Below is a daily SPX from Thursday’s report showing resistance.
The index blew through this resistance but in so doing tested “hidden resistance”.
An hourly SPX shows we tested a Tops Line connecting the July 23rd high and the August 1st high
On Thursday.
This potentially produces a third lower high.
Fast moves often occur from third lower highs (and third higher lows).
This possible hidden resistance also is revealed in the Square of 9 we posted yesterday.
Anchoring ‘0’ to the low day August 5th aligns with 554 (5540).
Both are also opposite 508 the SPY low pre-market on Monday, August 5th.
In other words, as is so often with The Wheel, time points to price and price points to time.
Having backtested this Tops Line, my expectation is a pullback.
90 degrees down is 5472 which ties to Phil D Gap from Thursday morning.
Interestingly, it also ties to the 20 HOUR moving average the 50 day moving average.
Yesterday’s Gap & Go was fueled technically by a gap over the 50 day line.
So a pullback into the open gap satisfies a 90 degree correction and a backtest of the 50 dma and gap fill. A nice Technical Trifecta.
A pullback to the 5472 region may satisfy a 4th wave in the advance from August 5th…leading to a final 5th wave to this same region struck on Thursday—or a tad higher.
Keep in mind that if 5 waves complete (or we get a 5th wave failure) the presumption is it is 5 waves of a B Wave.
Allow me to explain.
From my perch, the drop off the July record high looks like an A Wave.
The current rally would be a B Wave followed by a C Wave.
C Waves are like crash waves.
It should undercut the August 5th low…if that is the structure on the table.
180 degrees down from Thursday’s high…assuming we get a pullback from here—is 5398
A 180 degree pullback to 5398 ties to a test of the 50 hour moving average and the gap from August 13th.
5360 is currently where the Bottoms Line from August 5th resides along with the 50 hour ma and the August 13th gap…in case we get an undercut of the 180 degree square on a presumed pullback.
In sum, the story goes that $750 billion from the Fed is set to surge into markets.
In other words this rally is in anticipation of that.
Why would the Fed unleash that kind of liquidity cascade into markets if the Carry Crisis was over.
Because it’s not over.
I am told the Japanese have given our Central Bank the bird and are set to sell $400 billion in US bonds…half of what they have left.
They have ONLY sold $80 billion so far.
Why else is gold hitting new highs when all’s well?
Bottom line is if we get past the 28th trading day from high and are not going down, the likelihood of a crash into the first half of September is not the scenario.
That said:
WW 1 began 7/28/14= 49
WW2 began 9/1/39 = 49
Saturday is 8/17/24= 49
49 is a Panic Cycle …7 squared.
This rally has exceeded my expectations…and everyone elses.
I flagged the Flying Elvis surge pattern but did not give it its due.
Don’t mess with The King.
I believe this volatile market is setting up a classic Bull Trap, poised to catch bullish traders off-guard within the next day or two.