The Square of 9 chart demonstrated its power by identifying 1070 and this week. We had to get the big bounce, which always occurs if a time/price harmonic is legit and is going to exert its influence.
Click to enlarge
The S&P exploded following a test of the morning lows as it knifed back up through the key 1102/1103 level, noted in yesterday’s report. This level ties to October 4th. Once the S&P exceeded the late jack-knife from Monday, it rocketed into the bell, recapturing the 1121 bull/bear pivot. This is the 50% point between the 2009 low and the 2007 top.
There is probably better than a 50/50 chance we have seen a near-term low but any constructive pullback must hold 1103. A break of 1080 again would cause panic selling, sending the S&P down to 1018 or so with a shot at 973.
We have been zeroing in on a turning point date of October 7th for some time now, noting that it is always ‘the week of’ that counts. Just as the S&P missed a picture perfect tag of 1070, so too cycles are often plus or minus a day. The market is not a fine Swiss watch.
In addition, there has been a 67 trading day count vibrating off the 666/667 low in the S&P which has done a remarkable job of defining turns since the March 2009 bottom.
Interestingly, the low in early August this year was 66 weeks from the Flash Crash in early May 2010, while this week is 66 weeks from the early July 2010 low.
So there is another alternative here: the market could rally up for three days into October 7th, defining a high on Friday with another selloff. If that plays out , the nature of such a selloff will be critical to observe in regards to determining whether the low for the expected rally phase into year end is in or will come in near October 28th.
Remember that the market has not been able to go in the same direction for more than 3 days for a month. Thus a change in character will help determine the position of the market here as well. Once the Three Day Chart turns back up and the reactions are bullish, it will also help to determine the trend.
This week is 90 degrees in time from the important July 7th pivot high. These 90 degree increments often mark turning points. If yesterday did not mark a low for a sustained rally phase then there is a strong likelihood that the end of October, 180 degrees from this year's high at the end of April, will be a low. The end of October will be 666 trading days from the 666 low on March 6, 2009.
The March 2009 low was a Friday/Monday ‘workout’.
With October 10th being Monday and at/near the anniversary of the all-time bull market high in 2007, the bear market low in 2002, as well as the anniversary of the internal low in 2008, I can’t help but wonder if our October 7th turning point date will also see a Friday/Monday scenario play out. Will it be a successful test with 1103 holding?
If the S&P rallies up toward 1147/1150 into October 7th, it presents an interesting setup as that is 50% of the recent swing from the September 20th high of 1220.
Conclusion: It is easy to move the DJIA 300 points, as was seen in the last hour on Tuesday. Volatility is here to stay so don’t let huge moves color your thinking about the trend. Any market can rally 2 to 3 days without meaning anything, as seen in the last month. A Follow Through Day is required at least the 4th day to the 7th day from a low on a substantial increase in volume to indicate a change in trend.
Regardless of a rally phase that may play out into year end, the indication is that 2002 will see new lows.
The second year of the decennial cycle exerts downside pressure. There was a waterfall decline into July 2002 with a test/undercut in October 2002 (reminiscent of the spike up into July 2007 and the overthrow in October 2007). It may be that the mid-point of this summer’s action will mark a point from which the S&P falls 50% toward 580.
Trading Lesson
http://www.minyanville.com/businessmarkets/articles/jeffrey-cooper-technical-analysis-time-and/10/5/2011/id/37220?page=full
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