Technical Analysis Blog | PUG Stock Market Analysis, LLC

PUG Stock Market Analysis is here to help with Gold technical analysis, stock analysis and more. Read our technical analysis blog to learn more today.

  • PUG Twitter Feed

    • Looking for a potential 2nd consecutive daily $NYMO close below its lower BB and near oversold at -40. Potential explosive $SPX buy signal. 3 days ago
    • $SPX 2430/2427 is a deep 78%/88% Fib retrace for wave (2) of minor 5 of major [5]-P6-C1. Below 2424 we have a potential top at 2453. 3 days ago
    • German DAX has more room to run up to 14K, where Primary 5 = Primary 1. https://t.co/OsJ4vuU3mK 3 days ago
  • Premium Service

    To join the Premium Service follow this link: PUG Premium Service Sign-up. You must agree to the Terms of Service (TOS) and make a payment via a credit card Buy Now link or check in the mail. I will then send you the password to view the premium content. If you have questions send an e-mail to: pug.sma.llc@gmail.com.
  • Hits Since Oct 26th, 2009

    • 14,030,140 hits
  • Tags

  • Disclaimer

    The content on this blog (PUG Stock Market Analysis, LLC) is provided as information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author (PUG) and are for entertainment purposes only. PUG is not a licensed investment adviser (advisor) or commodity trading adviser nor is licensed as such with any federal or state regulatory agency. PUG does not manage client assets in any way. Any investment decision that results in losses or gains made based on any information on this site is not the responsibility of PUG. PUG may make statements about certain investment vehicles and strategies, but it is not to be taken as investment advice. PUG Stock Market Analysis, LLC is an educational service, not an advisory or stock recommendation service. At times, PUG will analyze the technical structure (chart) of various stocks or financial markets, but he is in no way compensated by the companies he analyzes either in reports or daily commentaries. All examples are provided for educational purposes.
  • Privacy Policy

    Corresondents's e-mails are strictly confidential. The thrid-party advertising placed by ad networks may collect information for ad targeting or store cookies. Links for commercial sites are paid advertisements. Blog links on the site are posted by PUG's discretion, without compensation of any kind.
  • Content Usage Terms

    PUG Stock Market Analysis, LLC blog site content may NOT be reproduced or excerpted online or in print without written permission of the author (PUG).

Denali’s Turning Points 2015

This free page is dedicated to a long time PUG SMA subscriber (Denali92) who has compiled and analyzed a large amount of good historical data on market turning points as it relates to FOMC (Federal Open Market Committee), Monthly Option Expiration (OPEX), Monthly Non-Farm Payroll (NFP) and Holidays.

 

Year End Holiday Turning Point preview for December 2015  (as of close of business on, December 24th, 2015)

Since 1998, there has been an end of year / start of year holiday turn in 13 of the last 17 years. In most years, the turn has occurred either side of the New Year’s holiday. Last year (2014) was somewhat of a surprise as the turn occurred on the 29th – the second day of trading after Christmas.

2015 has not been a particularly notable year for holiday turns. While there have been a few clear ones (MLK – MAJOR bottom day before, Memorial Day – minor bottom day after, 4th of July – MAJOR bottom two days after), there have not been as many as in prior years.

Current conditions do not provide any insight as to when the holiday turn and an end to the current rally might occur. Dec 26th is almost always a day that closes green and that has been the earliest date (2007) for a significant end of year holiday turn since 1998.   Could the rally have ended at at SPX 2067 on Christmas Eve – it is always possible – it is just not something that has occurred since 1998.

Overall, the market is still in a broad range. It has not been an easy market to forecast and the turns have occurred somewhat differently than one would expect based on history. The recent low at the close on opex day is a good example as in most instances a close at the lows on opex day would carry through to post opex lows. The last opex day low near the close that did not follow through the following week was in May 2012. The market bounced until the Tuesday post Memorial Day and then fell in to early June.

Here is the summary of when the end of year holiday turns have occurred (the full detail is below):

Christmas Turns   (3)

  1. 2014 – Top 2 days after on the 29th
  2. 2008 – Bottom 2 days after on the 29th
  3. 2007 . Top on the day after (the 26th) near the close

New Year’s Turns   (10)

  1. 2013: Top at the close on the 31st
  2. 2012: MAJOR Bottom at the open on the 31st
  3. 2009: Bottom at the close on the 31st
  4. 2005:   Bottomed on the first trading day of 2006 near the open
  5. 2004: Market topped on the first trading day of 2005
  6. 2002:   Bottom on New Year’s Eve
  7. 2001:   Top two days before (28th) and a bottom on the first trading day (the 2nd)
  8. 2000:   Top on last trading day (the 29th) and bottom on 2nd trading day (Jan 3rd)
  9. 1999: Top on first trading day (Jan 3rd) of 2000 and fell hard for two days
  10. 1998: Decent pullback from the 30th until Monday, the 4th and then rally continued until Friday, the 8th

No Turns (4   – 3 rally continuations and 1 fall continuation)

  1. 2011 – minor two day pullback during a strong rally
  2. 2010 – No turns just a slow motion rally until end of January
  3. 2006 – minor two day rally amidst a fall that did not end until Jan 10th
  4. 2003 – persistent rally with no turns

Bottom Line:

It is prudent to expect an end to the current rally and a holiday turn of some substance, but the historical record since 1998 and current conditions do not provide any indications as to when that turn will occur. It is possible the top and the beginning of the turn was before Christmas, but based on history, it is more likely to occur later this coming week.

ENJOY the HOLIDAYS!

-D

p.s. I am not involved and will provide the next commentary with the January preview early in 2016!

DETAILS

December Santa Rally and Holiday turn Info   (12 Santa rallies)

  1. 2014 – Post Christmas Top
    • Rally Start   Tuesday, Dec 16th
    • Rally End Monday, December 29th
    • Market then fell until Tuesday, Jan 6th
  1. 2013 –   Pre New Year’s Top
    • Rally Start   Wednesday, Dec 18th
    • Rally End Tuesday, December 31st at the close
    • Market then fell until Monday, Jan 6th
  2. 2011 –   No holiday turns   – minor 20pt pullback from Dec 27th to 28th
    • Rally Start   Monday, December 19th at close   (post opex)
    • Rally End February, 29th, 2012
    • Market just kept on rallying at the beginning of the year
  3. 2010 –   No holiday turns just slow motion rally until the end of January
    • Rally Start   Tuesday, Dec 16th
    • Rally End:   Friday, January 28th, 2011
  4. 2009 –  Bottom at the close on New Year’s Eve
    • Rally Start   Friday, December 18th
    • Rally End: Tuesday, December 29th
    • Market erased most of the Santa rally gains in a sharp New Year’s eve fall, but then rally resumed with a gap up post New Year’s
  5. 2007 – Top post Christmas
    • Rally Start   Tuesday, Dec 18th   (opex Tues)
    • Rally End Wednesday, Dec 26th     (near the close)
    • Rally ended post Christmas and market fell until post January opex
  6. 2004 –   Start of the year top
    • Rally Start   Monday, Dec 20th (Mon post opex)
    • Rally End Monday, Jan 3rd, 2005
    • Market then fell Jan 24th
  7. 2003 –  Persistent rally with no holiday turns
    • Rally Start: Wednesday, Dec 10th   (Wed post employment)
    • Rally End:   Monday, Jan 26th, 2004
  8. 2001: Some volatility around New Year’s holiday
    • Rally Start   Friday, Dec 14th
    • Rally End: Friday, Dec 28th
    • Market then fell sharply on Dec 31st and Jan 2nd, but bottomed on the 2nd and rallied until Monday, Jan 7th
  9. 2000 – Volatile around the New Year’s holiday (5% plus range)
    • Rally Start: Thursday, Dec 21st (Thurs post opex)
    • Rally End: Friday, Dec 29th
    • Huge swings at the end of the year – Market fell hard on the two days either side of New Year’s then rallied hard on Tuesday, Jan 3rd only to top on the 4th and retrace the rally until the 8th
  10. 1999 – Opex Wed, the 15th (Dec 30th)
    • Rally Start: Wednesday, Dec 15th   (opex Wed)
    • Rally End:   Monday, Jan 3rd
    • Market rallied above upper bollo from Dec 23rd and topped at the start of the year and fell to below lower bollo on Wed, Jan 5th
  11. 1998 – Rally resumed on first trading day of the New Year
    • Rally Start: Monday, Dec 14th   (Opex Monday)
    • Rally End Wednesday, Dec 30th
    • There was a decent pullback from the 30th until Monday, the 4th and then rally continued until Friday, the 8th

Decembers with NO Santa Rally – fell in to the holidays

  1. 2012 – New Year’s bottom at the open on the 31st
    • Start of Fall: Wednesday, 19th
    • End of Fall: Monday, December 31st   (at open)
    • Market then rallied till February, 19th, 2013
  1. 2008 –  Bottom two days after Christmas
    • Start of Fall: Wednesday, Dec 17th (opex Wed)
    • End of Fall: Monday, December 29th
    • Market then fell rallied until Tuesday, Jan 6th, 2009
  1. 2006 –  In the midst of a 4 week pullback with limited turns
  • Start of Fall:   Thursday, Dec 14th   (Opex Thurs)
  • End of Fall: Friday, December 22nd (Friday before Christmas)
  • Rally post Christmas lasted for two days and then market pulled back until Wed, Jan 10th, 2007
  1. 2005 – Bottom at the open of the year
    • Start of Fall:   Wednesday, Dec 14th (Opex Wed)
    • End of Fall: Tuesday, Jan 3rd , 2006
    • Minor Counter trend rally from the 20th – to the 27th, but market did little
  1. 2002 – Bottom on New Year’s Eve
    • Start of Fall: Tuesday, Dec 17th (opex Tuesday)
    • End of Fall: Tuesday, Dec 31st   (New Year’s Eve)
    • January rally lasted until Monday, Jan 13th

 

Opex / FOMC preview for December 2015   (as of midday on Tuesday, December 15th, 2015):

This may be the second month in a row that the market has gotten me with my opex preview!

