The Principle of Squares, as revealed by the Square of 9 Wheel, is the most incredible trading tool I have ever seen.
This is because the market is not random. It is geometric.
Legendary market operator W D Gann was known to use astrology to call markets; however, he wrote that
“In markets, math is more important than astrology.”
He was referring to the geometry of the Principle of Squares.
It works because time and price are not linear; they progress in a logarithmic spiral.
For example, following the Key Reversal Day on October 13, I stated that there was a strong likelihood that the SPX would push to 3854 because that is 540 degrees up from the 3491 Oct 13 low of the year.
Gann wrote ad nauseam about “squares” and “square-outs”.
Nowhere do I recall him referring to cubes.
But a cube is a true square, a 3-dimensional square of 540 degrees (6 sides of 90 degrees angles).
The SPX challenged 3854 on October 25, a quick 10 trading days off the low which coincided with its overhead 50 day line.
This price “combo” elicited some backing and filling prior to a spike above the 50-day moving average.
At that time Hit and Run noted that clearing 3854 opened the door to the next 90-degree square higher which is 3908.
Mr. Market has a penchant for overshooting and undercutting clear-cut levels– the 50 day line and 3854.
Too many cooks watching the soup?
I call these overshoots and undercuts “Pinocchio’s”
Mr. Market likes to set traps for bulls and bears alike. He is an equal-opportunity trickster.
Consequently, the SPX spike above its 50-day moving average on October 28th t0 3905..42 defined a high.
The market likes to test.
The SPX fully satisfied the 3908 level on Tuesday hitting 3911, prior to what we said would be the red wave of selling on Fed Day like the elevator doors opening in The Shinning.
Additionally, we showed converging trend lines at 3900 intersecting around November 1st.
Net, net, the idea of The Pivot leaked to the street by Blackrock and JPM was misdirection.
Our position was that the roll-over targeted the low 3700 region.
In sum, Hit and Run was well-positioned for the Powell Plunge with QQQ puts and SQQQ which we rang the cash register on yesterday.
The SPX knifed back through the aforesaid 3854 “square” on Wednesday’s FOMC Cha Cha, closing at 3759.
3854 now becomes well-defined resistance.
However, yesterday on the Hit and Run Private Twitter Feed we noted that the SPX had turned its 3-Day Chart back down testing its 20-day moving average for a Holy Grail buy setup and carving out the potential for a squeeze play to the topside for today—an Option Expiration Pinball setup.
The overhead declining 50-day ma currently resides at 3813.
The SPX could push to that region in front of the election without changing the ultra-bearish structure of a 3rd of a 3rd of a 3rd wave to the downside.
Conclusion. For the first time this year, we are finally seeing panic via the put/call numbers.
As well, big cap bell-weathers such as MSFT broke its October lows and AAPL is giving up its post-earnings ramp.
Fear is breaking out.
But it may have more to go
We have another set of converging trend lines at the 4100 region intersecting around November 16.
This is 90 degrees/days from the important August 16th Secondary High.
At the same time November 16th is 180 degrees straight across and opposite 482 (4820, the all-time high) on the Square of 9 Wheel.
In other words, that means that August 16 was 90 degrees square the all-time high.
Pretty good hit.
My expectation is that mid-November will be a pretty good hit as well.
In fact, it ties to the 14th anniversary of the Lehman Crash.
7 years (less 90 degrees) after the Lehman Crash, the market tanked in AUGUST 2015.
Why the 7-year cycle? It is 360 weeks.
It is to be determined what occurs on this 7-year cycle as to whether the market is testing the 50% retrace of the 2020-2022 range successfully or whether it will flush this “fulcrum” and tip into full-blown panic mode.
That said, many stocks such as ROKU have already dropped more than 90% and are mirroring 1929-1932
Debacle in a year’s time.
ROKU’s Earning’s Reversal flagged on the Hit and Run Private Twitter Feed yesterday undercut its October low and stabbed higher triggering a Soup Nazi buy signal…ie, no soup for the bad news bears chasing new lows.
IF the SPX can convert/reclaim the 3854 square, the second mouse may get the cheese with a rally to 4100.
The alternative is a drop into mid-November’s Time/Price square-out where we will further fit together the pieces of Time & Price together.