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Phil D Gap And Keyser Soze Walk Into A Bar…

I had originally thought the rally off the October 13, 2022 low would top on May 17-19, 2023.

If you recall, we had been using a price square-out region of 4187.

As well May 17/19 squares 481/482, the all-time high (4118)

Additionally, as Gann said, anniversary dates are always important to pay attention to:

1)      May 17^th is the start of the NYSE in 1792.

2)      May 19^th was the pre-crash high in 2008.

When the SPX drove thru 4187 after mid-May, 2023,  it was talking.

The advance past May 17-19 perpetuated a push into June 16^th where the SPX left a signal reversal bar.

So from the March 13^th, 2023 low we got a 90 day/degree runup.

In the QQQ the move looks like a 90 day/degree blow-off reminiscent of the blow-offs into the late summer of 1929 and 1987.

They both started near the mid-May anniversary of the NYSE.

A daily from 2008 shows the crash from May 19^th into October 10^th.

Notice the initial low in mid-July…a time frame we think will see cycles exert significant downside influence this year.

Notice the mid-March low in 2008.

Sometimes cycles invert and then go back into sync.

Is it possible that this mid-July time period sees the start of a dramatic down draft?

We are 15 years from 2008. This is ¼ of Gann’s Master 60 Year Cycle or 90 degrees of the 60 year cycle.

Checking the above dailies shows the SPX closed slightly below the sharpest rising trendline (blue) on the Friday weekly closing basis last Friday.

This also ties to the rising 20 day moving average (blue).

Friday was an important day, not simply because of potential follow thru below this aforesaid trend line, but because

Friday the SPX rolled over after a move into Phil D Gap from Thursday’s gap down open.

Allow me to explain. Technically Phil D Gap is a move that completely closes a gap with a move into the close of the bar prior to the gap. However, a move well into the window of the gap satisfies the spirit of Phil D Gap.

As I often say, the market is not a fine Swiss watch.

Moreover, importantly, Friday’s late reversal from a strong rally most of the session means Keyser Soze is in the house.

Why? Thursday’s gap down saw an upside reversal as price tailed up to close near the open.

So Friday’s late selling  was a Reversal of a Reversal, a Keyser Soze sell signal.

A Phil D Gap and Keyser Soze “bar”.

In sum, downside follow-through below the slight break of the rising blue trend line and the 20 day moving average opens the door to a test of the rising red trend line and the 50 day moving average in the 4240 region. That’s 160 points below Friday’s close.

That does not stop the bull per se…except for one thing:

This 4240 region ties to the Breakaway Gap from June 2^nd.

Breakage below the June 2^nd gap suggests a Buying Climax played out into mid-June with a test failure of that 4448 high in late June. As Gann said, “two weeks on the side”.

It must be said that June 16^th issued a Gilligan Sell signal (a gap up to a new 60 day high with a close at/near session lows).

That high was tested with the SPX leaving a Bearish Island Reversal on Thursday.

Friday’s rally failure looks like a validation of this Island Reversal.

More downside follow-through today underscores the idea of a double top.

Let’s pull back the lens to see what the weeklies say.

One of the technical factors perpetuating the advance from mid-March is the Breakout & Backtest pattern.

As you can see the SPX broke out above a weekly declining trend line and rallied sharply following a test of that trend line.

However, now there is evidence that we are in the Danger Zone.

I connected the closing weekly low from June 2022 low and the fall 2022 low.

I then paralleled that line off the closing weekly low from late December 2021---the weekly all-time closing high.

The SPX has hit its head on the upper rail of this declining trend channel 3 out of the last 4 weeks.

Above I mentioned the significance Gann put on anniversary dates and the potential turning point this May.

The bottom line is there were many elements there for a top, but it did not trigger.

Setups are only setups. Follow-through is key.

Now we have more square-outs and anniversary dates in July which we’ve walked through in this space since the May breakout.

On May 18^th the SPX broke out and failed with a sharp 110 SPX point drop in 3 days; however, the 2^nd mouse got the cheese.

Now we have a 73 point drop in 3 days.

Is it real or Memorex?

The weekly bar is going to be very telling I think.

Why?

Two weeks ago the SPX carved out an outside up week. Trade below the low of two weeks ago (4328) this week or next, will be a weekly Reversal of a Reversal, a weekly Keyser Soze.

In addition, breakage below the open gap from June 2^nd at 4240 snaps the 50 day moving average and an important rising trend line.

Breakage below the 4240 region opens the door to the Maginot Line, the October 2022/March 2023 rising trend line which resides at 4060-4070 in July.

This is the setup for a 10% drop over the next month.

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