While some were saying that Tuesday’s reversal was just another one day reversal like June 9 and July 27, Daily Market Report readers knew differently. We knew that the Jackknife from the false move above the key 2482 level was the straw that broke the camel’s back.
While midday Thursday, some were saying to buy at the 50 day moving average, we knew that things were just getting started if the SPX violated the June high of 2454 with authority.
While some are quick to blame this on Trump’s words, we know that the news breaks with the cycles, not the other way around.
While some may see a correction as a gift to buy, I think this time IS different.
Tuesday’s rejection by the SPX from the highly significant 2482 level has been dramatic and emphatic.
Remember, fast moves come from false moves and Turnaround Tuesday’s reversal may go down in infamy.
It is pertinent that Tuesday’s reversal came after the SPX tagged a record intraday high of 2491 as this number is square the solar eclipse on August 21, and that the Tuesday itself was a lunar eclipse.
Moreover, I now realize that on my Square of 9 Wheel, 2491 is straight across and opposite November 21.
November 21 of course was the crash low in 2008 and the low around the world.
The March ’09 low was an undercut low of the Nov ’08 low.
We have already outlined where we think the market can go in the big picture, let’s drill down to the short term.
Yesterday the SPX left an Expansion Pivot/180 sell signal. A wide range one.
90 degrees down from the 2491 all time high is 2441. The index closed below that but only by 3 points.
Follow-through suggests 180 degrees down will be satisfied soon.
This ties to 2392 which is obviously below the Maginot Line of 2400 and the last swing high from March 1st of 2401.
Our daily SPX from yesterday showed the waterfall setup that is unfolding.
First, we thought a gap down yesterday would lead to a Gap & Go that tested the June high of 2454 and sent an alert before the open.
Because Wednesday looked like a Pause Day, a TNT signal (Thrust, Noise, Thrust).
Thursday proved to be explosive all right.
The momentum saw the 50 day and a rising trendline from the May low snap.
Presumptively, the SPX should be magnetized to 180 degrees down from high (2392) which indicates a test/undercut of the trendline from the late March lows.
270 degrees down from high indicates 2344.
This level resonates as it ties to the March low.
Note that the August 8 turn came 270 degrees from the election low.
This 9 month, 270 degree, interval is important as it ties to the natural human gestation period.
Said another way, the Trump presidency is giving birth here.
And, as you know August 21, is 7 months from the inauguration.
According to Gann, 7 is the number of panic.
49 squared is 2401, the Maginot Line.
Was the push by the SPX above 2401 a false breakout in and of itself?
360 degrees down from high ties to 2295 and an undercut of the March 2322 low.
Conclusion. The short volatility trade has been so large that this decline could feed on itself for weeks.
This would be confirmed by a break below 2400, especially on the important Friday weekly closing basis.
Whether that occurs or not, if we get another big sell day today, we’ll be dealing with the Thursday, Friday, Monday playbook from the 1987 crash.
The PPT is all too aware of this and every time it’s on the table, it seems they intervene.
Be that as it may, this exact scenario played out in August 2015.
The market got hit big on Thursday, August 20, 2015.
Another big down day played out on Friday, August 21.
That Monday, August 24 was the biggest one day point decline in history.
The SPX was down 103 points intraday.
It is interesting that this drop followed an outside down signal bar reversal week on the week of July 20, 2015.
The last outside down week on the SPX was the week of 9/5/16 which led to a 100 point SPX decline into the election.
This week the SPX will leave an outside down week from a record high.