Our March 14 (+ or -) Panic Cycle turned out to be a buying panic.
I’ve had the date on my radar for over a month, as you know, but I was thinking/hoping it would be a washout with a reversal — in other words, panicky selling followed by a dramatic reversal.
One could argue that the persistent day after day selling in former high flyers had become indiscriminant… but if so, it was indiscriminant but orderly.
The promise of a 90% down day with capitulation to new lows was short-circuited by a Soup Nazi buy setup in the Q’s and a Trap Door in the SPX.
Let’s take a look.
QQQ struck a new low on Monday, closing near session lows.
Follow through after our panic cycle would be key. There was none.
Instead, the Q’s knifed up through the prior swing low from Feb 24.
Backstopping the setup was the Time/Price square-out flagged yesterday.
The 317 QQQ low on March 14 was 90 degrees square March 14.
So we had a Time/Price square-out into our panic turning point date along with a Soup Nazi buy pattern triggered on Tuesday.
I gave too much leash to the idea that a downside panic could still play out despite the aforesaid evidence to the contrary.
In this case, too much leash was one day.
Instead of a selling panic, we got a buying panic.
Indeed, I thought the SPX was on a trajectory to the 4350 region flagged on Tuesday on the private Twitter feed.
But individual stocks had face-ripping rallies that dwarfed the 100 points in the SPX.
Chinese names led the take no prisoners squeeze.
BABA + 28
PDD + 16
JD +19
XPEV + 7
LI + 7
There are a lot of things Mr. Market can do, but it can’t sit up on a short squeeze spike.
VXX proved that with its Eiffel Tower this week from 27 to 41 and back down again.
The aforesaid names remind me of spinning plates that Mr. Market is trying to balance on a stick at the same time.
Throughout history, many of the largest daily gainers have played out in bear markets.
Be that as it may, yesterday’s FOMC Cha Cha (3 intraday reversals) seemed one “Cha” shy.
I recall in the past how sometimes the 3rd Cha carries over into the next trading day.
If so, that would indicate a drop from yesterday’s high.
Technically, yesterday’s whiplash wreaked havoc on the bullish structure.
An impulsive 5 wave decline from here below 4300 opens the door to a drop to new lows.
Allow me to explain.
On Monday, the SPX Pinocchioed the bottom of a rising trend line connecting the 2/24 and 3/8 lows — the bottom of a short term triangle.
The ensuing turn up triggered a Trap Door buy setup which took the SPX above the top of this triangle — a declining trend line connecting the 2/10 high and the 3/3 high.
The breakout of this triangle occurred at the 4300 level on Fed Day.
A drop back below this triangle will trigger a Triangle Pendulum sell signal — as fast moves come from false moves.
This would occur on sustained trade below 4300 over coming hours/days.
PM Miners
Interestingly, the Fed announced that they are likely to raise rates 6 more times this year.
This means they will be driving short-term interest rates up from zero to 1.75 percent in one year.
The last three times they raised rates aggressively — the late 1990s, from 2005 through 2007, and again from 2016 through 2018 — in all three cases it led to a stock market plunge, from which they reversed their policy quickly.
The late 1990s rate campaign led to the recession of 2000-2004. The next campaign led to the Great Recession.
The next one led to the crash in 2018.
This time, their aggressive plan in the face of a weakening economy is going to ultimately wreak havoc.
We have strong inflation and a weakening economy that will weaken more with the Fed’s “timing” equally stagflation.
Be that as it may, gold and precious metals had impressive price action on the heels of the Fed’s announcement on Wednesday.
GLD reversed to the topside after pulling back to test the breakout point in February.
This looks like it’s carving out a weekly Handle of a Cup & Handle pattern starting from the August 2020 peak.
This is within the context of a monthly Cup & Handle pattern starting from the August 2011 peak.
GLD left a large range reversal on Feb 24.
As offered at that time, when GLD cleared/offset the Feb 24 high, it would rip.
GLD’s 6 day pullback has tested the Feb 24 reversal.
Now, when it clears what the bears are hoping is an Island Top (March 8), it should see a fast move to the topside as the second mouse gets the cheese.
99.999% of traders have never even seen the Square of 9... let alone understand its potential.
Do you dare to be different?
99.999% of traders have never even seen the Square of 9... let alone understand its potential.
Do you dare to be different?