What does that mean? In general, I prefer to publish my opex preview early in opex week when the market price action becomes somewhat clearer, and I can provide better guidance.   In November, the market surprisingly bottomed on opex Monday – which was only the second opex Monday bottom in a full opex week since 2007.   (Before 2007, there were 3 significant opex Monday bottoms in 1998 and 2 in 2006 and that is it!)

With the 60pt rally from late morning yesterday, there is little edge here and the future market direction will totally be driven by tomorrow’s FOMC announcement.

There are still a number of scenarios for the market. There is just no high probability play right now. Here is a summary of the points I substantiate in the detailed section below.

  • QUAD Opex with an FOMC meeting almost always has a MAJOR turn with the majority of those turns occurring post FOMC (though the Dec 2014 bottom was at the close on opex Tuesday before the FOMC)
  • Current conditions provide no edge
  • Gaps up on opex Tuesday in markets that are trending down are rare and the market has more than a few times reversed and made bottoms later in the opex period.
  • Hourly midcap buys on Friday before opex also are very rare – in 7 of 10 instances, the bottom occurred later in the opex period
  • Hourly midcap buys on opex Monday while this signal has indicated a possible bounce, the primary lows have always occurred later in the opex period (consistent with the rarity of opex Monday bottoms)
  • SPX below lower bollo on Friday before opex week – super rare – no edge now

Bottom Line:

Ultimately, December opex is generally all about when do we bottom and rally in to the last week of the year. There have been 12 rallies in to the end of the year in the last 17 years. (The timing is covered below in the detail)

  • The strong rally from the opex Monday lows could be a repeat of December 1998 and this past November when the lows were on opex Monday.   The market has turned a few times earlier than expected this year (eg: pre employment in November and December, opex Monday in November and opex Friday in April and January)
  • BUT, given the historical tendency for the primary turn to be post FOMC, it is also possible that the current rally is just a bounce and lower lows will be seen later in the opex period, either this week or early next week.

For now, there is just NO EDGE! Great stuff if you got long on Monday. If not, then historically (based on the Tuesday gap up and the hourly midcap buy signals, there is still a possibility for a bottom later in the opex period or even the formation of a significant top (in December 2012, there was an opex Wednesday top and a fall in to the end of the year – the FOMC had occurred the previous week.)

For now, I am just watching. (and smiling ruefully about the delayed preview and the rally) I will be back later in the week, if I notice the development of a significant historical edge.

-D

Detailed Research

Key points about December opex and Quad witch opex weeks that have an FOMC meeting (some repeats from March 15 and September 14)

  •  Quad opex week with an FOMC meeting almost always produce major turns with 50 plus SPX pt moves (June 2013 (bottom), Sept 2013 (top), Dec 2013 (bottom), Sept 2014 (top), Dec 2014 (bottom) , March 2015 (top)), June 2015 (top) and Sept 15 (top) are recent examples.
  • With FOMC during opex week, the primary turn generally occurs post FOMC, though it  – there was a MAJOR bottom on the day before in December 2014 and a major top on the day before FOMC in June 2013 (though the primary turn was a bottom on the Monday post opex)
  • There is an FOMC press conference on Wednesday that will produce volatility – the market generally rallies in to the press conference.

 

Current Conditions (as of midday on Tuesday, December 15th, 2015)

Clearly, there has been a huge bounce. While the daily indicators were suggesting a significant opex bottom was possible early yesterday, the indicators are now neutral.

Last Friday, there was an hourly midcap buy signal. (See below) This indicates a MAJOR bottom should occur during opex week. The daily SPY’s RSI (9) of 32 and MFI (14) of 31 are getting near the area of significant bottoms. (The RSI at the November low was 31) If the MFI gets below 25 (like in Aug 2015), this is an indication that a MAJOR BOTTTOM is near.

On Monday, there was an hourly midcap buy signal, while this signal has indicated a possible bounce, the primary lows have always occurred later in the opex period (consistent with the rarity of opex Monday bottoms)

On a weekly basis, the indicators are neutral.

Gaps up on opex Tuesday are reasonably rare – the last ones were in January and February 2014 – the markets continued higher for at least a week (Jan 2014).   The general rule of thumb is that sharp gap ups on opex Tuesday in markets that are trending down is more of a negative as the market has tended to reverse near the closing level or slightly higher later in the week and go lower for at least a few days if not longer. There have only been 12 significant Tuesday gap ups in the last 6 years. 6 of these occurred in corrective markets. The last corrective instance was April 2013 when the market bottomed on opex Thursday. (The others were Oct 12 – major top on opex Thursday, April 12 – Monday post opex bottom, Jun 11 – opex Thursday bottom, Aug 10 – Wednesday after bottom, July 10 – Tuesday after bottom, May 2010 – Tuesday after bottom)

Hourly midcap Buys on Friday before Opex

There have only been 10 of these signals since 2009 – they are VERY RARE! The last one was October 2014 when there was the MAJOR BOTTOM on Opex Wednesday well below the lower bollo. Taking the hourly signal has only worked Twice (Oct 2012 – rally in to opex and a MAJOR TOP on opex Thursday and Sept 2011 – gap down in to opex Monday and an all opex week rally), otherwise, there should be a lower low on opex Monday and a MAJOR OPEX LOW later in the week!)

  • 1 MAJOR Bottom on Friday before opex (Apr 2014). MID and RUT bottomed on opex Tuesday
  • 2 strong bounces and MAJOR TOPS (Oct 2012 – Friday before opex low and MAJOR top on opex Thursday) and Sept 2011 – opex Monday bottom and all opex week rally and top on Tues post opex (pre FOMC))
  • 7 Bounces and then later in opex bottoms
    • Opex Tuesday Bottom – 1 (Nov 2010)
    • Opex Wednesday Bottom – 2 (Mar 11 and Oct 14)
    • Opex Thursday bottom – 1 (June 11)
    • Opex Friday bottom – 1 (Nov 12)
    • Monday post opex bottom – 1 (Apr 11)

o   Tuesday post opex bottom – 1 (May 2010)

SPX below lower bollo on Friday before opex week

Closing below the lower bollo band on the Friday before opex week is a rare condition. It has only occurred 5 times since Jan 2007

  • Twice it bottomed on Opex Friday and rallied – one was a long lasting rally (Apr 2014 – short opex week) and one was a sharp bounce (Oct 2008)
  • Three times it bottomed during opex week – once was a sharp opex Monday to opex Wednesday rally (Nov 2007) and twice lasting bottoms were made on opex Tuesday (Dec 2014) and opex Wednesday (Oct 2014)

Given the rally, there is now no edge.

December opex Detail

December opex somewhat unexpectedly for the normally hyper bullish Santa rally pundits has produced pullbacks and major bottoms in the last few years so it is one to watch

  • Bottom line, it always produces a good buying opportunity – the question is WHEN? And December opex is all over the map since 2007 in terms of when that buying opportunity occurs….
    1. Dec 2007: Opex Tuesday MAJOR BOTTOM and then MAJOR top on the day after Christmas
    2. Dec 2008: BOTH a MAJOR TOP (Opex Wednesday) and MAJOR BOTTOM (Monday after bottom), had an opex Monday low and a 60 plus point bounce in to Wednesday and then a SHARP fall in to a Major Bottom on the Monday after opex
    3. Dec 2009: Major Bottom on Opex day – Market rallied in to the Wed of opex week and then fell in to opex day, which was the last low until the market stalled and rolled over in mid Jan.
    4. Dec 2010: Minor correction from Fed Day Tuesday top in to a Thursday at the open low and that was the last low for a LONG time until the market peaked at FEB opex DAY!
    5. Dec 2011: MAJOR BOTTOM on Monday post opex – Tues high for the week (though SPX was correcting from the previous week already) and then down in to just Wednesday… Market bounced in to Friday, but then fell hard on the Monday after opex and that was THE LAST TIME the SPX saw 1200!
    6. Dec 2012 – MAJOR TOP on the Wed / Thurs and a MASSIVE O/N move lower on Thursday night / Friday morning before market bottomed a week later on the Friday post opex in the after hours thanks to the FISCAL Cliff
    7. Dec 2013: MAJOR Bottom on Opex Wednesday – A fast and furious one minute spike down to new lows for the month created a bottom and the market was off higher until the end of the year
    8. 2014 – MAJOR BOTTOM on Opex Tuesday – day before FOMC – After an employment day top, the market started to sell off. Sell off accelerated on Friday before opex with a close below lower bollo band – opex Monday and Tuesday were both volatile with closes below the lower bollo band – but the final low was at the close on Tuesday pre FOMC. The market then reversed higher and took off until late December.

It should be noted that the market bottomed on opex Monday in December 1998 as well.

