Tech talk: The Ides of August

July 31, 2009 07:00 PM

In August 2007, I noted here that equity index markets were close to a historic pivot. That column stated the end of September 2007 was the 260th week off the old bear market bottom. The market stretched a bit but did give us that all important turn on Oct. 11-12th, just two weeks later on week 262. These cycles line up once a decade and have the potential for historic turns. The bear market that materialized certainly proved those calculations to be right on the money.

There is nothing of the magnitude lining up, but August tends to provide interesting technical turning points. In this decade, the month of August has given us two. Perhaps the most important was the Aug. 13, 2004 turn, which ended an intermediate level correction in the equity indexes. The market turned up for good at that time. The other important pivot turned out to be in August of 2007 when the cycles inverted and gave us one last extension. But the first and second week of August will be the 261-262 week/five-year anniversary of that 2004 turn. Anniversaries of important turns are important to cycle work. W.D. Gann believed the most important trading day of the year is March 21. Many turns are influenced by this date. As it turns out, Aug. 12 is 144 calendar days from March 21. That could explain the Aug. 13, 2004 pivot event. This year the turn came slightly early to coincide with the anniversary of the old bear market on March 10, 2000.

Perhaps more important to the near-term picture is that Aug. 13-16 will be the 160-163rd calendar day window off the March 6 bottom in the SPX. But the NDX bottomed on March 9, one day shy of the nine-year anniversary of the original Nasdaq bubble bursting. What that means is the 160-163 day window extends out to Aug. 19 when we consider both charts.

What does this mean? As we go to press, the markets are moving sideways. If that pattern remains, the higher probability is a resolution during this window. If correcting or in rally mode, expect a turn in that time frame. When markets change direction inside time windows, take the turn seriously. It usually is not a head fake.

Jeff Greenblatt is the director of Lucas Wave Intl. He is the author of “Breakthrough Strategies for Predicting Any Market.” E-mail him at .

About the Author

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.