It appears that the news out of Europe, right before the close, that the EU is looking at further measures to recapitalize the banks, was enough to halt what was likely going to turn into a very nasty drop into the employment report on Friday. Instead what started as potentially very ugly morphed into a key reversal day. Since the market was getting very late in its daily cycle this will likely mark not only a daily cycle low, but a greater degree intermediate cycle low.

I’ve noted in the past that these intermediate degree bottoms are often accompanied by a significant divergence in momentum. You can see on the chart below that this often plays out as a large divergence in the McClellan oscillator.

The market should now make another attempt at a respectable bear market rally. I would think a very minimum would be a return to the 75 week moving average.

And considering the amount of time the market has been consolidating a move back to the 200 day moving average is not completely out of the question.

I think we probably just saw a major turning point today. One that should mark a bottom for at least a couple of months.

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50 thoughts on “EUROPE TO THE RESCUE

  1. Mətušélaḥ

    I don’t think so, Gary. I think we might get another 20 or 30 points to the up side on the SPX (maybe not even that) and then we will continue down to SPX 1000 level. Today’s low was a very important pivot point for the bulls and it was imperative that it hold. (We marked a double bottom on the ES). I very much doubt the bulls will be able to hold this technical structure for very long.

  2. Gary

    Well I certainly wouldn’t want to be short 39 days into a daily cycle. The market was looking for an excuse to put in that cycle low and it appears the EU gave it to them.

  3. RJ


    Haven’t you said in the past that news events are temporary and the market eventually gets back to doin what it was supposed to do?

    Is this a reason why you might tag this as a DCL with a left translated cycle coming into a lower ITCL?

    Or, can this still be a head fake and Germany comes out tomorrow with a bombshell smashing everything again?

  4. JEFFtheFLEA

    when its time for a cycle low a news event is the trigger for the move. sometimes you will get a news event that should make the market go lower but the market will go higher if its time for a cycle. Buy the news if its in the mood, or sell the news, even if its the wrong news.

  5. JEFFtheFLEA

    you said the market was turning because
    1 it was time for a cycle bottom
    2 you saw the Buying on weakness numbers
    3 The strong close
    anything else?

  6. Chris Beanie

    Clearly we’re still in a bull market, as I’ve said many times. 20% correction = still bull market. Note that typical cyclical bull markets tend to last an average of 4 years. We’re only on our second year.

    2012 will be a great year for the bulls.

    We will never see today’s low again on our way to Dow 36,000.

  7. LowTax

    Too bad we didn’t get any BoW. I know there’s no real predictive value to it, but there’s actually -$102M on the QQQs. I’d love for this to be just another failed daily cycle so we can get some clear signals…

  8. panzer

    Looking at GDX weeklies,and comparing to 2008, the last recession, we are not anywhere close, not near, not nohow, to a bottom…….maybe we bounce, but not for long…

  9. TommyD

    I think we have arrived at a crossroad again. If EQ3 is announced then stocks and commodities will run while the dollar gets pressure to the down side.
    Or, if we are truly heading back into a world recession then the dollar should move up higher.

    We’ve got a mixed picture here with no real direction.
    I got run out of my shorts yesterday for an even trade.

    Let’s see what today brings.

  10. Russell

    I’m out of UUP. Too much uncertainty in the cycle. Could not stand to see the profit disappear by holding into uncertain waters. It’s funny how quick you can change. Just yesterday I expected to hold these options through October.

  11. Frank

    Nice turnaround in miners here. I picked up some NGD at 9.60 and SBB (Sabina on TSX) for 2.60 yesterday on lowball limit orders while I was sleeping.

    So NGD has gone from 9.50 to 10.45 now. Similar to the action in June and glad to see a higher low than 8.70 or whatever it was back then. But I have to learn to sell more on the upswings.

  12. wmp

    Can someone with a technical background “nterpret” the bubble pattern formed starting yesterday on the 1 hour /GC chart? Kind of an interesting pattern I haven’t noticed before.


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