Did the Market Just Throw Another Curveball?
The SPX pushed to 2755 on the runoff on Tuesday. which is just below the 2759 level 270 degrees up from the 2603 low for the move.
The market has been very straight forward of late in its technical action.
For example the 2603 low was 360 degrees down from the mid-October 2811 dual closing lows.
Additionally, the decline from the 2941 all-time high to 2603 low satisfied a perfect Measured Move of the drop into February 9th.
But Mr. Market doesn’t like to play nice for long.
So perhaps it was time for a curve ball.
The presumption was that the rally up into yesterday would define a pivot high with a pullback to a higher low above the late October low around 2650 to 2665.
Yesterday we showed an hourly SPX showing a little Head & Shoulders top formation with the projection to 2655.
I stated that clearing the right shoulder would trigger a Blade Runner buy with fast moves coming from false moves.
At the same clearing the reversal bar from Friday’s high would indicate higher.
It would have been sporting for Mr. Market to announce his intentions intraday by clearing those levels and winking higher intraday, but he doesn’t play nice for long.
Instead we get the gap up.
This implies that a 360 degree move up from low to 2811 is in the wheelhouse.
The problem with this is that we’ve been there and done that.
In other words, the reversal from 2811 gave the 360 degree decline to low.
It’s possible but I’m somewhat suspect of another 360 degree move that defines a high.
So that means we’re going higher than 2811 or it means we’re not getting there and this morning’s rally won’t last and that it will fade soon.
As flagged yesterday it would be fitting if a mirror image foldback of the Trump Thump from the 2016 election played out with an initial spike lower reversing .
The other curve ball Mr. Market threw is that November 5th setup to be a turning point because 2603 points to Nov 5 on the Square of 9 Wheel.
While it is always plus or minus a day or two,
My assumption was that the market was making a pivot high
That pivot high could still be today.
However, it is possible that Friday November 2nd (with the 5th being one trading day later) was the turning point.
On the above hourly SPX notice the pullback to the 50 hour m.a. which turned the 3 Hour Chart down for a nice combo short term buy setup.
So the structure has been nearly picture perfect for the last month. This move throws a bit of a monkey wrench into the wheelhouse, but it was time for a curve ball.
The question is does one good curve ball lead to another with a ‘slider’ playing out if the SPX can’t stick.
This morning’s open will satisfy a 50% retrace of the entire decline. So this is not a place to chase them—especially in an environment that has gone from buy the dip to sell the rip.
Moreover, remember there is no Follow Through Day on the table—yet.
A FTD occurs ideally on after the 3rd to 7th day off low on a greater than 1% move on expanding volume.
Interestingly, this is the 7th day off the low.
So this could be a very important inflection point if the gain sticks today.
We could get a FTD or the market could fail to deliver.
AAPL is the 1000 pound gorilla in the market and last week we offered that November 5th squares out with 198.
AAPL’s low on Monday was 198.
90 degrees up from 198 ties to 112 and the 50 hour moving average.
It will be fun to see where the market is if AAPL gets there.
Be that as it may, AAPL should be good for guidance here probably sets up as tradeable from the long side on intraday pullbacks as long as it holds higher lows between here and the prospect for 212.
That said we need to watch the hourly channel near 208-209.
The 50 hour moving average is a good swing trading tool—as it was on the hourly SPX above and should be on AAPL going forward.
On Monday we went an alert with TWLO near 70 that it looked buyable for a trade.
This is because it had pulled back to its 50 hour m.a. and an open gap.
I didn’t swing it because earning’s were due.
They hit last night and the stock was immediately magnetized to the upper rail of an hourly channel.
The market doesn’t always play nice. Yesterday TWLO knifed back through its 50 hour but it never violated the lower trend channel..
While Mr. Market likes to throw curve balls, combining the discipline straight forward moving averages with trend channels along with the Principle of Squares will put you in a position to take money out of the market.
Those three along with my Plus One/Minus Two Method are the cornerstone of how I made my fortune in stocks.
They have stood the test of time and I don’t jump in and until the market sets up according to my rules.
It’s called discipline.
Until the market actually proves itself there is little reason to get aggressive.
Going into October 29th I wrote an article Why the Market Is Set To Rally,
It threw a little curve ball with a late day swoon the next session.
This may be yet another curve ball from the bull pen.
Position in SPXS
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