Stuck in the Middle With You

Stuck in the Middle With You

The Monthly Chart Moves Slowly, But Renders the Macro Picture of Supply and Demand (Bulls and Bears) Converging on Each Other for Control.
The Monthly Chart Moves Slowly, But Renders the Macro Picture of Supply and Demand (Bulls and Bears) Converging on Each Other for Control.

Good Morning:

– ☽ – We start with the Monthly Chart for the big picture. On a negative note, the price has traded below last month’s low, a Low of the High Bar Sell Signal – at least if the Candle closed below last month’s low. We don’t trade monthly charts, so the argument is by analogy since the market is fractal (price behaves the same way in every time frame).

– ☽ – Obviously, monthly charts trade too slowly to be useful for buy and sell signals. Still, we note the price action for our narrative. 

– ☽ – But the monthly chart shows us the triangle consolidation where bulls and bears have traded places lately, with neither side scoring a macro trend since August last year. We certainly cannot call the bear market over at this point, though bulls have managed to hold the October and January lows.

– ☽ – The March 13th low should be a 20-week cycle low, and the “M” cycle shape is discernable. But whether the next cycle will be short-lived on the upside, with left translation leading to lower prices, remains an open question.

– ☽ – We have been back to cash for the past few sessions. Taking either the bull or bear side from the middle of a triangle ( approximately 4000 in our case) must be undertaken carefully and preferably by skilled professionals who understand exactly what buying the middle of a range means. Even waiting to buy the first breakout from a triangle can be treacherous. Breakouts fail 80% of the time.

– ☽ – If you want to lose money quickly and consistently, try fishing for the bottom. I could build a very nice home with the money I have lost trying to pick bottoms over the years.

– ☽ – Patience is a virtue. You don’t need to be first. When you look back from the next bull or bear leg, you will realize that you did not need to be in a rush. There is plenty of time for a daily swing trend, not to mention a new bull or bear market.

A More Granular Look at Price Through the Eyes of the Weekly Chart Shows the Ever So Slightly Bullish Edge
A More Granular Look at Price Through the Eyes of the Weekly Chart Shows the Ever So Slightly Bullish Edge

– ☽ – We see from last week’s price action that the price explored territory above the previous week’s high, even though it ended in a draw. I would have preferred that the candle body close above the previous week’s high. Nevertheless, note the accomplishment. The Devil (preferably the Angel) is in the details.

– ☽ – The Weekly Chart can be slow, but the 5-Week Line is pointed north and seems to want to poke through and above the weekly mean. Price also attempts to enter the bull half of the 180^ to 270^ M-Square. If successful, the blue angled Line becomes support, and the 270^ Line becomes the next target. 

– ☽ – Stops can always be maintained a few ticks below the blue Line in a trading time frame. We look to a weekly chart for a slightly more granular macro picture. We don’t trade it. But if the target is achieved from a trading time frame, the weekly target is close enough to mount a full challenge to the last swing high at 4243.25.

Steve Puetz (Universal Cycle Theory Author and Newsletter Writer) Calls Our Attention to the Relationship Between Lunar Eclipses and Panic Cycles

– ☽ – Lest any creeping bullish bias on my part leads us astray; Steve Puenz put together the chart above regarding panic cycles.

– ☽ – It is undisputed that Full Moons, New Moons, and Lunar Eclipses have a funny way of packing Hospital Emergency Rooms. Whether or not the Moon truly affects the stock market, enough institutional traders with big books believe so, and that is all it takes. This would not be the first or only self-fulfilling prophecy in financial markets. Regardless, we need to carry this forward in our narrative.

On this Daily Chart, Price is Trading in the Bullish Buy Zone of the 0^to 90^ M-Square. If price can break above 90^, it can eventually tag 180^.
On this Daily Chart, Price is Trading in the Bullish Buy Zone of the 0^to 90^ M-Square. If price can break above 90^, it can eventually tag 180^.

– ☽ – At the Daily Chart level, the 22-week trading range is still roughly 3750 to 4200. The market will open around the middle of this range this morning.

– ☽ – But if the market continues higher, all our turn windows were accurate as the swing low remains intact as of March 13. If not, rallying into the March 21 Spring Equinox proved fatal, as I pointed out in previous writings.

– ☽ – And even with the failing bank news, if the Master Cycle (still maintaining an 80%+ correlation) reasserts, then the March 13 low becomes dust in the wind, and it will all turn out as we forecast as far back as November.

– ☽ – Of course, that is a very big “IF.”

– ☽ – Traders will BLSH (Buy Low, Sell High) until there is a strong breakout from either direction of the balance range. Don’t forget your Balance Rules.

– ☽ – While BTFD (Buy the F’ng Dip) was the old mantra, STFB (Sell the F’ng Bounce) may replace it.

– ☽ – As noted above,  last week’s poor bullish follow-through from the previous week was disappointing. Poor follow-through and reversals are hallmarks of a trading range.

– ☽ – For the week ahead, traders will see if the bulls can create another follow-through bull bar.

– ☽ – Stalling again around the 20-week exponential moving average maintains the status quo.

– ☽ – Tee up your Gap Rules this morning. Let’s see if the price can conquer the 90^ line around 4028.50.

As always, be careful. The Trading Room will be live Thursday. On the other days this week, my live charts will be up most of the time, and I will pipe Rose into the room on Wednesday. I am traveling, so bandwidth can be an issue. I will have a two-gig pipe for Thursday, so we can trade if our overnight friends don’t steal all the thunder.

A.F. Thornton

AF Thornton

Website: https://tradingarchimedes.com

A.F. "Arthur" Thornton is an expert in logic, risk/reward quantification, market fractals, pattern recognition and asset class behavioral analysis with 34 years devoted to developing algorithmic and quantitative trading systems. In addition to trading his own capital, Mr. Thornton designs custom algorithmic and quantitative trading systems for a small and exclusive group of exceptionally qualified traders.

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