QUAD OPEX WEEKS

QUAD Witch option expiry has a BAD reputation – but it is actually a great time for traders. Interestingly, it is much more likely for QUAD opex to produce a MAJOR turn (move of greater than 50 SPX points) than a minor turn. Amazingly, there is an equal split between TOPS and BOTTOMS and turns of the major variety outnumber minor turns by close to 3 to 1. Latest MAJOR Turn was the Monday post Opex day top in June 2015

QUAD Opex Bottoms

  • except for the Bear Stearns Monday bottom in March 08 and the pre FOMC Tuesday bottom in Dec 2014, they have all occurred from the Wednesday of opex week (twice when there was extreme selling related to issues in Asia (Mar 07 and Mar 11) to the Wednesday after opex (just once – Sep 2012). Last one was the spike low post FOMC in Dec 2013.
  • The Monday after opex is slightly favoured as the most likely day for a low, particularly if it is a post opex pullback in a bullish market (ie March 2010 when we just had a minor Wed post FOMC top to Monday after opex pullback)
  • On a pure price basis (as SPY goes ex div on the Friday) – all of these lows except for one, have seen SPY down on opex day but except for March 09 (down 17), there have not been any huge losses on opex day.
  • Generally, but not always, the high of the week is Monday or Tuesday.   Also, at least one, if not multiple hourly buy signals will indicate that the low is near.
  • The bounces out of Quad opex bottoms are almost always significant with 42
  • pts being the smallest in price and 6 days being the shortest in duration
  • Recent examples:
    • June 2013 a MAJOR Bottom on the Monday post opex after a Tuesday opex top pre FOMC
    • Dec 2013: FOMC on the Wednesday and we spiked down for 1 minute to the low for the month and then we were off – quite a quick MAJOR BOTTOM.

o   Dec 2014: MAJOR Bottom on Opex Tuesday and rally till Dec 29th

Quad Opex Bottoms

  • 2014
    • Dec – Opex Tuesday – day before FOMC
  • 2013
    • Dec:   Wednesday before – FOMC Spike bottom
    • June: Monday after   (Major Bottom)
  • 2012
    • Sep: Wednesday post opex (Minor Bottom)
  • 2011
    • Dec: Monday After – closed at the lows (Major Bottom)
    • June: Thursday of Opex week (Major Bottom)
    • Mar: Wednesday of Opex Week Japan Tsunami (Major Bottom)
  • 2010
    • Dec:   Thursday Before – Minimal 2 day Post FOMC correction (MAJOR Bottom)
    • Mar Monday after (Major Bottom) – after minor correction but MDY Hourly signal
  • 2009
    • Dec – Opex Friday – midday (Major Bottom)
    • June Tuesday After (after big down Monday) – minor bottom
    • Mar:   Opex Friday – at the close – Major Bottom
  • 2008
    • Sep: Thursday Before – Paulson afternoon save (Major Bottom)
    • Mar: Monday Before (Major Bottom)
  • 2007
    • Dec: Wednesday Before (Major Bottom)

o   Mar: Wednesday Before (Major Bottom)

December FOMC and FOMC during opex week

Prior to December 2013 and 2014, the question for December FOMC was always about when does the market top and pull back. In 2014, the market spent three days sliding underneath the lower bollo band and then bottomed at the close on the Tuesday before FOMC. In 2013, the market rose a little bit at the start of the week and then spiked down in a one minute flurry of selling post the FOMC decision and then commenced a sharp rally in to the end of the year.

DECEMBER – timing of the move in to the final week of the year.

As a reminder, there is generally, but not always a rally in to year end. In 12 of the last 17 years, there has been a year end rally.

START of Year end rally:

  1. 2014 – Opex Tuesday
  2. 2013 – Opex Wed
  3. 2011 – Mon Post opex
  4. 2010 – Opex Thurs
  5. 2009 – Opex Friday
  6. 2007 – Opex Tues
  7. 2004 – Mon post opex
  8. 2003 – Wed, the 10th
  9. 2001: Friday, Dec 14th (ended on 28th)
  10. 2000 – Thursday post opex, Dec 21st
  11. 1999 – Opex Wed, the 15th (Dec 30th)
  12. 1998 – Opex Monday, the 14th (ended on 30th)

Start of year end fall

  1. 2012 – Opex Wed (ended on 31st)
  2. 2008 – Opex Wed (ended on 29th)
  3. 2006 – Opex Monday (ended on 26th)
  4. 2005 – Opex Wednesday (ended on 3-Jan)
  5. 2002 Opex, Tuesday, the 17th (ended on 31-Dec)

 

December 2015 Employment Turning Point Preview  (as of 2pm on Thursday, Dec 3rd ):

I noted in the December preview:

  • most of the normal turning point patterns have occurred this year, but quite a few of them – such as the late September (and not early October) bottom or the November Monday opex bottom (normally opex Tuesday or later) or the January opex Friday (not the Tuesday after post holiday) bottom have occurred just a bit earlier than usual.
  • In November, the earlier than expected opex period bottom and the failure (somewhat expected per the holiday preview) to have at least a minor top pullback post Thanksgiving to create a late November or early December low does indicate that the market is operating slightly different right now.

Given the failure to continue to rally in to the December employment report (only 3rd time since 1998) and the first time the market has fallen in to and through the ECB meeting, it is safe to say that we are operating differently.

Given the market’s history since 2009, the market could bottom at any time, but the history of December and also the pullbacks we have seen in to the employment report would suggest that the most likely scenario is for the market to bottom some time between:

  • Next Wednesday (early December pullbacks have lasted 7 to 9 days initially) and December has generally seen rallies in to the FOMC report and opex week.

and

  • Opex Tuesday (when we bottomed in December 2014 and when the longest December employment related pullback would occur)

After we have seen the post employment report price action, I will be able to provide further context

BOTTOM LINE

The market is acting differently than in the past, and one needs to be flexible in one’s thinking and positioning. Bottom picking for at least a few more days could be dangerous to one’s p&l, unless one is quite nimble.

The good news is that this market should set up a good opportunity (at some point and at some price level) for a solid Santa rally.   Even in the worst December instance (2002), there were a few opportunities on the long side, as well as the short side.

Definitely super interesting now!

-D

December EMPLOYMENT DETAIL

 

SPECIAL Research – EARLY December highs

 The market has only fallen THREE TIMES in to the December employment report since 1998! It occurred in 3 consecutive years: 2001 – 2003. It is interesting to note that all three initial declines lasted between 7 to 9 days and bottomed the week before opex. Two of the years then saw rallied for the rest of the year (2001 and 2003), while 2002 just saw a pause.

  • 2001: MAJOR TOP on the Wednesday before (5th). Market had bottomed in late September and had a rally that ended on the Wednesday before employment at the upper bollo band and the 200 day MA. Market declined sharply till Friday the 14th of December at the lower bollo band. It bottomed there and rallied until 4-Jan-02 when it slightly exceeded the declining 200 day MA and effectively double topped and declined in to February.
  • 2002: MAJOR TOP on Monday, Dec 2nd at upper bollo. (3% below 200 day MA) – market had rallied since 13th of November and topped. Market then slid hard for a week until the Monday post employment. Market then bounced around under the 20 day MA before ultimately making the low for the month at the lower bollo on 31-Dec
  • 2003: minor top and pullback – market had a decent rally from 21-Nov, but then hit upper bollo on Wed, Dec 3rd and had a mild week long pullback to the 20 day MA before heading higher the rest of the month. (market was above 200 day MA)

 Recent employment reports

Except for the late January report and the November report, 2015 has all been about WHEN does the market bottom around the employment report –

  • Most of the time, it has been EARLY month weakness and bottoms before the report (Feb, Apr, May (late report), August (before and after), September and October
  • After the report March (Wed after), June (Tues after) and July (Tues after)
  • One other 2015 important note – we have RALLIED in to every opex week this year – except for January when we topped on the Friday before, which was a late employment report and November when we topped on the Tuesday before employment and fell in to opex Monday.

December Employment Reports

Given the market has only ever rallied in to the employment report since 2004, the only thing that might provide some perspective is how long the pullbacks have lasted since December 2007 employment related tops (note: 2010 rally continuation and 2008 was a rally in to the report a sharp drop and then a further rally)

  • Dec 07 – 7 days
  • Dec 09 – 5 days
  • Dec 11 – 12 days
  • Dec 12 – 2 days
  • Dec 13 – 3 days
  • Dec 14 – 11 days

This suggests the market could bottom and rally as soon as the employment day or as late opex Monday. (note: the general tendency – but not always is to rally in to December opex week and Quad opex week – it did not happen in Dec 2014!)

 Current Conditions  (as of 2pm on Thursday, Dec 3rd)

The daily RSI is approximately 42 and the MFI is 54. The weekly stochastics at 83 are still elevated. The market is hourly oversold. There has never been an hourly oversold signal on the Thursday before employment in December since 2009. Hourly buy signals on the Thursday before employment are very rare. Only 9 since the bull market began. The signals have produced 5 losers and 4 winners. No edge there.

I looked at a combination of high weekly stochastics (above 80) to see if the daily RSI of 42 provided any indications. There are not many similar instances. Only 5 instances with the daily RSI below 50 and the weekly stochastics above 80.   There is only one instance – April 2012 – where the market was falling in to the Thursday before the report. In April 2012 the market bottomed on the Tuesday after the employment report after falling for 8 days. (nb: it bottomed 13pts below the lower bollo band)

Note the last time there was such a sharp two day drop prior to the employment report was in August 2014. The market gapped down on the employment report and bounced a bit before falling until the Thursday before opex. The market then rallied the rest of the month in to early September.

