Looks like the SPX is painting a “Heinz 57″ pattern. The 1427-1484 range is now the “New Entertainment Zone”—a price range where the Pigmen™ can crank and shank without signifying the next move up or down. This is a 57-point range.
Also note that the distance between 1484 and 1541 is also 57 points. The 1540-1541 level is key because it represents the technical top (early Jun) of the topping pattern from Jun/Jul. There is also a small gap left at 1541 from the first cascade down.
In addition, notice that the distance between 1427 (the first low) and 1370 (the spike low) is also 57 points.
So we now have four important price levels (1541, 1484, 1427, 1370) all separated by increments of 57 points. Nice symmetry.
This tells me that, if the key 1484 level is exceeded, the next move is likely straight up to 1540-1541. The zone between 1484 and 1541 is now a “free fly zone”, meaning that we saw a very fast move down through this price area in late July and we would likely see an equally fast move back up.
This sounds wildly bullish if it happens. But it may not be. Frequently, a broken chart will attempt to desperately “return to the scene of the crime”. In this case, the “crime” occurred at 1540-1541 when the SPX broke below its Jun high in mid-July.
A fast and furious rampage back to 1540-1541 (once 1484 is cleared) would actually be molto bearish if the SPX was unable to get above 1540-1541. But we shall see if and when we get there. For an example of a bearish “return to the scene of the crime”, check out the chart below of the Sow Jones in 99/00. The Sow revisited the crime scene over and over, but to no avail.
So for now, watch for the “Heinz 57″ move to develop. A move above 1484 will cinch the deal. A stall at 1484 means the market is not yet ready for a “return to the scene of the crime” and will likely come back down into the “Entertainment Zone” between 1427-1484.
From a voodoo perspective, is the number ‘57′ trying to tell us anything? Probably not.
But there is one ‘57 rhyme that is interesting. The market peaked on July 16, 1957—exactly like 2007, fifty years later.
Then in 1957, the market had a last-ditch rally into the first trading day of September. Then it fell for the next six weeks into a mid-Oct low.
But while that Oct57 low was the nominal low, there was no 4Q boner rally. The market stayed more or less pinned to the lows from Oct57-Apr58. So there was no joy in Mudville for six months. Then the market rallied from Apr58 to a peak in Jan60. But by mid-1962, it was right back at the 1957 lows again. Five years of nowhere action. How ’bout dem apples?
Is the 2007=1957 rhyme too voo-doo-ey?
Well, how about 100 years ago then: 2007=1907. That was the Rich Man’s Panic. Sound familiar? The market didn’t bottom until mid-November 1907 with the worst carnage from Sept-Nov.
That not good enough for you? Well, then try “The Panic of 1857″ on for size. That was exactly 150 years ago. According to Wikipedia, “The panic of 1857 was a sudden downturn in the economy.” There were bank panics in the Northeast and they were closed briefly in October to prevent runs on the bank. To no avail. It took 18 months to recover from the “Panic of 1857″ and the full effects did not dissipate until after the Civil War.
There was also a minor panic in 1807, though I couldn’t find much on it.
So we have rhymes from 50 years ago, 100 years ago, 150 years ago and 200 years ago. ‘Tis an historically-appropriate time for panic.
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