“You will never be happy if you continue to search for what happiness consists of. You will never live if you are looking for the meaning of life.” – Albert Camus
You will never be a great trader if you insist on knowing why the market does what it does.
Speculation is observation, pure and experiential. Thinking isn’t necessary and often just gets us in trouble.
The market speaks to us through patterns. Patterns of accumulation and distribution. These patterns are like X Rays on the market’s intentions.
Since early last week, we’ve been remarking on a change in complexion of the market's price action.
From the typical bull action of early pullbacks where buyers chomp at the bit to buy, instead we’ve been getting early strength that has been clobbered.
To wit, Buy The Dip has metastasized into Sell The Rip.
This change in the market’s personality has led to an unusual occurrence:
Tuesday marked 7 consecutive lower daily lows. Not closes, but each day traded below the prior day’s low.
This is a rare bird. This is the first time this has occurred in 2021.
It is the first time it has occurred since February 2020 — right off all-time highs as well — and in the middle of a crash.
As master technician WD Gann stated, 7 is the number of time. Many turning points occur on the 7th day, week or month.
On February 28, 2020, following 7 consecutive lower daily lows, the SPX rebounded, albeit in Zig Zag whiplash fashion — one day sharply up, the next day sharply down, the next day sharply up.
Until… the wheels came off.
That’s the way Mr. Market rolls. He likes to go around the turns like Casey Jones shaking bullish and bearish passengers alike off their stance before continuing in his appointed rounds — with as few tourists as possible remaining on board.
I’m not sure when the last time prior to 2020 was when the SPX traced out 7 consecutive lower daily lows.
But I do know that the same thing happened right off the high in 1987 when the SPX saw 8 consecutive lower daily lows, breaking the 50 day line in the process on the 8th session before turning up the next day.
That was 34 years ago.
Interestingly, on my Square of 9 Wheel of Time & Price, the number 34 is square (90 degrees) September 22.
Red, 34
Blue, Sept 22
In other words, there is an harmonic this year between 1987 and September 22.
On September 22, 1987, the SPX had the largest POINT rally in history to that point in time.
It occurred after a second flush of the 50 day moving average, putting in a double bottom.
It was a nice looking double bottom… until a few weeks later when the market crashed.
This was around the time I came to the conclusion that price isn’t momentum, persistency is momentum.
That big one day rally in and of itself in late September 1987 meant nothing in the big scheme of things… especially when it was violated, leading quickly to the market being obliterated.
Late September was a Sell The Rip for the ages.
It’s when I came to the observation/realization that fast moves come from false moves.
What’s interesting is that this September 22/23 is straight across and opposition March 23, the crash low in 2020, eighteen months or 540 days/degrees prior. A critical time period.
So this year’s Autumnal Equinox sets up as a critical day.
Actually, the Autumnal Equinox has seen many historic turns in various markets throughout history.
On Tuesday, the SPX declined to just above its 50 day line, with today the 8th day in a possible string of lower lows.
In the midst of this decline, Hit & Run members have capitalized on several shorts such as ADPT, VMEO, MARA and FIVE.
Despite the market’s string of declines, we flagged longs in ZI and TASK.
Indeed, many glamours such as DUOL, DOCS, ASAN and ZS shrugged off Tuesday’s selling.
Whether this is a sign of a turn in the markets or unbridled complacency is to be determined.
Speaking of fast moves coming from false moves, the DJIA carved out an outside up day at its August 16 ATH.
The next session, it snapped the bottom of the outside up high day, continuing lower to test its 50 day line.
From there, a secondary high played out followed by a drop below the initial August 19 low.
The DJIA now presents as a pattern of lower highs and lower lows.
As well, it triggered a Rule of 4 Sell on Wednesday on breakage below a 3 point trend line from mid-June.
The earlier lows in this sequence were brief shake-outs below the DJIA 50 day moving average.
It will be important to observe whether the recent breach of the 50 will be another shake-out or if it’s a bearish change in character and the major trend.