 

December 2015 Turning Point Preview (as of close of business on Monday, December 1st, 2015 )

The following is my monthly turning point preview that touches on important and interesting historical information about the upcoming month.

December – more than any other month has an extremely distinct pattern that it generally (though not always) follows. That pattern is as follows:

  • Early December or late November low     (note: has not happened in 2015)
  • Rally in to employment – generally ending post employment
  • Pull back for a few days generally ending on the Thursday or Friday before opex
  • Rally in to opex
  • The opex period can then be a high or more usually a double turn with a high and a low
  • Rally in to year end or at least post Christmas

With the FOMC meeting during opex week, the combination generally provides a minor top and a pullback to a buying opportunity for the rally that at least goes to after Christmas, if not Dec 31st.

It does not always happen – but as most aspects of this pattern have occurred 12 out of the last 17 years, it is a pattern worth noting. (I have not included the detail, but I can do so on request). In 2014, the rally to employment occurred, but the market fell in to opex Tuesday (instead of the usual rally) and then topped post Christmas.

In addition to the above pattern, here are the December highlights:

 Employment

  • In 2015, the employment turns have been quite different and inconsistent compared to previous years. The last three months have had MAJOR TURNS on the Tuesday before employment. There have also been two bottoms on the Tuesday after (June and July), two bottoms on the Wednesday before (April and May), a bottom on the Wednesday after (March) and three employment day turns – (January- major top, February – minor top and August – minor bottom)
  • Given the history since 2007 of bottoming during November opex or post Thanksgiving, the very pronounced trend for December employment is to rally in to the number and minor top some time between the day of the employment report and the Wednesday after. There are exceptions – but even when we topped on the day after Thanksgiving in 2013, we still managed to rally in to the employment number with a bottom on the Wednesday before the report and a minor top on the Wednesday after.
  • In December 2014, we major topped on the day of the employment report and fell in to the major opex bottom.
  • Only outlier to note is that 3 times since 1998 the market has made a Wednesday before employment high and fallen in to employment

FOMC during Opex week

  • There is almost always a rally in to the FOMC meeting when it is during opex week. This almost ironclad rule has been true once again in 2015 – though it took its time with the bottom on the Tuesday before the FOMC in June (and also last December)
  • December opex is slightly different than the other three Quad opex weeks (Mar, Jun & Sept). Somewhat unexpectedly for the normally hyper bullish Santa rally pundits, December opex has produced pullbacks and major bottoms in almost every year (2012’s fiscal cliff drama was the one exception as the pullback lasted till Christmas Eve) so it is one to watch.
  • In December 2014, we declined from the employment day until opex Tuesday, the day before the FOMC.
  • In 2013, there was a spike down low for the month and a major bottom on opex Wednesday (FOMC day)

 Holidays

With the exception of the government shenanigans during 2012 (and 2008), it is true that we always rally in to the Christmas holiday. After the rally in to the holiday, there is almost always a turn at one of the two holidays. Generally that turn is associated with the New Year’s holiday, but in 2007 and 2014, the market major topped post Christmas and declined rather significantly.

Lastly, the ECB meeting is on Thursday. We have rallied in to every ECB meeting in 2015 and with the exception of October, we have topped and at least temporarily pulled back.

Overall, it must be noted that most of the normal turning point patterns have occurred this year, but quite a few of them – such as the late September (and not early October) bottom or the November Monday opex bottom (normally opex Tuesday or later) or the January opex Friday (not the Tuesday after post holiday) bottom have occurred just a bit earlier than usual.

In November, the earlier than expected opex period bottom and the failure (somewhat expected per the holiday preview) to have at least a minor top pullback post Thanksgiving to create a late November or early December low does indicate that the market is operating slightly different right now.

Bottom Line

The ECB meeting, the employment report and the FOMC meeting are especially highly anticipated events this month.   December does generally follow a pattern – even with highly anticipated events, so until there is a clear break from the normal pattern, it is best to keep in mind the pattern noted above.

Very interesting, but must admit right now, it feels particularly challenging right now,
-D

 Note: To shorten this preview, I have removed the detail that I normally include. I also do not have any special research this month

 Current Conditions

There is nothing special to report in the current conditions.   The stochastics indicate the market is due for a pause and a pullback, but as was experienced in October and so many other times in this bull market, the momentum indicators can stay overbought for extended periods of time.

 Other things to highlight:

  • The failure to pullback at the end of November / in to early December (the minor down day on Monday, the 30th, does not count) is VERY RARE. The only previous year since 1998 was 2002. In 2002, the market pulled back until opex Wednesday in November and then rallied until hitting the upper bollo on Monday, December 2nd. The market then slowly slid lower the rest of the month until Dec 31st.
  • This Thanksgiving holiday was only the second time since 1998 where there was no turn around the holiday. The other instance was 2003. The market topped then on Wednesday, December 3rd and had a minor one week pullback to the 20 day MA.

 

Thanksgiving Holiday Turning Point Preview for Nov 2015  (as of 2pm on Wednesday, November 25th, 2015 ):

Thanksgiving has generally been an excellent turning point for many years, but this year has the potential to be just the second year since 2007 (2012 was the other) where there has not been a noticeable turn, particularly if the market continues higher in the next few days. Why?

  • The next ECB meeting is on Thursday, Dec 3rd and we have rallied in to every ECB meeting this year (and topped on that day – except for the October meeting)
  • The market has rallied in to every December employment report since 2007 with the lows occurring no later than the Wednesday before the employment report
  • The 27pt minor top from opex day to yesterday (Tuesday) reduced the overbought pressure on the markets. (That opex day top does still exist, so it may still be significant, but the OB condition is reduced)

A minor top and a pullback must still be expected as the likely outcome, but the evidence noted above gives it a lower probability than history would normally suggest.

One thing to be aware of (that I failed to publish early enough to help in September) is December is The ONE MONTH that most consistently has had an early month low (or late in November low) and a rally in to, at least, the employment report – it has occurred 15 of the last 18 years.

If there is a drop early next week, then this December tendency and 2015’s historical long bias in to the Thursday ECB meeting, might provide an edge for long positions.

Also, one should remember that this has been a year of notable turns either at the very end of the month or the beginning of the next month – 8 of 11 months so far. (All of these turns have represented extremes for the month for a considerable period of time – this is something that is new to this bull market)

  • (January: none, February: Monday, the 2nd, March: Monday, the 2nd, April: Wednesday, the 1st, May: None, June: Friday, the 3rd, July: None, August: Friday, July 31st, September: Tuesday, the 1st, October: Tuesday, the 29th and November, Tuesday, the 3rd)
  • March, July and November were highs. The other times were lows.

Bottom line

The market feels like it has once again entered a challenging period like was experienced between late Feb and mid August this year. December has a fairly distinct pattern with the rally in to the employment report and then a pullback. (I will cover this in more detail next week).

  • If the market continues to rally in to next week, there is a low probability of a Thanksgiving turn.
  • If there is a pullback post Thanksgiving, then the tendency to bottom between the Monday and Wednesday before the December employment report might a provide an historical edge to longs, particularly if the market gets quite hourly oversold.

Happy Thanksgiving!

-D

DETAILS for Thanksgiving

 Current Conditions:

SPY RSI is 61, Stochastics are 90 and MFI is 41. These are lower than in 2013 and 2014 where there were minor tops on the Friday after Thanksgiving. Given they are not at extremes, the current conditions provide no edge in terms of a potential top turn post Thanksgiving.

The RUT has been on a mission since the Nov 16th low, but it should be remembered that it was on a mission until the Friday after Thanksgiving in 2013 and 2014 and topped and fell sharply in to mid December both years.

 Thanksgiving Historically

Thanksgiving is an excellent turning point, particularly for lows – though there was no turn in 2012 (due to the oversold opex day bottom). In 2013, there was just a minor top on the Friday after Thanksgiving. In 2014, there was oddly both a minor top on the Friday after Thanksgiving and a Monday after bottom after a 25pt pullback.

WATCH for lows on Monday after or if a panic, the Friday after…. Has had some tops… but the first few days of the week after are the keys.

  • Monday after lows – 2007, 2008, 2010 and 2014 (after a 25pt Friday to Monday pullback).
  • Friday lows were 2009 (Dubai) and 2011 (massively oversold)
  • There have also been a few years where the low was later, but still in November – (see 2000, 2001 and 2005)
  • In 2013, there was a Friday after Thanksgiving high and a Wednesday after bottom and bounce in to the employment report
  • Between 1998 and 2006: There were turns in 8 of 9 years (2003 was the outlier with a delayed minor top). Overall, it worked very well, though most of the turns were minor

Holidays in General in 2015

Holidays continue to produce reasonable turns. The last two holidays (July 4th and Labor Day) saw volatile markets. The 4th of July bottomed post holiday as expected. Labor Day saw a low re-test on the Friday (employment day) prior to the holiday, but no true extremes during the holiday period as the low had occurred on Tuesday, September 1st.

2015: Two of the holidays where turns were definitely expected – MLK and Good Friday – both had turns a little earlier than expected.

