Pause Day Or Turning Point?
- April 3, 2019
- / Jeff Cooper No Ads
- / By Jeff Cooper
Yesterday the SPX put in an indecision bar. It was either a consolidation/ Pause Day following Monday’s strength or a turning point.
Tuesday was an NR 7 Day as well, the narrowest range in 7 days. These contractions in volatility typically see an expansion in volatility within a few days.
This morning the market is set to expand to the topside in the direction of the Line of Least Resistance and in the direction of Monday’s upthrust.
Interestingly into our early April turning point, the SPX high was precisely the level of the January 26th, 2018 blow-out top.
Monday’s start to the new quarter was a large range/high tick day. Sometimes these represent exhaustion as shown on the chart above.
So, it’s interesting the index is flirting with the January 2018 primary peak.
Arguably the market has been in a 14 month topping phase—the SPX is where it was 14 months ago.
Today is April 3rd which is 180 degrees opposite the October 3rd pivot where a waterfall decline started.
The above chart shows that decline started when the Line of Least Resistance was broken.
Currently the Line of Least Resistance ties to around 2830.
A pullback toward 2830ish could install a 3 point trendline with one more push higher.
However, if the SPX is able to continue decisively through this region then the likelihood is for new all time highs to be seen.
The NDX finally peeked above its March 21st swing high. So now the market is in gear for the Soup Nazi reversal here …IF one is on the table.
It would be interesting indeed if such a signal came from an Up Opening Reversal today….being 180 degrees opposite October 3rd and at the same level as the big January 2018 top.
But this is calculated conjecture until the final arbiter, price, says so.
Conclusion: We still need to see a break of 2830 ish to provide an indication of a top. The reason to be concerned about identifying a top is because there are reasons why a top here will not lead to a garden variety pullback:
Recently we mapped the potential for either a vicious C wave decline or even a 3rd wave decline.
In either event both point to declines to below the December low.
Even a bullish correction points to risk to the low 2600’s on the SPX.
Remember the chart we used the other day showing the slope of this advance was steeper than that of the leg up from September 2017 through January 2018. Remember that January 2018 registered the highest RSI in history.
So that says a lot about the trajectory of this advance….and the risks it poses when it exhausts.
In January I noted that even a B wave rally may make a higher high to just above 3000.
I have also said that the rally has to be strong enough and high enough to make everyone certain that there is no way this is a B wave.
Mr. Market has done a wonderful job as there is simply no one really looking for a trip to 2200 ish SPX … at this time.
Mr. Market has done a superb job of convincing everyone that the rarest of birds, a V Bottom, is not in danger of being extinct.
Chart Reading:
The above chart walks through GH action using out Hit & Run strategies/patterns.
GH is a good example of Moving Average Pinball. Once it broke its 20 day m.a. and failed on a backtest of that m.a., it plunged to its 50 day line and we bought there in the hole on Tuesday morning.
This was a calculated setup because 67 is 360 degrees down from the 106.58 all time high with a 90 degree undercut equating to 61.50.
GH turned from a low of 61.69 on Tuesday.
I never cease to be amazed at the power of the Square of 9.
99.999% of traders have never even seen the Square of 9... let alone understand its potential.
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99.999% of traders have never even seen the Square of 9... let alone understand its potential.
Do you dare to be different?