Como se combate o populismo? "Com eleições", responde Fukuyama

[Ulisses Pereira]

"S&P Could Be Getting a Leg Down"

By Jeff Cooper
Street Insight Contributor
10/18/2005 7:04 AM EDT


"As if on cue, the market has rallied into Monday's lunar eclipse.

In recent columns we have mentioned the likelihood that if a rally were to occur here and now, that 1176 on the S&P 500 was the likeliest level from where that rally would play out.

Despite the undercut of our 1176 pivot on Thursday, this level was regained by Thursday's close. As we showed at the time, the day's action traced out a Lizard Buy Setup.

Despite wholesale liquidation and intense selling pressure last week, the 1176 level persisted on a closing basis for two consecutive sessions. That's not happenstance.

Now that a rally into what is many times an emotional pivot -- a lunar eclipse -- has transpired, what can we expect next?

Well, the S&P has now traced out a potentially bearish Minus-One, Plus-Two Sell Setup on the daily chart. So the market owes us nothing more from this point, especially if we are in a period of accelerated downside momentum. However, this week is also options expiration, so anything can happen.

Furthermore, there is a live angle that runs through 1200 S&P, which coincides with the overhead 200-day moving average. That level also coincides with what I call a True Swing Pivot. A True Swing Pivot exists on multiple time frames -- daily, weekly, monthly, quarterly and yearly.

For example, if you take the range of the month of October so far, you arrive at a midpoint of around 1201. Consequently, any further weakness below 1176 would indicate that this is only the midpoint of the decline -- or what may just be a midpoint of this leg of the decline. If that is so, this midpoint equates with the minimum projection to 1143 S&P.

As you may recall, 360 degrees down from this year's 1245 high on the Gann Square of Nine calculator equates to 1142 S&P. I don't think it is happenstance that the second-lowest close on the decline into this year's low in April was 1142.60, scored on April 15. There was only one session, April 20, with a lower close, which was 1137.50. You can't make this stuff up. The market has a memory. There is a Rule of Symmetry at work in the market. That is why the behavior after the S&P has tagged 1176 and the behavior going forward is so important.

In my work, time is not up on this decline. My cycle work shows that pressure should persist at the very least into the end of October. It will be important to watch the level at which the weekly chart turns up, which this week will be trade above last week's high at 1196.50. This is just below the overhead 200-DMA as well.

Moreover, once the Wheels of Time and Price are in gear, as they are now, and the intermediate trend has turned -- which is the current picture -- there is a strong tendency for price to snap back to the breakdown level. That is what I call a Jesse James Pattern, which means the price many times rallies back to the scene of the crime. In this case, the breakdown point was the swing low that occurred in August off this year's high. That low was 1201.05. Again, as you can see, the 1200 level shows up as significant: The Rule of Symmetry manifests itself many ways.

Conclusion: In wrapping price around time, it is interesting that the weekly chart turns up just below key price resistance. On top of that key resistance is a three-month topping pattern. Consequently, although mapping the market out in this fashion looks too simple -- like painting by the numbers -- if the S&P rallies toward 1200, it would be a solid reward-to-risk setup to sell and sell short.

The market's geometry looks too pat to believe sometimes -- like I said above, like painting by the numbers. But we have to believe what we see until proven otherwise. In trading, we have to believe what we see and not what we think. "

(in www.realmoney.com)