  • New Year’s Eve: Fall continued – given the somewhat unexpected post Christmas top – it was not totally surprising that the market continued to fall until Jan 6th.
  • MLK: MAJOR BOTTOM – occurred the day before – not the day after as is normal
  • President’s Day : (no turn expected as it was during opex week) – No turn – market kept going steadily higher during opex week
  • Good Friday: Major Bottom – again a little earlier than expected – normally Good Friday turn is post the holiday – this one occurred two days before…
  • Memorial Day: minor bottom on the day after – Sharp sell off on the day after – got very hourly oversold (14 RSI on SPY hourly) and bounced 28pts – but just for a day
  • July 4th : MAJOR BOTTOM on Tuesday after post employment –Very volatile due to Greece – BIG gap down on the Monday, but a rally, then a strong sell off on the Tuesday and an 11:30am bottom
  • Labor Day – Very volatile due to August sell off – primary low was Tuesday before employment 6 days before with the low re-tested on the employment day – pre holiday
  • Thanksgiving – ???
  • Christmas – (No turn expected)

 

Opex preview for November 2015 (as of mid morning on Monday, 16 November 2015)

So far, the November opex tendencies that I commented on last Thursday (‘The risks to buying this dip to the 200 day MA are elevated.’) has proven accurate. I have no idea WHY November opex operates this way – it just does!

From here, the markets still do not get much easier on what might exactly happen this opex period. Though with each passing day, the possibilities will narrow. Given the new low today, Opex Monday, the data from the special research – BIG DOWN weeks before opex combined with the data on bearish Novembers provides three realistic scenarios (by likelihood)

  1. Fall in to an opex week low with no significant bounces some time between opex Tuesday (eg. Nov 2010) and opex Friday (eg. Nov 2008 and Nov 2012)
  2. Bounce during opex week and then decline in to a post opex or post Thanksgiving bottom (eg. Nov 2000, Nov 2007 or Nov 2011)
  3. Decline is more severe and market does not bottom until post opex / post Thanksgiving (eg. May 2011 and a number of instance between 1998 and 2007)

In the detailed research section below, I have looked at the data in a lot of different ways.

  • Opex Bottoms this year have been either opex Friday (January and April) or Monday post opex (August)
  • November opex and post Thanksgiving have provided great buying opportunities in 2007, 2008, 2009, 2010, 2011 and 2012
  • Current conditions – if they continue – will provide a strong long side bias later in the week
  • BIG DOWN in to opex week from early month highs – has essentially happened 8 times since this bull market began in 2009.   This data supports a bounce, but NOT a lasting opex period bottom
  • WHEN do opex bottoms occur – this is NEW research and should provide some perspective on when opex period bottoms will likely occur.
  • BIG DOWN WEEKS before opex week – this is a new study. I looked all the way back to 1998 and zoomed in to the 2007 and later data.

BOTTOM LINE:

We are clearly in a bearish November period now – which, in the end, should resolve in, at least, an opex period bounce, if not a longer lasting bottom in to the December employment report or the December FOMC meeting (during opex week). The key things to remember:

  • November provided great late month buying opportunities between 2007 and 2012 – as early as opex Tuesday (for a bounce – 2010) and as late as the Tuesday post Thanksgiving (2007)
  • The day for an opex period bottom is effectively normally distributed with opex Friday and the Monday post opex being the most likely days for a bottom. Though November 2011 is a reminder that opex declines can continue until post Thanksgiving.
  • BIG DOWN in to opex week from early month highs does warn that while a bounce is likely, it may not be a bottom that lasts in to December. The market may need to wait until post Thanksgiving for that to occur.

Risk is elevated here. Once a few more days pass during this opex period, I will post again as the historical data should have narrowed the opex period possibilities quite a bit

Happy that November has become so interesting,

-D

Detailed Research

Recent Opex Weeks

  • Opex has been the driver of many key turns in 2015 – with the notable exception of October – where there was a not totally unexpected rally continuation. All of the turns have occurred either late in opex week (The Thursday top in September was the earliest and the Wednesday post opex tops in May and February were the latest)

November opex Detail

  • Definitely gaining a reputation for major turns – especially bottoms lately – though that was not the case in 2013 or 2014
  • Pre 2011, we made a turn during opex week 2007 (Wed – top), 2008 (Fri – Bottom), 2009 (Fri – low), 2010 (Tues – bottom)
  • 2011 was the MAJOR sell off in to the post Thanksgiving low
  • 2012 was a MAJOR MFI OS Daily bottom on opex Friday
  • Hourly signals have been fairly good with some substantial wins with the exception of 2011 and a Thursday buy in 2009
    1. 2007: Major top on the Wed of opex week and then fell in to the post thanksgiving low
    2. 2008: MAJOR BOTTOM on opex day and a huge 1 week bounce in to a post Thanksgiving top
    3. 2009: Just a minor low on opex day and a 3 day 27 pt bounce
    4. 2010: Major bottom on opex Tuesday – the initial bounce was just a week and 23 pts but we never took out the opex low especially in the MID and the RUT
    5. 2011: MAJOR BOTTOM on the Friday post opex / post Thanksgiving – this one took more time than usual to form
    6. 2012: MAJOR BOTTOM on the Friday of opex week – we were daily OS and the market gapped up and ran post opex
    7. 2013: Employment was the Friday before and it helped create a strong all week rally. We minor topped on the Monday after and pulled back for 3 days and 25pts.
    8. 2014 – Rally continuation – after the MEGA bottom in October, the market was bid all of November and refused to pull back until the very end of the month

Current Conditions (as of mid morning on Monday, 16 November 2015)

  • On a weekly basis, the stochastics have just turned lower and do not provide any useful guidance (though see comments below on BIG DOWN weeks before opex)
  • On a daily basis, the market is getting near oversold levels with an RSI of 31 and an MFI of 28. An MFI below 25 is one of the BEST opex week buy indicators, though it can take a few days to work, this is something to watch
    • There have only been 7 lower Thursday daily stochastics readings on the SPY since 2007. The three most recent low readings (Mar 15, Aug 14 and Oct 12) saw rallies in to opex week that ran higher until at least opex Thursday
    • Three of the other readings occurred in 2008. The fourth in June 2011 saw the market fall in to an opex Thursday bottom that eventually resulted in a strong rally in to the July employment report.
  • On an hourly basis, we are deeply oversold. We got a RARE hourly Buy signal last Thursday that continued in to Friday’s trading as well. This is only the 8th HOURLY BUY signal on the Thursday before opex week in OVER 6 years!   Alas, the results from this signal are mixed. There have been four strong bounces in to opex week and three moves lower that ended with significant opex week bottoms – Dec 2014 – opex Tuesday (the last time this signal occurred), Nov 12 – opex Friday and Mar 11 – Opex Wednesday

A continuation lower this week should set up for a very nice opex bottom, particularly if the daily SPY MFI gets below 25. A strong bounce during opex week will eliminate this edge and make things a bit less certain, though a bottom during the opex period is still likely given the market’s historical opex tendencies.

SPECIAL RESEARCH

BIG DOWN in to OPEX from early month / late previous month Highs since March 2009

  • Big Down from the beginning of the month with limited bounces is NOT something we have seen a lot since the bull market began.
  • Earliest bottom (2) – thanks to the FOMC was Dec 2014 – opex Tuesday and Nov 2010 – opex Tuesday – none of these rallies lasted in to the next month
  • Post opex bottoms (4) – Only one of these – Aug 2010 – was a bottom that lasted in to the next month
  • Opex week bottoms (2) – One – June 2011 – lasted to the next month’s employment report. The other May 2012 was just a ten day bounce
  1.  Dec 14 – Down from employment day – Dec 5th – bottomed on opex Tuesday
  2. Aug 2013 – Fell from an employment day top – did nothing the week before opex and then fell during opex week. Had a brief bottom from Wednesday post opex. Last bottom was formed on 28-Aug
  3. May 2012 – An ugly slide from the first trading day of the month. Bottomed and bounced from opex Friday until post Memorial Day, then fell in to a final low post employment on Monday, June 4th
  4. July 2011 – Topped pre employment on the 4th trading day of the month – bottomed on Monday post opex and bounced for 5 days before the epic August 2011 slide
  5. June 2011 – Slid from the last day of May until opex Thursday, then rallied in to July employment report
  6. May 2011 – Choppy decline that did not end until Wednesday post opex and resulted in a brief bounce in to the end of the month
  7. Nov 2010 – Topped post employment and fell in to a double bottom on Opex Tuesday and the Monday post Thanksgiving
  8. Aug 2010 – Had a sharp opex Monday – Tuesday bounce and then fell in to the final summer low on the Wednesday post opex before embarking on a Monster rally

This data suggests that whatever bottom occurs – it may not be lasting as only 2 of the 8 bottoms (Aug 2010 and June 2011) extended in to the next month.

WHEN DO OPEX BOTTOMS OCCUR?

Over half of the Opex Turns occur between Opex Friday (14%), Monday Post Opex (23%) and Tuesday post opex (16%). Bottoms are slightly more likely to occur during opex week than tops.

For bottoms, opex week is just marginally favoured as the time for an opex bottom. This is due to some times the extreme selling we have seen in to and during opex week that have created lows below the lower bollo band. Opex bottoms that have occurred post opex generally have a decent bounce at some point during opex week or in to opex week (good recent examples – August 2015 and June 2013) and then a sell off later in opex week.

