Happy golden spiral day! Am I the only one who celebrates this day? Many people don’t know it exists, but it is part of the seasonal change point time window that impacts all markets on a cycle basis. What is golden spiral day? It is June 18, simply put 6.18.
For the uninitiated, markets don’t go straight up or down. They do change direction and in contradiction to what the random walk crowd would have you believe, there is nothing random about it. I remember one-year sugar ended a massive correction and started a year-long rally right there on golden spiral day. There are other examples, but we have more important fish to fry.
Markets could finally be at the beginning stages of rolling over right here. European markets were perfectly set up at the end of last week to do just that. In fact, both the FTSE and CAC put up readings late Thursday where the retracement numbers matched Gann square of 9 numbers. Not only that but the FTSE also lined up at 144 hours. If these were the only charts that would be one thing but right here in our own backyard, the HGX is lining up in a similar way. Additionally, it stalled right there at the connect the dots magnet line on a 30% retracement at 30 days off the bottom.
Housing got hit last week as collateral damage to the Fed meeting where new Fed chief Powell decided to change the way he is going to conduct these meetings. He announced starting in January he will hold a press conference every meeting, not just the quarterly meetings that seem to coincide with our seasonal change points. The market received that in a bearish mood, thinking that’s four more chances for him to say something the markets would not like. They also changed the wording in their guidance concerning rate hikes. The words were changed from ‘gradual adjustments’ to ‘gradual increases.’ Two thoughts on this. First of all, why worry about the wording?
Everyone who follows markets is perfectly clear about the rate hike environment by now. Press conferences? Didn’t we have to suffer the good cop/bad cop era where Yellen would be the dove while some other Fed president would come out the day or week after the Fed announcement and directly contradict what she was saying? If you read the tea leaves, markets are starting to look for an excuse to sell. Concerning the housing market, once that goes the market is on borrowed time, but it theoretically could be a long time. The HGX topped in 2005 but the overall market didn’t top for another 2 years. If we lose housing I doubt it would take that long this time around.
Getting back to the FTSE, the downside action stalled right near prior support on May 29 in the 161-hour window. This is the key inflection point to the pattern. It is precisely here where it could stage a recovery. This could be the last ‘out’ for this pattern in terms of saving the bulling case. In terms of Elliott, we could say this is either the start of a 3rd wave down or a truncated C wave in a flat correction. Tomorrow will be the key fulcrum point. The bearish side has an edge here given the CAC pattern is not as crystal clear. As of the open, the HGX is sitting right on a small trend line as well. Should it break, and it has a good chance to do it, look out below.
But this is the time of year where a snowball can gain momentum. Markets can do whatever they want at any time but there are certain times of the year where bears could get an edge. After ‘sell in May and go away’ the wind is no longer at the back of the bulls.
Can I take a moment to insert myself into the news? I shouldn’t sneak new indicators into these charts without explaining what they mean. For the past three years, you’ve seen an upgrade in the methodology I’ve used with the insertion of my Kairos square out/vibrational work. That’s why you see retracement values other than the default retracement values on your trading software. Now what I’ve incorporated is the square of 9 into this mix because it fits like a glove with the rest of the Kairos work. So, you will see references to this methodology from this point going forward.
For me, it’s the culmination of work I started 8 years ago. The takeaway for Gann aficionados is "never give up," it’s been said by many it takes a good 10 years to become a true Gann master. Gann presented so many different methods and some of them do take a rocket scientist to understand. For those of you who remember the old Dragnet series, the theme was ‘just the facts.’ Here I look no further than the pattern at hand and wait for conditions to line up.
This is a market that is stubbornly bullish and has mostly recovered from the January/February selloff. But it is divergent with tech at new highs but the Dow only able to retrace roughly 60%. We’ve been at this juncture many times before over the past few years. This time certain markets are on the brink. If Europe drops, it could start a contagion where other markets join in sooner or later. Where would ‘later’ be? The next important signpost comes in the middle of July at the next 610-day window to the February 2016 bottom. The day a market turns is certainly ‘the’ event. However, it only comes after a long process where participants play a game of musical chairs and the game ends only when the music stops and there are no more chairs. My word to you is staying engaged as long as you can. Be defensive to lock in profits and don’t be the guy standing when all the chairs are gone. Risk is high right here and it might be one of those weeks.