don’t Gann ever considered such complex conditions. It’s possible we can have a bear and a bull right next to each other when we think of banking and technology. I know it hard to put your brain around that. But think about the 1970’s where the real bottom came around the turn of the year in 74-75. That was before the second oil spike, Jimmy Carter, stagflation, misery indexes or the Iran hostage crisis. So housing and banking could drag on and lag for years without setting new lows. We’ll only know in the fullness of time what happened. All I can tell you is remember the Russell webinar I did for this magazine where we discussed how the 2009 bottom came in on 4 of the best textbook formations you will ever see in the history of markets. Then we have the Dow/NDX 1108 connection which I’m going to discuss with Dan Collins in New York. That will be covered in my Gann article next month in this magazine. So I’m not going to cover it here. You are just going to have to get the magazine and come on out and see us in The Big Apple on President’s Day.
With a very strong bottom it’s no wonder we are at the high end of a range that is erasing at least some of the bad memories. We don’t go out and make predictions but what we do here is use cause and effect. We judge the strength of pivots and let nature take its course. Likewise, we also take notice of good symmetries being violated. The Dow and SPX still have that 262 week pivot working but the fact that any market could be above the 2007 highs is important and impressive.
That being said, we had 3 very important Gann relationships fire off this past week. The most important was in Gold and traders still don’t know what hit them. Our subscribers were prepared as I didn’t take off for the holidays. But we saw it coming. Not to be left out of the mix is a smaller Gann relationship in Crude Oil and a potentially very important one on the Corn chart. The Corn relationship was well hidden and I almost overlooked it. All of this is to be discussed at our break out session in New York City. If it sounds like I’m promoting the New York City event, I am. You don’t want to miss it because you’ll learn something that should change the way many of you look at financial markets. You can register right here: http://www.moneyshow.com/tradeshow/new_york/traders_Expo/workshop_details.asp?wid=737FDAA2785D43AAB8A1BA988530DDCC&scode=021493
So here’s what I can tell you. Let’s take the low on the BKX on November 29 to the high on January 6. The high is 54.23. From one date to the next it is exactly 5.428 weeks which rounds to 5.43. Just divide 38/7 and you’ll see. It’s incredibly close when we manipulate the decimal point. Given the fact its also 90 trading days off the August low and we can see why we have a change of direction. We still have our price and time readings on many indices so come kind of corrective activity is long overdue. But the 666 symmetry was taken out so there is still a good amount of underlying strength in the market.
I look to the commodity/reflation trade to take a break and see further corrective activity in charts like oil, cotton, copper and corn. They should make a bounce attempt this week but the magnitude of the readings suggests there is more in the cards. That means the US Dollar still has more in the tank as well.
But let’s revisit that banking calculation. It has perfect symmetry with the November 29 low. Now take the high in April at 58.81 and low at 42.70 and you get a range of 16.11. We are up 18 weeks and 128 calendar days so this is a smaller degree calculation which relates to the November low, not the August low. So whatever is materializing in the banks is not likely to be anything close to terminal. None of the symmetry between August and January works other than the 90 days. If the banks have something less than an absolute reversal based on the information we have now, the market isn’t in any danger of losing the bull. But it is testing the median channel from the summer.
But Gold is entirely different. I think it can bounce here but my readings don’t call for a bottom here. On Friday morning Gold took out a key median support line but recovered to close back above it. All I can tell you is that the Gold pattern is in its most vulnerable position in the entire 11 year bull market. Think about how this makes sense. If you have an equity market that is setting new highs and Gold Bugs are banking on the Armageddon type play, doesn’t it make sense that Gold would stop going up when markets are doing what they are doing? Make no mistake; we’ve all seen the predictions for Gold. The highest one I’ve seen is $5000 per ounce. It’s never going to be remotely close when times get and stay good. By any statistical analysis, times are substantially better than anytime in the past 2 years. We even saw a drop in the unemployment rate. But I do look for a market that can be all over the map this week. It appears to be a bifurcated market with banks taking a break and perhaps still more new highs to come in technology.
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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.