  • Opex Monday:                       2         4%   (Mar 08 – Bear Stearns and Aug 09)
  • Opex Tuesday:                        5          10%   (Dec 14 is most recent)
  • Opex Wednesday:      4         8%   (Oct 14 is most recent)
  • Opex Thursday:                      5          10%   (April 2013 is most recent)
  • Opex Friday                10           20%   (Jan and April 2015)
  • Monday POST Opex  12           24% (August 2015!)
  • Tuesday POST Opex       6              12%   (July 2010)
  • Wednesday POST Opex 4             8%     (August 2013)
  • Thursday POST Opex and post holiday   – None   (Only in Feb and Jan)
  • Friday POST Opex and post holiday   –   1   (November 2011)

Opex when below the 200 day MA since July 2009

This information was posted in the August preview. The full list can be found in the Denali section. This is the 4th consecutive month that the market has spent at least some time below the 200 day MA.   EXCEPT for October 2011 (minor top post opex) and October 2015 (no turn), the market has had MAJOR TURNS.

For completeness, here are the last three opex weeks that were below the 200 day MA:

  • Oct 2015: (NO TURN) After a massive rally from the late September low, the market stalled during the first three days of opex week before surging on Opex Thursday. The pattern repeated the week post opex before another surge carried the index much higher in to early November. There was NO Opex Turn.
  • Sep 2015 – (MAJOR TOP) Strong rally from August opex terminated on opex Thursday post the FOMC a few pts below the 40 day MA and the market then re-tested successfully the August lows at the end of September
  • Aug 2015 – (MAJOR BOTTOM) The gap down break below the 200 day MA on opex Thursday caused an unprecedented wave of selling that ended on the Monday after opex with the SPX 210pts below the 200 day MA. (futures were even lower, but bottomed in the first 7 minutes of trading on Monday morning). The market then began a volatile rally till opex Thursday in September.

BIG Down weeks before opex

Weekly charts or stats is not something I normally assess or research, but as last week’s analysis provide insight in to the possibilities for this past week, I thought I would dig further in to the weekly data – specifically weeks that were down more than 1.8% in the week prior to opex since 1998.

Interestingly, the data pre 2007 was more negative and more cautionary, but still resulted, in most instances, in a solid opex period bottom.

  •  Total of 930 weeks – 169 were down more than 1.8%   (18%)
  • 44 weeks before opex were down 1.8%
  • 22 times since 2007
    • Bounced during opex week – bottomed post opex   –   4 times
    • Fell in to an opex week low with no bounces         – 8 times
    • Bottomed week before opex and rallied   – 4 times
    • One off occurrences – 4 times
      • Bounced in to opex week and fell in to a late November bottom – Nov 2007 – Once
      • Bounce all of opex week and peaked on Monday post opex – May 2008 – Once
      • Bottomed post opex and bounced – Feb 2009 – Once
      • Inconclusive – trendless chop – Feb 2008 – Once

NOTE- 4 severe November slides (2007, 2008, 2010 and 2012) – 3 bottomed during opex week and in 2007, there was a bounce and then a slide in to a post Thanksgiving bottom. (Nov 2000 also did the same)

  1.  Dec 2014 – Bottomed on opex Tuesday (pre FOMC)
  2. Oct 2014 – Bottomed on Opex Wednesday – way below lower bollo
  3. April 2014 – Bottomed on Friday before a short opex week
  4. Mar 2014 – Bottomed on Friday before opex week
  5. Nov 2012 – No daily bounces – slid along the lower bollo to an opex Friday low
  6. Oct 2012 – Opex Monday to opex Thursday bounce and then slid slowly till 30-Oct low in ES (as market was closed for Sandy
  7. April 2012 – Bounced from close of opex Monday to opex Tuesday and bottomed on Monday post opex
  8. June 2011 – Bottomed on opex Thursday – bounced in to next week – pulled back and then strong rally began
  9. Nov 2010 – Bottomed on Opex Tuesday
  10. Aug 2010 –   Opex Monday – Tuesday bounce and fell in to a Wed post opex bottom
  11. July 2009 – Bottomed week before opex
  12. Feb 2009 –   Slid all of opex week – bounced from Monday post opex for a few days
  13. Jan 2009 – Had a sharp opex Thursday – Friday bounce – Bottomed Tuesday post opex and post MLK
  14. Nov 2008 – VERY large one day rally on Friday before opex and then bottomed on opex Friday and rallied for a week
  15. Oct 2008 – Low was on Friday before opex, peaked on opex Tuesday and fell in to a higher low post opex
  16. July 2008 – Bottomed on opex Tuesday
  17. May 2008 – Bottomed on Friday before opex and topped on Monday post opex
  18. April 2008 – Bottomed on opex Tuesday and rally continued
  19. Feb 2008 –   Trendless chop
  20. Dec 2007 – Bottomed on opex Tuesday and bounced in to a post Xmas top
  21. Nov 2007 – Large OPEX Monday close to Opex Wednesday open bounce and then fell to a low on the Tuesday post Thanksgiving
  22. June 2007 –   Bottomed on Friday before opex

Between 1998 and 2007, the market tended to be more negative during the opex period

  • Bounced during opex week – bottomed post opex   – 4
    • Mar 2004 (Wed post), Dec 2002, Feb 2002, Nov 2000
  • Fell in to an opex week low with no / limited bounces   – 6
    • July 2006 (Tues), June 2006 (Wed), Sep 2001 (Fri), Aug 2001, Oct 2000 (Wed), Aug 98 (Mon)
  • Bottomed week before opex and rallied   – 4
    • Dec 2001, Apr 2000, June 1999, Oct 98
  • Fell all of opex and bounced post opex – 5
    • May 2007 (Wed post), March 2005 (Wed post), July 2002 (Wed post), Jan 2002 (Tues post MLK), Feb 2001
  • Bounced in to opex / during opex and then kept falling – 2
    • June 2002, Feb 00

 

November 2015 Employment Turning Point Preview(as of midday on Thursday, Nov 5th )

The primary edge for November employment (buying early in the week weakness) did not happen this employment week. (note: If the market totally falls apart Thursday afternoon and makes new lows for the week (like in Nov 2013) then this statement is invalid)   That means that there is no real historical November employment edge to consider (though one should for now remember 2007 – more on that below)

Below in the November employment detail, I provide support to the case for going lower. The two pieces of evidence that support a move lower are the fact that MOST of the persistent rallies in the last two years have ended around the employment report. (I just completed this research – apologies for not including it in the November preview) Secondly, the SPY ETF has had a second recent MFI signal above and now again below 75. This does not always indicate a top, but it has done so the last three times this condition has been observed.

Given Tuesday’s high for the week (so far) that leaves three things to consider.

  • We are trading like March 2015 where we made an early week high and then fell in to a low on the Wednesday post employment
  • The persistent bull is alive and well, the low for the week 2081 holds and the market continues with a rally in to next week if not opex week
  • Tuesday’s high was more significant (2007). Market is not able to regain its footing and we head lower in to at least opex. (ie. NO BOUNCE in to OPEX)
    • This analog is possible and should be actively considered as long as the market is not able to gain further strength and regain Tuesday’s high.
    • The reason I make this point is that in the five Bearish Novembers (2012, 2011, 2008, 2007 and 2000), once the market had pulled back from an early month / late October (2007 and 2011) high, and it was not able to regain the high, then the market fell in to late in Opex (2008 and 2012) or post Thanksgiving (2000, 2007 and 2011) bottoms

It has been quite some time that I can see clearly two directly opposite scenarios for the employment report and a particularly turning point. The persistent rallies of November 2013 and 2014 are reminders that significant bottoms in October (late September?) can continue for all / most of November.

On the other hand, Tuesday’s high at SPX 2116, provides a clear level that needs to be overcome soon for the persistent bull to remain and demonstrate price action similar to November 2013 and 2014.

If not, then a post employment bottom and a bounce in to opex (like March, June and July 2015) OR a fall in to a late in opex or post Thanksgiving bottom (November 2000, 2007, 2008, 2011 and 2012) need to be considered the primary scenarios for the month.

BOTTOM LINE

We are at a clear inflection point with three distinct scenarios to consider in your trading and positioning.

-D

November EMPLOYMENT DETAIL

Recent employment reports

Except for the late January report, 2015 has all been about WHEN does the market bottom around the employment report –

  • Most of the time, it has been EARLY month weakness and bottoms before the report (Feb, Apr, May (late report), August (before and after), September and October
  • After the report March (Wed after), June (Tues after) and July (Tues after)
  • One other 2015 important note – we have RALLIED in to every opex week this year – except January when we topped on the Friday before, which was a late employment report

September and October 2015 – AMAZINGLY, these two employment reports were almost identical – very rare to see such identical price action two months in a row

  • October 2015 – MAJOR BOTTOM on Tuesday before, market bounced on the Wednesday and Thursday. It gapped down on employment day, testing the highs of Tuesday. Lows were made just after 10am and the market ripped higher
  • September 2015 – MAJOR BOTTOM on the Tuesday before tested on employment day, a bounce in to the Thursday ECB – down hard initially and then a reverse higher in the late afternoon on Friday
  • August 2015 – minor bottom on employment day – a slightly strange one – in that the market ended a three day retreat on the employment report and bounced 38pts in to the Monday, but then it fell away to new lows on the Wednesday post employment before rallying in to opex
  • July 2015 – MAJOR Bottom on the Tuesday post holiday / post employment – lots of volatility due to Greece and China. The low held and the market rallied strongly through opex until topping on the Monday post opex. Rally lasted 13 days and 91pts.
  • June 2015 – Minor bottom – market Topped post May opex and ultimately fell until the Tuesday post June employment and then bounced for two days and 44pts
  • May 2015 (late report) – MAJOR BOTTOM on the Wednesday before a late employment report. Bounced 70pts in 14 days
  • April 2015 – MAJOR BOTTOM on the Wednesday before a Good Friday holiday report – low was tested, but held – bounce lasted 14 days and 65pts
  • Mar 2015 – MAJOR BOTTOM – market topped post Feb opex and fell through the employment report in to a major bottom on the Wednesday post employment
  • Feb 2015 – Just fell on the first day of Feb (a Monday) which is too early for an employment report turn and then rallied until after February opex – though there was a minor top and Friday to Monday 31pt pullback post the February employment report
  • Jan 2015 (late report) – Fell to the Tuesday before employment, bounced in to the employment report, topped near the open and fell in to Jan opex.

