Raging Bull?
- September 22, 2020
- / By Jeff Cooper
“I have squandered my resistance
For a pocket full of mumbles.” – Simon & Garfunkel, The Boxer
As walked through in yesterday’s report and as long time readers are familiar with, the behavior after the 3 Week Chart turns down is critical to observe to determine the intermediate Line of Least Resistance.
Following a turn down of the 3 Week Chart, last week, the NAZ plunged on Monday but reversed to close near session highs.
It is to yet be determined whether this is a knee-jerk reaction to the turn down in the 3 Week NAZ Chart or whether Monday saw a meaningful low — at least for a while.
That said, knowing that the 3 Week Chart had turned gave me the confidence to suspect an Opening Spike Low reversal in many of the liquid growth glamours may play out.
This is why I called an audible long swing on CRWD and FSLY long in the early going.
Ditto small cap FLGT at 35. It rallied 3 points after hours to 41 after being included in the small cap S&P 600.
It was telegraphing something all day.
Naturally, their own behavior was part and parcel of initiating long swings — FSLY was a Torpedo even while the averages were getting slammed.
It was a green bean in a sea of red before the open. Ditto CRWD shortly after the open.
It didn’t just grind higher, it was shot out of a cannon.
It seems there was an agenda by big money that was generated over the weekend to buy their favorite names into the hole.
The appetite to buy certain techs was also largely a Stay At Home play as news that Covid was ramping in Europe sent overseas stocks plummeting.
The “move off the mat” was so undeniable it was as if a boxer who was knocked to the canvas got up on the count of “three” — instead of waiting to the count of 9 to regain their composure.
A daily NAZ below shows Monday’s reversal from a new low for the move with the index closing at session highs leaving a large Bottoming Tail.
Whether this is a sign of strength or a contrary sign of FOMO where players won’t get accommodated for running in where angels fear to tread remains to be seen.
That said, yesterday’s bar left a Soup Nazi (Plus One) buy signal.
That’s a SIGNAL. It must be confirmed with FOLLOW THROUGH.
Of course, this is a game of inches and odds and if you wait for confirmation, such as yesterday, you missed the banana boat in names like CRWD and FSLY.
You puts up your money, youse take your chances.
To recap, a Soup Nazi buy signal occurs on a new 20 day low that reverses back up through the low of at least 4 days prior within the context of this 20 day look-back.
No soup for the “trend followers” (who follow new 20 day highs and lows) who shorted into the fray.
So Monday was a Soup Nazi buy signal PLUS ONE.
In other words, an idealized Soup buy setup would have played out on Friday on a reversal back up through the prior low — instead we got it on Monday.
A PLUS ONE Signal.
These are valid. The market is not a fine Swiss watch.
So follow through will be key… not just for 1 or 2 days.
A 1 to 2 day rally with two higher daily intraday highs will carve out another Minus One/Plus Two sell setup.
As well, the NAZ must contend with what looks like the Neckline of a Head & Shoulders top pattern.
This Neckline is just overhead.
Above that looms the 50 day line, which is just now rolling over.
So it is just too early to tell whether yesterday was muscle memory on the turndown of the 3 Week Chart or the real deal.
Even if it is the real deal, I suspect a pullback or test may play out into September 24 or so.
This is 180 degrees/days from the major March 23 low.
So there is some good symmetry on the table for a possible low to low cycle.
As well, the end of September 2018 was an important pivot low.
The end of September was an important high in 2018.
There is a strong likelihood that by the end of this week the market will have installed a nice low — or another pivot high.
It must be said that we could be in the Gann Danger Zone.
The high was September 2 in league with the September 3 high on the 90 year cycle from 1929.
The Danger Zone is 49 to 56 days from a high where a roll-over is in play.
This is the culmination of a possible waterfall decline.
This is when the crashes in October occurred in 1929 and 1987.
There are possible projections to the 10,000 and 9,300 region on the NAZ shown recently, so caution is warranted below Monday’s low.
As well, a sharp reversal from a backtest of the overhead 50 day line and the Neckline warrants caution.
Remember that the NAZ left a near Key Reversal Week from its record high in early Sept and has traced out a large range outside down month.
Additionally, it triggered an undeniable Rule of 4 Sell on a break of a well-defined rising trendline from May.
A bullish scenario presents if the NAZ should reclaim its 50 day line and in concert with the Head & Shoulders Neckline. This would put it in a position to offset the potential Right Shoulder around 11,300.
This also ties to the declining 20 day m.a.
IF the NAZ can do this, it would trigger my Blade Runner buy setup.
In other words, it would be offsetting what is currently presenting as a Right Shoulder.
A sustained push above this 11,300 region would be a bullish event as fast moves come from failed patterns.
The failed pattern would be a potentially bearish Head & Shoulders.
In sum, the market should telegraph its intentions by the end of this week.
Let’s allow it to tell its story without committing to much one way or the other and taking the nice sharp moves it is offering.
Pos FSLY, FLGT