Reversal Took Many by Surprise but ES Missed Golden Spiral Target By 1 Point

04/06/2017 8:15 am EST

Focus: STRATEGIES

Jeff Greenblatt

Director, Lucas Wave International, LLC

This is a freight train market going forward but the bears finally have the upper hand, asserts Jeff Greenblatt, the director of Lucas Wave International and editor of The Fibonacci Forecaster, a market-timing letter for traders in 17 countries. 

Today is my debut article for MoneyShow.com. Some of you will remember my MoneyShow breakout sessions over the years, I specialize in Fibonacci and Gann cycle work which I use for trading strategies as well as a very reliable GPS navigation for market forecasting in the near and long term. Today I will discuss how we got here.

Gann followers know when price and time square, the pattern changes direction. The challenge over the years is most take it literally. For instance, if ABC stock goes from 30-60 they believe that 30-point gain will materialize in 30 days, weeks, or months. For a long time, I believed the common knowledge as well and thought Gann’s methods were obsolete for the 21st century.

Nothing could be further from the truth. Take the Dow, for instance. It peaked at 21169 on March 1 at 170 trading days off the Brexit low from 2016. Most of my cycle work is plus or minus one. This high has a square out vibration of 169/170. As we know tech has done better, creating a divergence mostly because of certain heavily weighted NASDAQ stocks like AAPL, AMZN, MSFT and FB doing much better. Compare those names to the BTK which represents biotechnology and you’ll see the difference. Wednesday the BTK hit a new relative low for this move off the high.

Many names found highs close to the seasonal change point in March but found lows either on March 22 or March 27 and started bouncing again. Markets tend to change direction near the change of season. For the ES, it was down 160 hours when it turned back up.

chart

The highlights of this chart are a first leg up of 26.25 points and when measured from the 2333.50 secondary low, the golden spiral target for a 1.618 extension was 2376. Along the way, it got hit on Monday but made a quick recovery.

Another important strategy is the last leg to the high or last thrust to a bottom. Many consider trading to be a zero-sum game and those who get in late will find themselves underwater in many cases. The key test is whether the latecomers exit if they get the chance close to their breakeven point which is represented by the line which I call the trap line.

The early theme of the week was the bears’ inability to take it down and keep it down. It retested the trap line late Monday. It started dropping again but turned back up again on a square out vibration. The first low was 2340 and off the near-term high turned back up at approximately 41 hours.

That is not a coincidence. Markets usually give a hint at what they are likely to do if only we are willing to stay open to what we see. That led to Wednesday’s big rally to the upside. Just as quickly as the market gave, the market took it back and caught many by surprise.

Upon careful observation, the ES came to within 1 point of its Fibonacci golden spiral target. On Tuesday, the Dow closed at 20689 and the high on Wednesday was all the way up to 20887 but closed at20648, down 41 on the day. It’s the biggest one day reversal in months.

This is a freight train market but going forward the bears finally have the upper hand. Let’s see what they can do with it.

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