November Employment Reports

While some significant moves have occurred– there does not seem to be a real edge. Other than 2007, we have rallied in to the number with the market making bottoms during the week before the number in 2008 (Thurs), 2009 (Monday), 2011 (Tuesday) 2012 (Tuesday with futures – due to the market being closed by Sandy) and 2013 (Thursday before). In 2010 and 2014, there were small dips during the week before the report, but the noticeable pullback lows had been made previously in October.

  • 2007: MAJOR TOP the Wednesday before (On FOMC disappointment)
  • 2008: Minor Bottom on the Thursday before – good for a short bounce in to the Monday after
  • 2009: MAJOR BOTTOM on the Monday before and then the market was off higher
  • 2010: MAJOR TOP on the Tuesday post employment. Post Bernanke op ed – market topped on the day, but did not roll over until the following week
  • 2011: MAJOR TOP on the Tuesday after Very volatile period – market bottomed the Tuesday before (pre FOMC) and then we topped on the Tuesday after and fell until post opex
  • 2012: minor top – GAP UP on the number was sold and the market had a minor top on the day that ended on the Monday after employment as the market rallied in to the election (Sandy impacted – futures made their low on the Tuesday before)
  • 2013: (delayed report by one week) MAJOR bottom After a sharp all day sell off on the day before, we bottomed near the close on Thursday and then surged higher on a positive report
  • 2014 – (rally continuation) Market ended a strong impulsive move during October opex week and then rallied persistently in to the end of November. Other than a small pullback on the Tuesday before employment, the market moved higher steadily higher through the whole employment period

Persistent Rallies in the market – what has happened the next month for employment

Definition (for me) of persistent rallies is no touch of the 20day MA after a significant bottom and a rally that lasts most / all of the month. The recent instances have shown pullbacks of some duration pre or post employment. But Nov 2013 and Jan 13 show that the market can briefly pull back and continue

On balance, last two years, suggest a slightly longer employment related pullback.

  • Feb 2015 – (Bottomed post employment) Market actually topped post Feb opex, but did not fall hard until a test of the high on the first trading day of March failed. Market reversed and bottomed on the Wednesday post employment
  • Nov 2014 – (Topped and pulled back in to opex week) Market pulled back briefly post Thanksgiving and then rallied to new highs post employment. Topped on the Friday and fell hard in to the MAJOR opex low on opex Tuesday
  • Aug 2014 – (Topped and pulled back in to opex week) Market topped on the Thursday before September employment and began a slow rollover that culminated in a bottom on opex Monday and a bounce in to opex day
  • Feb 2014 – (Top and pullback for a week) Market rally finally stalled in early March – Market topped on employment day and fell for a week
  • Oct 2013 – (brief top and continuation) Market topped on Thursday pre employment in November and fell hard for the DAY – Hit the 20 day MA, reversed and continued higher
  • July 2013 – (Top for the month) The market advance slowed post July opex, but kept going until peaking on employment day. Market then fell all of August
  • Jan 2013 – (brief top and continuation) Market briefly topped on employment day at the close and reversed until the Monday post employment then the market rally continued

 Current Conditions  (as of midday on Thurs, 5-Nov)

SPY’s RSI (9) is 70 and its MFI (14) just ended its second period recently in an MFI OB state above 75.

While the daily RSI of 70 is high, this high a daily RSI on the daily employment report has been seen almost 25% of the time since 2007 (RSI above 65). Rally continuations, Major tops and minor tops are about equally split – so there is NO edge with this RSI reading.

  • In Dec 14, there was an RSI reading of 68. Market topped on employment day and fell hard
  • In Nov 14, the daily RSI was 74 and the market kept going

Slightly more interesting is the daily MFI reading which hit a high on 19-Oct above 75, subsequently fell back below 75 on 27-Oct and then got above 75 again on 3-Nov and has fallen back again. This type of MFI action has been seen a few times at recent tops. Most recently at the March 15, Dec 14 and Sep 14 tops – so this indicator may give an edge to the downside.

 

November 2015 Turning Point Preview (as of cob on Monday, 2-Nov-15)

The following is my monthly turning point preview that touches on important and interesting historical information about the upcoming month. 

I thought I had consigned the term ‘persistent bull’ to the history books this past summer – but I must return it to my commentary, as this past month of October has been one for the record books in many regards.

The three points that are particular impressive to me are

  • the largest point gain ever for a month in the SPX
  • the complete disregard for the 200 day MA (though history would suggest that usually at least one if not multiple tests are needed from below to overcome it when the market has been below it for at least 3 weeks)
  • Only the 2nd time since 1986 that the late September low in a declining market was not exceeded in October (2001 was the other year)

Overall, November is a challenging month for swing traders that are looking for turns as it tends to be a month that only provides clear turning point opportunities from the latter part of the month (opex and later) for entries on the long side and some times it trends in such a way that there are either minimal or no real turn opportunities till the very end of the month or early December for those interested in getting short – this was really the case in 2013 (one 25pt post opex turn) and 2014 (no turns until Thanksgiving).

EMPLOYMENT

The edge in 2015 has been to buy employment related weakness on either side of the employment report. Weakness before the employment report is also a November edge. Tops prior to or post employment in November have occasionally occurred, but there is no strong historical edge. With the recent strength in the market, a clear employment buying opportunity does not seem likely.

OPEX

The highest probability opportunities for November opex have been bottoms during opex week or post opex week. While there have been many significant opex tops in 2015, the month of November is not a month that seems to produce significant opex tops.

THANKSGIVNG

The period around Thanksgiving has consistently produced turns – generally minor tops (like in 2013 and 2014) if we are rallying and excellent bottoms if we are falling (2007, 2008, 2009, 2010 and 2011)

SPECIAL Research

The special research below – provides a few points of caution for the bulls.

  • Only 3 of the 6 big UP months that saw new highs in the following month in the S&P500 were followed by continued strength. The other 3 (Dec 99, Aug 00 and Feb 15) fell hard after early month strength (see below for details)
  • Months following opex rally continuations (ie. No turn in opex) had a bullish track record prior to 2014, but Feb 14, Aug 14 and Nov 14, all saw early month strength fade in the following month.

I delayed this preview by a day to see if the early month weakness we have quite frequently seen in 2015 persisted after Friday’s pullback, but clearly not – which most likely strikes one 2015 characteristic (early month weakness) off of the possibilities for the month. This is the first month since Dec 2014 that the market exceeded the previous month’s high during the first few trading days of the month.

Bottom Line:

The bulls (and the persistent bull) have the ball here and there is no clear point until the end of the month or in early December that favors the bears.

Having said that, there have been bearish Novembers that have started out with early strength only to fade – they are just not that frequent (and some are election related). Unfortunately for the bears, there is no November turning point that provides a clear high probability opportunity.

It does not mean that the market can not pull back significantly (as seen in 2000, 2007, 2008, 2011 and 2012), and as seen after some huge up months (like in Feb-Mar 2015) and post persistently bullish months in 2014, it just means that there is no strong high probability turning point edge that might identify when it could occur.

Just as my shoulder starts to be better, it seems possible that this month will not be that interesting, but one never knows…. I will be back with the employment preview and anything of note, if and, when it turns up….

-D

Note: If there is a new all time high in November, then there is likely to be a new all time high in December as the last time the high for the year was in November was in 1983!   (also, occurred in 1982 and 1980)

Detailed Turning Point Comments for November 2015

 November Employment and recent employment reports:

  • Recent employment reports
    • Weakness in the week of the employment report and / or the week after the employment report has been the theme for 2015. We have had unusual weakness every month and then bounces in to opex. This has not been the pattern we have previously seen in most years since 2009.
    • The timing of the early month low has been mixed
      • The low has been as early as the first trading day of February, April and September
      • The low has been as late as the Tuesday (June and July) or the Wednesday (March) after employment
    • March and May 2015 were the only months that saw strong initial moves in the first day or two of trading towards the highs of the previous month before retreating to make their lows for the month after the first Friday of the month (I make this distinction as May was a late employment report)
  • November employment
    • While some significant moves have occurred– there does not seem to be a real edge.
    • Other than 2007, we have rallied in to the number with the market making bottoms during the week before the number in 2008 (Thurs), 2009 (Monday), 2011 (Tuesday) 2012 (Tuesday with futures – due to the market being closed by Sandy) and 2013 (Thursday before). In 2010 and 2014, there were small dips during the week before the report, but the noticeable pullback lows had been made previously in October.

