Saturday Review’s recording (for 11/21/2014)
Here”s the link to this weekend”s Saturday Review, and its transcript:
https://roddavid10.mitel-nhwc.com/join/vsmvjsh
Good morning and welcome. It’s Saturday. Time for the Saturday review. Everything checks out. Interesting spot for the market to greet the next week which is a new high close. New high close above a multisession range that is a breakout. Breakouts on a Friday are not often confirmed on Monday’s so we will see how that goes. It is a new trend high close so some new higher close following it, whether immediate or eventual is pretty much historically mandated. That new high close may not be above Friday’s range. It could be within Friday’s range just so long as Friday is not the highest close of the trend. As I say, it need not be immediate. The trend itself, I think a little extended here, could retrace immediately, begin reversing down, not durably, remember? You do produce one more higher close at least. Maybe 100 higher closes. As soon as we get that one more higher close, that information becomes less useful but if we start trending down immediately, very useful information to know that the trending down is temporary.
Then there is also the matter of yesterday’s open. The opening print being above all prior highs. Itself has to be retested. Has to be retested. Not arbitrarily from some post open dip that recovers. Did not happen Friday and Monday. It will not qualify. Not until these lower prior highs are probed and Friday’s low came within 3 tics but did not touch those lower prior highs. So, we still need a little bit more weakness before recovering back up to Friday’s open can neutralize it’s attraction, can allow a down leg down turn to be durable. And just more on that, doesn’t have to be as clear-cut as that. That is, to dip back down under these lower prior highs and then neutralize that attraction above. It’s possible to avoid that. Form a complex pattern. Multisession complex pattern, not single session. Then dip back under these lower prior highs and rather than having to retest Friday’s open just retest some relevant portion of that complex multisession pattern. You have to be determined what that actual price is until we actually see the multisession pattern.
These are all unfinished business above. These are all finished paths down. These are all choices open to the market and here’s one more of two remaining. That one more would be, I think I’ve given away part of it since Friday’s low did not touch lower prior highs. Since Friday breakouts tend not to be confirmed on Monday. We have not even addressed the momentum is down on an expiration Friday. Trending down throughout the day on Friday tends to be duplicated Monday morning. Not necessarily opening down. We can gap up and then trend down, but all of those combined do create the potential for gapping down back under those lower prior highs trending down. What does that do? What does that make out of Friday’s session?
If I have not given it away with my descriptions of the other conditions or elements, it should look kind of obvious, exactly right, an island. Islands are reversal patterns. They are called island reversals and that is because they reverse direction. However, that is a mainstream description or definition. In fact, islands are always retested again. Knowing that the Friday trend high close, that already tells us that will be retested, knowing that the Friday gap up above all prior highs needs to be retested. That will be recovered. All of these if in fact there is an immediate down turn. But also, if that downturn were to begin by gapping down back under last week’s prior highs, to whatever degree. Temporary, substantial, steep, shallow, whatever the character of it, multisession whatever the reversal, it’s only temporary and that island needs to be recovered, retested. Not necessarily exceeded. Probed, sure, but whether that recovery resumes the rally having trapped shorts, squeezing them to help refuel the rally’s resumption or whether that island is just retested to form a more durable top at that point. Neutralize those attractions outstanding, the new high close, the open, etc.
That’s irrelevant to that one fact that islands are always retested. And, we cannot forget about that one other and there is just one other outcome here. One other resolution to Friday’s pattern, just resume the trend. Whether it’s from a shallow opening dip, gapping down, dropping, whatever. Monday is certainly welcome to gap up and resume the trend. Normally, on Wednesday’s expiration week, we have an indicator called the Wed X, Wednesday expiration indicator, Wed X, and it is just a few observations, comparisons, reference points, sequences, a few bells and whistles that I created that identify what big money is trying to do in positioning itself ahead of expiration. Not all big money utilizes the options markets and so even if we do get a signal, there are times that it is not influential. There are times when it is obviously going to be influential. We can have a bullish or bearish Wed X. We can have an actively bullish or bearish or passively bullish or bearish Wed X. Actively meaning if it’s a bullish Wed X, an actively bullish Wed X, that price will plow higher. If it’s a passively bullish Wed X, that dips will recover and vice versa with the bearish, and it applies to Friday afternoon and Monday morning.
Friday afternoon bounced but more so arranged sideways. It’s bounced within the range. Irrelevant to Friday’s open other than to compare Friday afternoon’s actions to the session. That’s passively bearish. And then retrace anything relevant remained under the gun. I should back up a second and point out the indicator did not trigger this week because Wednesday’s session was an inside day, the day prior to it was the first day of any trending. It was a breakout effect, so we didn’t have enough there to get a signal and we still don’t. What I’m trying to do is reverse engineer this just to keep the options open as to what kind of resolutions might anticipate or be prepared for. So, we can’t actually call that an actively bullish signal because Friday’s bounce or this actually Friday afternoon’s bounce would not have qualified, would not have fulfilled an actively bullish signal. But passively, bearish signal, maybe passively bullish if the lower prior high has been tested but it wasn’t so if that is the case, if perhaps the signal didn’t trigger because it was restricted from triggering. For some reason, one or more of the bells and/or whistles could not connect in time, then did that mean that the big money is not necessarily in a big way trying to reposition or position itself ahead of and into and out of expiration? It doesn’t. And, it’s also possible that the overnight action really threw the market for a loop and that is price was already firming, but then China’s interest rate cut triggered this big spike.
