Not a bad call from early August (the opposite of Crawkford):
"CATCHING FALLING KNIVES
In last weeks commentary we stated:
"Our cycle analysis points to a turning point low in the
8/6 +/- 3 trading day time period... while the next week or
two could see some further weakness or possibly some choppy
sideways basing action, we still feel that new highs will
be seen before the year is out, and that the period between
now and 8/11 could prove to be a good intermediate-term
buying
opportunity... Short-term there is important support around
1332 SPX. A break below this level would target 1308 SPX.
If 1308 SPX is violated, key support is at 1277 SPX..."
Trying to buy dips on this decline has thus far been akin
to trying to catch falling knives, especially in the
internet sector which has had all the buoyancy of a lead
balloon over the last 2 weeks. From Friday morning when
last weeks report was written the 1332 SPX support gave way
followed by 1308 SPX, and finally key support was tested
with the 8/5 low of 1287.3 SPX.
Our cycles had called for a top in the 7/22 +/- 1 week
timeframe and then a decline into 8/6 +/- 3 trading days
(8/3-8/11). We are now well into this cycle window where we
would look for an intermediate-term low.
This low could very well have been seen at the 8/5 low, but due to
continued poor internals we must consider the possibility
of some further decline into 8/11. However, since so many
bears are expecting a crash next week due to the astro
aspects associated with the 8/11 solar eclipse, we think
that the market could very well surprise to the upside with
a strong short-covering rally.
From the 8/6 +/- 3 trading day turning point low our cycles then call for a rally into
9/27 +/- 3 trading days. There are some minor cycle lows
due around 8/20 and 9/2, so the next month could prove to
be choppy, but we still expect new highs to be seen between
now and the end of September.
Given extreme oversold readings in momentum, volume, and breadth measures, some of
which are the most oversold in several years, we would look
upon any panic selling next week as an intermediate-term
buy.
If new highs are seen into late September we would then
look to enter an aggresively short posture, as our cycles
suggest that the month of October could be a disastrous one
for bulls.
So, while the early going next week still holds the
potential for further selling, we expect this 8/6 +/- 3 day
low will prove to be an important one, at least capable of
producing a rally into late September. From a fundamnetal
perspective, at Friday's close the Fed funds futures had
already priced in a 90% chance of an August tightening by
the Fed at their 8/24 meeting, and also a 90% chance of a
third tightening at the October meeting. So, the bad news
seems to be in the market so to speak, setting the stage
for the coming rally phase.
However, if the market is right
and the Fed does tighten the third time in October beware
of the dreaded "three jumps and a tumble" rule that says
three rate hikes will cause a TUMBLE in the market.
From any new high seen in late September we would expect to see anywhere from a 30-50% decline in the market.
So, fasten your seatbelts it could be a wild ride over the next few
months."
urbansurvival.com |
