As we enter the end of March and just had the vernal equinox of March 21, the market is confronted by the push and pull of many powerful cycles.
There is plenty of bad news to go around in the way of
American International Group
Moreover, there were many breakaway gaps on Monday, such as
Level 3 Communications
. So if a panicky plunge is going to play out, these could be the telltale signs.
At the same time, the
made a new low for the decline on Monday, pushing it into the body of support we referred to last week between 1160 and 1180 S&P.
It's important to remember that the high of the low-bar day this year from Jan. 24 was 1173.15, while 1174 conjuncts or resonates off March 21.
grazing its 200-day moving average, there are reasons to anticipate that this time frame will carve out a low. However, I do not expect such a low, if it occurs, to be of a V-shaped nature. I think a more sustainable pattern to launch a rally would be found in a down-up-down sequence, with the first-quarter low being punctured at the beginning of the second quarter. That is how the late-March 2001 low played out. The pattern I am looking for is a low at some point at the end of March/early April, to be followed by a rally into July.
The monthly chart on the S&P turned down on Monday as the index undercut its February low scored on Feb. 1, at 1181.05.
My expectation would be for, at the very least, a knee-jerk reaction up on Tuesday as this big wheel of time -- the monthly chart -- has turned. However, watch the behavior carefully here if a puny rally unfolds and the S&P knifes back below Monday's low in short order -- as in the next few days. Then I would expect a quick drive down toward 1160.
Jeff Cooper is the creator of the Hit and Run Methodology and the author of the best-selling books
Hit and Run Trading (The Short-Term Stock Traders' Bible),
Hit and Run II (Capturing Explosive Short-Term Moves in Stocks), as well as a video course, Jeff Cooper on Dominating the Day Trading Market. He also created the Hit and Run Nightly Reports and co-founded a trading markets Internet site.
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