The preliminaries are over; the lowest volume week in ages is behind us.
There’s a chance the next six weeks can define the next year. Realize we don’t have a crystal ball. Gann is not a crystal ball. Some people think market cycles are static, a nine-month cycle, 13-month, even a 39-month cycle. I’ve never seen these work. Why? Markets are not linear which is why economists get it wrong most of the time.
Markets respond either to specific Fibonacci or golden spiral windows (161, 261) or by a squaring of price and time. So it turns out as the holiday completes we welcome the month of September and with it the biggest time window I’ve seen in the 15 years I’ve been doing this work. If all windows have a margin of error of plus or minus 1, then the 987-month window starts as soon as the overnight session begins. It’s also 144 months off the 2002 bottom by Oct. 10.
We have one very interesting calculation to start this window. With a 2009 low of 1265.62, September starts in the Nasdaq with a percentage change reading of 261.89%.
This is rare but I’ve seen charts turn right at 161 and 261%. It’s early in time window season and this is a good early indication if we can get the turn right here or whether it lingers into October. So just as the young NFL season kicks off this week, the young cycle season kicks off right here with this golden spiral percentage change test.
As I said, we don’t have a crystal ball but from my experience we are likely to continue this rally into October. That being said, I realize September is the toughest month of the year. So what is the theme coming into September? There are a handful of stock market minds that grace our televisions every day. Last week Art Cashin was asked about his concerns for the market. What did he say? I’m not quoting because it’s too long but this is crux of what was said. He said he was concerned about the complacency that has created a condition where every pullback which comes as a result of a geopolitical event. His feels it’s possible that one of these events will be big enough we won’t be able to come back from it. Where else have you heard that? This has been the year of the geopolitical surprise. Nothing new, you read that here just about every week.
This week it appears the situation in the Ukraine is escalating with the EU putting out an ultimatum which has the feel of a state of war existing between Russia and the West. Don’t worry, the West isn’t sending troops in, there’s a precedent for this situation. Remember when the Nazis invaded Poland? From September 1939 into the spring of 1949 they had a condition known as ‘the phony war.’ The French sat in their World War I style trenches all winter with very few shots getting fired. There is also a NATO meeting this week where Mr. Obama seeks to put together a coalition of nations to fight the barbarian in the Middle East. Art Cashin isn’t that old but he must be a darn good student of market history to take this stuff as serious as he does. It’s a shame more people don’t.