OK now I see what you are talking about.
Jeff Cooper thinks we might be topping here also:
Forming a Top on the S&P
By Jeff Cooper
This week, I've been showing the possibility the S&P cash has been carving out a Broadening Top formation. The missing ingredient to nail down the pattern was a new high for the move. That new high occurred on Thursday on the back of weekly initial jobless data that were better than expected.
But the back was spineless: Despite the fact that the Labor Department said that the weekly jobless claims dropped to their lowest level in eight months, the market reversed a gap-up open, leaving a Gilligan Sell Signal. (A Gilligan Sell Signal is a gap up (or down) to a new 60-day high, with a close below the open and near the bottom 25% of the day's range.)
Thursday's Oops -- which is a gap open at a new high with a close below the open -- comes on a perfect Time and Price square-out. It was exactly one year ago in October 2002 when the S&P traded to a new low only to leave an outside Key Reversal day to the upside on Oct. 10, 2002.
So, on the one-year anniversary, the S&P came close to the 1050 Master Square, as the S&P traded up to 1048.30. This confirms the notion that the current move up from the Sept. 30 low may be a test of the square-out of the March 12 low. We know that the March 12 low resonates off 1043/1044 S&P in mid-September. The Sept. 18-19 high at 1040 missed by 3 points. Thursday's move may have fulfilled that square-out as well as squaring out the one-year anniversary that harmonizes with the Master Square on the S&P.
Here are the possible nails in the coffin for the near term in the market:
The S&P tagged the Master Square near 1050 on Thursday.
This tag of the Master Square occurred on the anniversary of the October 2002 low, which saw a Key Reversal day. As they say, as above, so below. Very rarely do square-outs in price and time hit so perfectly on the money. But when the market reacts so strongly in reversing as it did on Thursday, there is a greater-than-average likelihood that this is testimony to the significance of such a square-out.
Since 1942, the average gain for the month of October has been 4.9%. The mean gain has been 4.1%. At Thursday's highs, with a booming 1,100 upticks on the NYSE, the month of October showed a 5% gain -- albeit short-lived. What are you going to do with the knowledge of these stats? Buy the market? Apparently, more than a few trading desks know this history.
Additionally, history shows that five consecutive up days in early October confirm the notion of a September high. We just came off five consecutive up days in October. You'll remember that yesterday I mentioned that September highs in the market lead to declines into late November and early December. That does not mean that the ball game is over. I think that there is a greater-than-average likelihood that should such a decline come, although it may be the greatest decline since the March lows, it will set up another buying opportunity for a turn up of the yearly chart in early 2004 ... in other words, a trade over whatever the high is in 2003.
It is also more than interesting to note that 1050 S&P, which as we know is on the Master Square, resonates off Aug. 25. Aug. 25 is the important precrash high in 1987. It is important to note that in 1987 the first week of October marked another inflection point from which the market, shall we say, rolled over. That does not mean that we will crash from here. It simply implies that this DNA may make its presence felt at this time. To what extent or amplitude, we will know only in the fullness of time.
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