And the Winner of the Miss America Market Pageant Is…

And the Winner of the Miss America Market Pageant Is Miss TINA FOMO: Are We At the Most Important Turning Point Since October 3 and December 26?

Panic has permeated the tape again. Buying panic that mirrors the selling panic in December.

Of course, the rationalizations and extrapolations now abound as to why higher prices are a fait accompli as usual at this critical juncture (if this is what that is).

We know that prior to the Fed’s QT program that TINA, There Is No Alternative but to be in stocks, was the prettiest girl on Wall Street. Now it is revealed that her last name is FOMO, Fear Of Missing Out.

Just as FOLO, Fear Of Losing Out, had market participants paralyzed with panic in December,

Now FOMO, has the vast majority of players convinced much higher prices are around the corner.

At important turning points, it’s always “higher to buy” and “lower to sell”.

In early October few if any were looking for a 20% smash for Christmas.

Now few, if any, think new lows are possible.

I warned throughout September that a Red October would start a plunge.

In late December, I said when this thing turns “It will be The Hulk.”

I was looking for a doozy of a rally.

This has exceeded my expectations.

Despite the fact that throughout January, I outlined the premise for the possibility of a run to new highs to 3000, I clearly didn’t think we’d get this far this quickly.

Be that as it may, stocks are on stilts going into our idealized turning point of 2749 and February 13/14.

Let’s recap why this is an ideal turning point based on the Principle of Squares popularized by legendary trader W.D. Gann.

The market is not linear. The Principle of Squares holds that price progresses in a natural spiral of logarithmic values that can be measured using square-root functions.

Let’s take a look. It’s really very simple.

From the December 26 low at 2346 a 360 degree advance or one square of 360 degrees, is 2544.

Checking a daily SPX below shows that the index blew through 2543 and its 20 day moving average on January 7 perpetuating

a persistent run and potentially projecting to the next 360 degrees up which is 2749.

We’re there.

One can readily see this visually using a tool I have called a Square of 9 Wheel.

However; this is based on math and square roots as I mentioned before.

How do I arrive at these numbers?

The square root of the 2346 low is 48.43.

To find a complete 360 degree move, you add 2 to 48.43 and resquare which gives 2543.

To find a 720 degree move (2 full cycles or squares of 360 degrees) up from low you take the square-root of the

Low of 48.43 and add 4 and resquare. This gives 2748.9.

This would be enough in and of itself to expect a reaction; however, not only do we have a price ‘square-out’ at 2749.

But the advantage to having my physical Square of 9 Wheel is that it brings time into the equation.

Around a grid of numbers are the days of the year.

This enables us to see the interrelationship between Time & Price.

And, Time & Price are the Lennon & McCartney of the market.

There is nothing else.

The digital representation of the Square of 9 below does not extend out to a range of 2000.

My physical Wheel goes out to 4000.

What is important is that 2346 and 2749 align/vibrate off February 13/14.

So not only to we have a price balancing out or squaring out, but we have a time/price square-out right here today.

In Gann Methodology, time points to price and price points to time. They become one in the same at turning points creating a change in trend.

Not all square-outs are created equal.

While all major tops and bottoms are square-outs, not all square-outs are major tops or bottoms.

It takes price action to confirm the idea of a turning point.

Let’s look at the daily SPX again:

In addition to striking this 2749 region, the SPX is also probing its 200 day moving average, which is the bull/bear pivot for many technicians. The T Rex in the ointment of course is that if you waited for an all clear on trade above the 200 day to signal the Line of Least Resistance was up, you left a mountain of profit on the table.

Note the two prior instances the SPX challenged its 200 day moving average in early November and early December.

In both cases the SPX probed above the 200 day for a day or two and reversed with authority.

This begs the question: will the 3rd time be a charm for the bulls or the bears?

At the same time, the SPX is toying with its 200 day m.a. it is flirting with a declining trendline connecting the November/December peaks.

Most of you are probably familiar with legendary trader Jesse Livermore’s Line of Least Resistance concept.

On the above daily SPX, I connected the important October 29 low and the November low and extended it forward in time.

I call these ‘Live Angles’, the Line of Most Resistance.Note that the SPX is backtesting this line for the second time in 6 days. A Stab & Stick back below last weeks high (2639) with follow through will be the first sign that the aforesaid time/price square-out at 2949 this week is exerting its influence.

Yesterday, the SPX gapped up. Trade that offsets yesterday’s gap (trade below 2718) will be another indication that an important turning point is on the table.

Pos SPXS

Chart Reading

In Monday’s Nightly Stock Report we used SHOP as a short swing idea thinking it had a date with destiny to its 20 day moving average.

Indeed it did, but it gapped down to 163 without us.

This is a game of inches, price-wise and time-wise.

The short setup was based on Monday’s Gilligan sell signal.

This is a reversal strategy I created to define exhaustion moves and Buying Climaxes —at least in the near term.

A Gilligan sell occurs when a stock gaps up to a new 60 day high with a close at/near session lows.

This is what SHOP did on Monday.

Checking a 10 min shows the plunge on the runoff late Monday in front of earnings.

You think someone knew something perhaps?

Be that as it may, the Gilligan sell signal worked although I typically don’t like to assume the risk of the binary bet of earnings.

Additionally, the drop to test the 20 day moving average at 164 setup a beautiful long setup.

A test of the rising 20 day m.a. is what I call a Holy Grail buy setup.

As you can see SHOP rocketed off its 20 day launching pad closing at 175.