The Red Alert Time Zone
The SPX finished last week +2.0% to 1666.12 and has advanced 17 of the last 21 trading days [80.9%] from the 1556.03 low at the 50DEMA on 4/18/13. The “Fed Rules’ as it has been able to continue inflating the “bubble” despite the negative economic and fundamental misses/below expectations.
There is an incredible “herd mentality” that the Fed will keep the pedal on the QE program, which is the so-called “magic put” for the market. However, the herd mentality has been, and will be wrong again this time as the Fed is caught between a rock and a hard place to extricate itself from the artificial bubble it has created.
The 10 Year T-Note hit its all-time high yield in Sept 1981, and has most probably made its all-time low in July 2012 because that is a 31.4 year Pi Cycle [Pi =3.1416 x 10 = 31.4 years], so the odds certainly indicate that it is the low engineered by the Fed following the “Panic of 2008”.
The market is approaching very significant Pi symmetry measured from the 3/6/09 bear cycle 667 bottom in the 3rd week of June, and the other highly significant long term symmetry in the 1st week of August. It is significant to note that every key SPX market reversal during this secular bear market that began in 2000 has been made at Pi symmetry zones confirmed by other technical evidence such as momentum. Those of you that have read my “Markets Trade with Geometric Symmetry” know how to anticipate and calculate those dates, and if not you can go to www.geometricmarkets.com.
The current SPX bull cycle is 1531 calendar days old [4.19 years] and + 150%. It is extremely O/B as you can see on your monthly chart using a 5 RSI indicator, so with key Pi symmetry in the 3rd week of June, followed by significant longer term symmetry in the 1st week in August, the odds favor a major index significant decline. In addition to the time symmetry, the SPX is setting up in a highly vulnerable RST sell pattern once it took out the 1576 top.
There is nothing positive about the risk/reward of this market based on price and time symmetry, and it certainly is not “melting up” because of the economic and fiscal outlook, so longer-term holders are best to significantly lighten up if you haven`t already, and be thinking “sell risk assets-not buy risk assets”, as was so aptly said by Bill Gross of Pimco.
Take a picture of the angle of advance for this bull cycle within a secular bear market, because you will see a similar angle on the downside as the Fed flees and the “herd’ tramples each other on the way down (and you). The Fed is not going to ring the gong alerting you when the music stops, so have a plan on selling into this strength, and also some downside sell parameters and an allocation reduction plan.