Stock market gains face time windows, resistance hurdles

Fibonacci Forecaster

Stock market chart Stock market chart

The market is going up forever. It seems that way. Since this is our Super Bowl edition, I have a little analogy to share. Years ago, too many in fact, I lived in Miami during the days of the great Dolphins dynasty. That’s right, I went to the Orange Bowl when Griese, Kiick, Csonka and the rest were creating history that lasts to this day. Most of you know the Dolphins are the only modern team in NFL history to go unbeaten over an entire season. In fact, about the time they won their first game the next season, there was a famous headline in the Miami Herald that said: “What If the Dolphins Never Lose?” It was a humorous story based years in the future where the Dolphins won multiple championships, never losing a game. Just as humorous was an old Munsters episode where Herman was signed by the LA Dodgers but the problem was he hit the ball out of the stadium every time he had an at bat and got kicked out of the game.

Right now it seems unbelievable that anyone should ever be concerned that Miami would never lose again. In fact, shortly after that article came out, the Dolphins did lose a game but won the Super Bowl that year anyway. What does this have to do with us? It’s starting to feel like the market is never going to lose a game. All you hear on television is the market beating one resistance level after another. Goodness, we even have Bob Pisani talking about a secular bull market. Long time readers of this column know we first mentioned the word secular about a year and a half ago.

This week we hit an important time window. It will be 987 days off the bottom. That means the time window starts Tuesday. Are we going to peak? It’s possible, but we also have longer range calculations that could propel the SPX as high as 1564 and the Dow a couple hundred points beyond the all-time high. But it doesn’t necessarily have to be right now. We could get there but the time window is a possible stumbling block because it’s not likely the SPX gains another 50 points before the end of the week.

The other stumbling block is the U.S. dollar, which is now sitting at the bottom of a multi-week/month trading range. It’s testing lows going all the way back to September. This particular leg shows Fibonacci completion. If the dollar turns, the chances of a market pullback grow exponentially and then I can stop worrying about the hyper-inflationary scenario. It would be great if the dollar and equity markets could both go up at the same time, but that’s not likely to happen.

What was the most important item of the week? The market survived despite a lousy GDP at -0.1%. The market survived in spite of a slightly weaker jobs number. Our view here is that markets may pull back if the jobs number is really good because that will mean the economy is moving closer to its Fed target of 6.5% where they remove the sugar fix currently feeding this market. We didn’t get to test that hypothesis this month. I guess there’s always next time.

If nothing else, we have a resilient market that continues to push higher despite everything. The NASDAQ loses AAPL leadership? No problem. While it’s fresh, let’s take a quick look at AAPL. Since it broke down from its big time window low of 501 the next low is 435 which fulfills a major hypothesis we teach at Lucas Wave, which is when a pattern violates a very important time window it won’t just drop a little, it will violate it by a lot. It is already 13% lower. Right now it’s bouncing into 89 days off the high. It means we could have an inversion high by Tuesday after day 90 (Gann). What I find fascinating, and what we are starting to teach clients, is to look for relationships between corrective legs. Here the November and December legs are close (not perfect) to a 161/61 relationship. People are always wondering how to gauge the pullback/spike. This is one of the ways. In Apple’s case we could be close to another leg down because we have lower projections to just under 400.

For now, it really doesn’t matter to the market at large but for the sustainability it’s doubtful the market can stay up unless it gets new leadership. New leadership is just not likely to materialize in the same trend. After a correction new leadership is needed and the NASDAQ is the equivalent to a team playing without its starting QB. They can make a run for a while but longer term sustainability is just not likely.

apple, fibonacci

Finally, the EUR-USD has some serious Fibonacci resistance from about 1.3763 to about 1.3840. It’s starting to extend and get tired, leaving an upper tail on Friday. For the market to continue to 1564 now which is the longer projection it means the Dollar and EUR-USD have to break through important support and resistance right now. Is it going to do it? That’s the big question of this week. The trend is your friend until it isn’t so all I can tell you is the Euro relationship is a zone with 2 calculations and in the Fibonacci world if we get a validation at this level, because there is more than one relationship tied to it, chances are it will fire off.

So what do I think is going to happen? I’ll let the market decide but since this is a game of probabilities I’ll let the time window decide. But we are hitting a key timing point where at least part of the market has hit intermediate term targets. That’s all you can do, anyone that tells you otherwise isn’t honest because nobody has a crystal ball.

Next page: A wall of worry?

Comments
comments powered by Disqus