That changes things dramatically as you can see. The balance of this session really just retraced all of that. So, it is possible that there is a Wed X in there just to be prepared for it. If it is a passively bearish signal and Friday afternoon’s price action barely qualifies as passively bearish, then we would normally expect Monday morning to be very actively bearish so that whether it is a gap down that trends down, a gap up that trends down, just flat, I think you’ve seen a consistency here as half of the open to trend down and to trend down aggressively through the morning.
So, that still leaves the door open to a lot of outcomes. I really have not been able to narrow down the template for Sunday night let alone Monday morning to a great degree, but we do have several options in front of us. Now I think Sunday night is going to help to limit those options but this cannot be the high even if there is an immediate downturn, a gap down that trends down, that high will have to be retested. Now, let’s say there is a downturn immediately, how it is deep and its probe essentially it is this, so let’s look for the difference in sponsorship, clear difference here, and we, if you recall last Monday afternoon, off of the 2035 high on Monday afternoon. Three consecutive timing windows that were the first three consecutive timing windows to trade exclusively above all prior intraday highs. That was not a turning point, but a reference point and that action stopped. Stopped influencing the market at that point where there was a breakout.
So, basically, what we’re looking for is some sort of retracement of this leg. Where it begins, where it extended to, and so my minimum objective would be of 61.8% retracement of the low to the high of that leg. 2022.25. Considering this to be its own entity, and if in fact that is peaking, not topping necessarily, just peaking, but it needs to refuel back into the prior leg. Once we start getting through there, there being room for noise below there down to basically 2017.50, 2014.50. Before when it starts assuming something more dramatic underway, before we would get out of the orbit of this high that would still require a retest. Anything down to this area, any probes lower that keep recovering back above 2022, dup under 1750 and recover 2022, dip under 1450 and recover 2022. That’s all accumulation. Start closing below it, and below them, and suddenly we have actually a much bigger leg that takes the place of this leg.
So, this is the leg that is now generating a retracement back into a previous leg. And you can see how those measurements then, the potential drops and this is just ballparking, but you can see how those potential drops start expanding as the legs start extending. So, if there’s an immediate downturn, it’s objective 2022.25, room for noise around it, down to 2014.50, 2017.50. Otherwise, extending higher and assuming that that previous leg was accumulative and so it’s targets are guiding the market higher if in fact that previous leg does break out as it did which we now look for signs that that is extending higher. There’s room for noise around it by 61.8% or 61.8% projection above it, 2063.25. Was pretty influential trapping Friday’s recovery attempt. If 2063.25 is not the high, 2096 may be the next objective put into play. It does not happen just as simply as that closing above 63. This whole range that tested 2063.25 the room for noise above this leg. That’s now resistance. Close above Friday’s highs and the next working target becomes 2096.25. A second consecutive higher close above Friday’s highs would be needed to confirm that, but until being confirmed, that is still the working target.
Otherwise, this area needs to be the high. There’s reasons to suspect that it still could be the high. Remember, coming out of last Monday or the prior Monday, I should say at this point, having had those three consecutive afternoon timing windows, all developing above all prior intraday highs indicating a trend change and the trend did change. It went from up to flat. Trend change warning at least. That told us the next attempt to trend higher would be met intraday by a reversal down. In fact, the last three attempts to trend higher have been met intraday with reversals down.
So, those are signs of distribution. That can continue indefinitely and the rally can appear to be extending but that’s distribution into the rally. Doesn’t mean we have a sell year. In fact, unless we get the right open on Friday, I wouldn’t be a seller, and if we got that right open, that down leg would still be recovered. But if you think that this is extending this huge rally from October’s, we can’t even exceed all of them, from September was it 19th? September 19’s high and October’s low, and back up again and now higher. If you think that is just a little abrupt and that V bottom will require retest. There was already new bullish reason for Thursday’s low to retest Wednesday’s low. Wednesday’s low, a very natural common occurrence to retest lower prior highs after a breakout that had already been done. There was no bullish reason for that to be revisited. Overnight would have been alright had that been recovered but the open. That needs to be retested and not only retested but flipped. Actually punitive damages as it were.
So, there’s downsize out there piling up. There’s the weight of those downsizes evident from our post open action. At least this early morning drop was still in that range but this drop came late in the day. This drop came right away. See that weight getting heavier.
Alright, let’s look real quickly at comparisons among the markets. I didn’t see anything that was really going to be, but we do like to do those. Here’s our control group. The EX, higher and higher highs, the Dow. Also substantially higher and higher highs. Its intraday pullback. Even much more glaring, the margin, the buffer back to lower prior highs. NQs, these were flashing a warning last week and really on a net basis, they have not improved. They tried but NQs, that is the NDX 100 stocks, technology stocks, dominate, less predictable, less reliable. Can’t really say they are not widely covered but something I have widely covered is the Dow stocks would be not as liquid as the Dow stocks are. You would have to say that there is more of a focus on Dow than on NQs. That is to the extent this represents speculation among bigger money institutional tension, mutual funds, the stuff that is mandated to be in the market and will take risks when it can but this idea of no risk is not cash because it’s mandated to have X-exposures, X percent exposure. It will go to the Dow type of stocks. This under performance not great but it is not too sessions in a row. That’s where that becomes predictive. This is just the kind of behavior that if it repeats consecutively, then we’ve got an issue. Finally, Russell, which is smaller, speculative, not even making a new high.