LET’S LOOK AT THE S&P 500 INDEX DAILY CHART

Two weeks ago I said the index was at some resistance in price and time but any correction would hold support and the index was likely to resemble the 1975/1976 advance at this juncture.  The index didn’t show a counter trend but just congested for two weeks and has resumed the trend.

This chart shows the important time periods through the New Year.  The index went 60 days low to low and set up the following probabilities.  But first there are some time periods that have historically brought in a top in this index.  Those time periods, for the last drive up, are 42 to 52 calendar days, 60 to 67 calendar days, 90 to 99 and 180 to 191 calendar days.  The index moved 60 days low to low and now 90 days low to low.  The 90 low to low offers a probability of running up another 90 days or out to the first week in January and that time period is always a good “time” for a top.  The index is currently running into 45 days from low and should be resistance.  One of the workouts of a 90 cycle is to start a congestion now (at 45) and resume the uptrend on 60 days from low or around Nov 1^st (+-2 days) and would allow for a 30 day run to 90 days around Dec 1^st.*  And could be an important top, then 180 calendar days from the July low in early January and 180 from the August low in early March and both of the time window coincide with yearly cycles.  If there is a high on 90 or around December 1^st then we must pay particular attention to January 13^th if a lower high is presenting itself as that could set up a crash scenario.  Because this is a bit complicated I left this picture up on my website.  Also keep in mind that a top will take many months to form and when there is a high or top there will also be months of distribution before the trend reverses to down.  Also remember the last 30 days of the move can be the fastest as markets can exhaust into important highs and lows.

LET’S LOOK AT THE DOLLAR INDEX

Here are the masters of the “bugger thy neighbour” policy. Our preferred day for a low to this drive down has been 29 October.  There is a small chance for an exhaustion into 20 October.  I though around 75.60 could be the low but honestly with momentum this strong it could be down into the 71s the way this is capitulating.  Remember the first indication this has found a low or is close to it is when the index can rally past 4 trading days.  That indicates a low is in place or the next marginal new low should the low.  But could just be temporary.  This is a weekly chart and shows this to be an outright panic move down.

Two weeks ago I indicated a concern for the DAX and CAC40 as the pattern of trend was starting to take on a look of distribution although not complete.  This week they may have come out of the topside of those patterns.  So unless they immediately reverse and show a few lower highs the reason for my concern may be over.  Also the US 30 year bond looks like top but there is no distribution so the move down will be limited to breaking the last low.  More next report.