“Well I don’t know where they come from
But they sure do come.” – Cat Scratch Fever, Ted Nugent
The NAZ and SPX started the week with a gap higher.
A gap higher to kick off the start of a new week is nothing new in this rally—
The SPX has gapped higher to start every week except the last one in August.
Monday’s gap was somewhat different in that 90% of SPX stocks advanced on the day, which is stronger breadth than prior instances.
However, all measures of the market are contextual:
Strong breadth at the start of an advance signals a kick-off, whereas strong breadth at the end of an advance is a sign of buyer exhaustion, which leads to a rollover.
Given the near Key Reversal Week off the highs in which the NAZ saw one of the fastest 10% declines in history (if not THE fastest 10% decline in history) — three days, the likelihood is that the strong breadth this week was a sign of exhaustion, i.e., the buy the dip strategy is/was in full swing with the SPX/NAZ testing their 50 day moving averages for the first time since March.
This is to be expected.
The danger is if/when the presumed rollover comes, buyers of this “dip” will puke up their buys.
They will hit bids indiscriminately.
Of course, the market can do anything and dip-buyers could be right again.
Today is Fed Day. Friday is quadruple witching options expiration. September 22 is the Autumnal Equinox.
Volatility is in its element. It should be a fascinating FOMC Cha Cha Day, where a series of 3 whipsaws usually occurs.
As well, W.D. Gann wrote that the Autumnal Equinox was one of the most reliable turning points of the year.
I will write about this over the weekend for Monday’s report
Suffice to say that it is 180 degrees straight across and opposite the late March crash low.
March 21 is Gann’s “Zero Point,” the natural beginning of the year. As Gann wrote, if you can find the zero point, you can measure anything.
So in and of itself, this time period is of particular significance this year… and you always want to give this plus or minus a week.
The market is not a fine Swiss watch.
As well, NAZ breadth continues to deteriorate with the 10 day daily NAZ advances minus declines, now at its lowest since March. The 10 day moving average of NAZ advancing issues versus declining issues has slipped below its May low, which was an important trough in this measure of breadth.
In sum, the large range outside down near Key Reversal Week in the NAZ struck in league with the 100% Rule, i.e., the NAZ was up nearly 100% off its March low in 180 degrees of time prior to an historic reversal.
This is an important inflection point.
The market has done a good job this week getting traders to forget last week's carnage.
FOMO has poked its head out of last week's foxhole.
Spac fever reigns.
Retail call volume swamps share volume.
The SPX and NAZ are in the Minus One/Plus Two sell position: their respective 3 Day Charts are pointing down followed by two consecutive higher daily highs… as Jerry Day Trader takes center stage.
What does he do for an encore? Announce the Fed is going to buy stocks?