S&P on support

The S&P 500 last week, pulled back to the 21 day moving average(yellow line), after testing the monthly R2 pivot(blue arrows and green line marked R2) at 1074. When the S&P hit the monthly R2 pivot last week, I knew there was an 85% chance that the index would not close above R2, and to look for a little pullback. With the end of month and end of quarter this week, we could rally back up to 1074, and make a right shoulder. If the S&P closes below 1040 this week, look for a fast fall down to the monthly pivot and 50 day moving average @1013. We get new monthly pivots on this Thursday, October 1. Monthly pivots will tell us where to look for support and resistance, for the month.

The 10 year cycle

The stock market the past 30 years, seems to be following this 10 year cycle.

YEARS ending in;

0. deeply depressing mood disappointments failing economy & businesses, unemployment etc.(in 2000, 1990 & 1980...big correction years)

1. More of the same but worse. (2001 and 1981 where ugly down years)

2. Amidst far worse mood, the fundies actually bottom out as do prices, however people are so badly burned out by the doom & gloom few spot it & even fewer trust it - this is the actual market bottom in many assets real & financial often, amid a crisis. .(in 2002 and 1982 markets started to bottomed)

3. Quietly recovering still lots of distrust & very little feel good around. (in 2003, 1993 and 1983 where big up years, after bottoming the previous year)

4. Have things really been going UP for the past 1-2 yrs ? Quick buy something!( in 1984, 1994 and 2004 where consolidation years...the market went sideways before starting a new up trend)

5. Amid a modest dip & sometimes mild panic that turns into consolidation, gives way to the strongest up wave. ( 2005, 1995, 1985 =market was up)

6. Now things are really getting hot, prices are rising rapidly , the media is excited, etc. However, the astute observer sees that under the hood cracks are beginning to appear, tops are being built, etc. (in 2006, 1996 and 1986 where big up years)

7. The public thinks things are never going down again, but mid year, markets top out & towards the end. They give a violent warning of their wrath to come.( the 1987 crash, in 2007 the market topped )

8. Armageddon! ( markets went down big in 2008 and 1998. In 1988 it was a flat year, due to the '87 crash, a few months earlier)

9. Huge relief bounce that eventually rolls over, setting up for the disappointment of a long winter of years ending 0, 1 & 2.x. Media is excited, disaster has been averted, depression / recession, etc., is now over. Buy! Buy! Buy! Supposedly, this is the year that the markets / economy, etc., finally is coming back, etc., Or is it ? ( in 2009, 1999 and 1989 the stock market had a big up year)

Canadian dollar at major resistance

For my Canadian friends: The Canadian Dollar(loonie) hit the yearly R1 pivot today(purple line R1). And the US dollar hit it's yearly S1 pivot today. Look for a pullback in the Loonie and a bounce up in the Dollar.

U.S. Dollar on Yearly S1 pivot

UUP is the ETF for the U.S. Dollar index. It is testing the yearly S1 pivot here. Look for the U.S. Dollar to bottom here and the Euro to top out at 1.4737, which is the Yearly R1 pivot.

we are now in the "Gap Zone"

S&P has now entered the gap zone from last October (see blue arrow on chart). Typically the gap gets filled. But we are also at the monthly 20 moving average too(see earlier post on the 20 month moving average).

http://mpgtrading.blogspot.com/2009/08/s-20-month-chart.html