In an earlier commentary last month I was quoted as saying “There is an incredible herd mentality that the Fed will keep the pedal on the QE program etc. 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 Fed shook the complacency in the markets last week with the QE tapering indication which was taken as “more hawkish” than expected. The odds are that the Fed minions will be out in force this week to ‘jawbone” in hopes of calming the market reaction to the FOMC statement and the stumbling Bernanke who seems to be “choking” on his erratic economic forecasts and QE exit strategy.
The SPX finished -2.1% last week to 1592.43 after making a 1577.70 intraday low on Friday after it had taken out the daily chart 1598.23 swing point low [6/6/13], with the 50DEMA up at 1614.25 and 200DEMA down at 1521, which is the probable next zone before a bounce.
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 baring a deflationary disaster 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 all time low engineered by the Fed following the “Panic of 2008”. Last week the 10-Year yield went out at 2.514 versus 2.126 the previous week, and is the highest yield since August 2011 when the 10-Year was on its way down to the 1.394 July Pi 31.4 year cycle low. The increase in yields last week obviously rattled the Fed.
There was time symmetry for the SPX 1687 high [5/22/13] which was +153% from the 3/6/09 667 bear market low, in that it was a major angle [225 deg] from 667 as I highlighted on the Square of 9 Calculator in a previous commentary and also had Geometric Date time symmetry surrounding 5/22 at 5/20 and 5/24. I also highlighted with the Fib Time Ratio Calculator the 5/20/13 time symmetry which is the 1.5 Fib Extension of the previous two significant SPX tops at 1422.38 and 1474.51. The May time symmetry was also confirmed by the long term O/B condition.
The index has declined -6.5% so far from the 1687 extremely O/B measured high to the 1577.70 intraday low, and -4.6% from the 1654.19 Pi high on 6/18 to the same low on Friday. The Pi symmetry is that 6/18/13 is 51.6 MO`s [6 x 8.6] from the 3/6/09 667 low, and 6/23/13 is 1570 CD`s from the same 3/6/09 low, or 4.3 years [.50 x 8.6]. Think time zone, not specific date.
The Fed statement was the catalyst, but it never ceases to amaze me how often these catalysts happen in specific Pi time symmetry periods when confirmed by other O/B or O/S technical evidence.
You can’t predict markets with any high degree of success, or the duration and extent of a market move, but you can anticipate and pinpoint high probability reversal or acceleration price and time zones with a positive mathematical expectation of success. This is consistently possible utilizing primary tools such as Pi, Fibonacci, and Square Root relationships.