Time Takes Precedence Over Price
Kevin Haggerty is a full-time
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The SPX advanced 6 straight days into the Monday
1539.18 close, and was short-term overbought (6/4 commentary). The rally was 55
days old on Friday (6/1), which is the current 1540.56 cycle high, so I don’t
think anyone is surprised at a reversal in price action. The SPX was +0.2% on
Monday, and the other major indexes were up as well, but all the primary sectors
were red, except energy and the RTH, due primarily to WMT. This negative
divergence to the indexes obviously carried over into yesterday’s market action.
The rise to SPX new highs over the last 5-6 weeks has been led by a much smaller
universe of stocks, and a significant decline in the new high average for this
period. I have posted the similarities several times before on the analogy of
the 1987 pattern and this current market. This week will match the final bubble
move in trading days before the 1987 top.
This week has a couple of Fib/Gann time dates,
but next week ending 6/15/07 is more significant, as it is week 377 (Fib) from
the 3/24/00 top. You remember that into the last significant SPX high (1461.57)
preceding a -6.7% decline, it was weeks 360 (Gann) and 361 (square of 9) from
the 3/24/00 high. Time plays a more significant role in cycles than does price.
Next week will also have a time milestone, for the length of a 4-year cycle low
sequence since the 1949-1953 cycle. 6/14 is calendar day 1708 from the 10/10/02
last 4-year cycle low, which surpasses the 1707 days between 10/22/57-6/25/62.
The longest 4-year cycle over this 58-year period is the 1898 days from
8/9/82-10/20/87. The current bull cycle had already become the longest time
between bull cycle tops when it exceeded 2463 days (11/26/80-8/25/87), and is
now 2629 days old as of yesterday. This current bull market has exceeded most
all of the probabilities in time, "so I guess that must be President Bush’s
fault also."
NYSE volume was 1.5 billion shares yesterday,
with the volume ratio negative at 23 and breadth -1763. All primary sectors were
red, and the TLT made new lows at 85.44 and closed there (see 6/4 commentary and
TLT chart). The discount opening in the major indexes yesterday set up some 1st
Hour reversal strategies, with the most extended being the DIA to the -1.0
Volatility Band zone and 480 ema. After two small profitable contra moves, the
DIA made new intraday lows along with the other major indexes. The DIA then set
up again for a long reversal at the 816 ema and -1.5 Volatility Band 135.42,
versus the 135.43 low. The rally was to 135.98, and it closed there. There were
also some RST long trade setups from the energy sector into the noon hour. This
sector never disappoints daytraders.
At 8 AM ET, the SPX futures are -7.5 points, so
if that holds, the 816 ema at 1525 (5-min chart) is in play, in addition to the
Fib retracement levels to 1505.18, the last significant low, and also the
Volatility Band levels for today (see free trial Trading Service). Based on the
probabilities already exceeded in this market cycle, how can we not expect the
1552.87 3/24/00 bull cycle high to get taken out before any significant market
decline.
Have a good trading
day,
Kevin Haggerty
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