November Opex

  • In 2015, opex has seen more major turns than most years, but October just witnessed the first opex rally continuation of 2015.
  • In general, the market has rallied in to opex week in 2015 with the exception of January when it topped on the Friday before opex on the late employment report. (nb. Even in August, we rallied in to opex with a rally from the Wednesday the week before opex to opex Tuesday)
  • When falling in to November opex, the market has set up a number of great buying opportunities (2008 – opex day, 2010 – opex Tuesday, 2011 – Friday post opex and post Thanksgiving, 2012 – opex day)
  • When rallying in to opex, there is no set pattern. It has only occurred 3 times since 2007. There were small post opex pullbacks in 2009 and 2013 and a rally continuation in 2014.

 Thanksgiving Holiday

  • Thanksgiving is an excellent turning point, particularly for lows – though there was no turn in 2012 (due to the oversold opex day bottom) and there were just minor tops on the Friday after Thanksgiving in 2013 and 2014 – prior to the last three years, it had a very strong turning point edge.

The Rhythm of November

October rightly has a reputation when the month has been below the 200 day MA as a bear killer. It does not happen all of the time (see 2008), but it happens a lot of the time. November is generally a bullish month, and there have been lots of bullish Novembers when the market has been below the 200 day MA in October.

For the bullish Novembers (total of 10 out of 17), all pullbacks are bought and do not last more than a few days before new highs are made until at least late in the opex period, if not until Thanksgiving (see 2013 and 2014 as recent examples)

For the bearish Novembers (5 out of last 17), except for 2007, there has been early November strength that ended around the election or post employment and then the rallies were brief 2 to 3 day affairs that could not exceed the previous large down days.

For the Neutral Novembers (2 out of 17), there was a move higher early on until post the employment report and then a fall in to opex week and bounce (2010) or a bottom (2002). For both years, the low for the month was made during opex week, but the pullback was not very significant.

(*** if below 200 day at some point in October)

Bullish Novembers   – 10

  • 2014***, 2013, 2009, 2006, 2005***, 2004***, 2003, 2001***, 1999*** and 1998***

Bearish Novembers with low during opex or later – 5

  • 2012, 2011*** (but initial strength), 2008***, 2007, 2000***

o   2012, 2008 and 2000 could be election influenced too
Mixed Novembers (early Strength – weakness in to opex) -2

  • 2010 (double bottom lows on opex Tues, the 16th and Nov 29th ) and 2002 (13th low opex Wed)

SPECIAL RESEARCH
BIG Months Up – Biggest Monthly Gains – October 15 is the largest ever – what happened to the other 8 months that showed a gain of at least 80pts?

  • Three bullish continuations – Two (Oct 98 and Sep 10) kept going all of the following month and Apr 01 continued for most of May 01
  • Three (Dec 99, Aug 00 and Feb 15) peaked right at the beginning of the next month and fell hard.
  • Two (Mar 00 and Oct 11) both had peaked in the last week of the big up month and fell till the middle of the following month (Apr 00) or towards the end of the following month (Nov 11)
  1. Dec 99 (80pts) – Rode the upper bollo post Christmas and then fell hard on the first 3 days of the year to the lower bollo
  2. Oct 98 (82pts) – Another strong November – but pulled back from 30-Nov to 14-Dec – bollo to bollo
  3. Aug 00 (87pts) – Peaked above upper bollo on the 1st of Sep and the bear was on
  4. Apr 01 (89.1) – All below 200 day MA – brief peak from 2nd to 4th of May and then ran until closing above upper bollo post May opex
  5. Sep 10 (92) – Kept going slowly and steadily all of October as well – surged in early November with the Bernanke op ed (topped on 5-Nov), but then topped and rolled over and closed slightly lower for the month
  6. Feb 15 (110 pts) – High lived for 3 months was tested on first trading day of March
  7. Oct 11 (122) – topped on 27-Oct and after a bounce from 20 day MA on 1-Nov – till post employment – fell hard until post opex / post Thanksgiving
  8. Mar 00 (132 pts) – Peaked post FOMC on 24th of March – had a big drop on 4-Apr, but bounced then plunged till the 14th of April
  9. Oct 15 (159pts) – ???

No Opex Turn – Rally continuation

There have been 9 opex period rally continuations (where there has been no discernible pullback or weakness during the opex period) since 2007. Prior to the three in 2014, the persistent nature of the bull market allowed the market to continue higher with minimal weakness. For the three rally continuations in 2014, early month strength ended for at least a week post the employment report.

Oct 15: ???

  1. Nov 14: In December, the market pulled back briefly at the end of the month and then topped on employment day and fell sharply in to opex
  2. Aug 14: Market stalled in early September and declined from Thursday before employment until opex Monday and then bounced to until the high of the month on opex day
  3. Feb 14 – Surged during the first few days of March, but topped on employment day and fell for a week (ended up range bound for the month)
  4. Oct -13 (late employment report post opex) – The market stalled between on the 30th of October and did nothing until a sharp one day fall to the 20 day MA – market then resolved higher starting after the employment report
  5. Jan 13 – After the fiscal cliff crisis low at the end of December, the market surged higher and kept going. February was a slower month, but was persistently higher until some post opex weakness set in
  6. Feb-12 – Market double topped at the upper bollo at the end of Feb / beginning of March and fell sharply over a 3 day period to the lower bollo before moving steadily higher in March.
  7. Jan-12 – February 2012 was just a steady move higher that never even touched the 20 day MA
  8. July 09 – Market made a significant low in early July and kept going until employment day in August and then pulled back until early in opex week
  9. Apr 07 – market dipped slightly at the end of April, but then kept higher in May with just occasional visits to the 200 day MA.

 

September 2015 Employment and Holiday Turning Point  (as of early afternoon on Thursday, Sept 3rd )

FIRST, the introduction this could be an almost exact replica of what I wrote in July…. My suggestion back then that fresh lows on the employment day or as late as the Wednesday after would be what history suggested would occur – in the end, we bottomed on the Tuesday after at 2044.

Unfortunately, history provides no such suggestion for a post employment holiday bottom – it is possible, but so is a rally continuation and an employment related top and pullback.

Some of the things that I wrote in July are the same for pre employment now in September. Essentially,

  • The market has seen early month bottoms (and at least bounces) every month this year. This month is NO DIFFERENT except for the fact that historically the last Tuesday of August and the first Tuesday of September have had a remarkable history for market turns – not everyone (for example 2014….), but there have been a lot of excellent opportunities, particularly buying opportunities on those Tuesdays
  • Unlike previous years, the employment reports in 2015 have been producing lots of bottoms – 6 months in a row right now – the bottoms have occurred between two days before (April and May) and three days after (March). Unfortunately, Tuesday’s low, if it holds, does NOT meet the criteria for an employment bottom.

Two other important points to remember are the early month bottoms and the history of the first Tuesday in September being an important turning point in many years.   This could well mean that Tuesday’s 1903 low holds and we squeeze higher in to opex like we did in February and April.   (note: February 2015 did have a small employment related pullback, but the low from the first trading day held)

Additionally, we have been rallied in to opex 6 of the 8 months this year (just January and June did not) and September opex has a particularly strong bullish bias with only 2008 (since 2007) seeing lows later than opex Monday during the week.   The market does not always rally in to September opex as in 2014, there was a Thursday pre employment top that sold off until opex Monday and in 2011 (which shares similarities to this year), there was a sharp Tuesday to Thursday post employment rally and then a pullback to 3pt lower lows on Opex Monday before the market squeezed higher all of the Sept 2011 opex week.

Bottom Line   

Right now, there is NO employment report / turning point edge.   Historically, the low this past Tuesday, the 1st, could set the market up for a nice squeeze in to opex week or possibly like February 2015, there might be a small employment related pullback and then a move higher towards opex week.

As I am not long, the only pattern, I would look to play is a sharp pullback below 1903 that ends next Tuesday or Wednesday. At 1960 on the SPX this does not seem likely, but it is the only play that makes sense if you are flat and looking to play the turning point edges.

Best advice is to not get married to either side of the market right now, it is volatile and as long as the VIX stays elevated above 20, it will stay volatile.

I’ll be back post surgery…. Just not sure when,

-D

September EMPLOYMENT DETAIL

Recent employment reports

  • August 2015 – minor bottom on employment day – a slightly strange one – in that the market ended a three day retreat on the employment report and bounced 38pts in to the Monday, but then it fell away to new lows on the Wednesday post employment before rallying in to opex
  • July 2015 – MAJOR Bottom on the Tuesday post holiday / post employment – lots of volatility due to Greece and China. The low held and the market rallied strongly through opex until topping on the Monday post opex. Rally lasted 13 days and 91pts.
  • June 2015 – Minor bottom – market Topped post May opex and ultimately fell until the Tuesday post June employment and then bounced for two days and 44pts
  • May 2015 (late report) – MAJOR BOTTOM on the Wednesday before a late employment report. Bounced 70pts in 14 days
  • April 2015 – MAJOR BOTTOM on the Wednesday before a Good Friday holiday report – low was tested, but held – bounce lasted 14 days and 65pts
  • Mar 2015 – MAJOR BOTTOM – market topped post Feb opex and fell through the employment report in to a major bottom on the Wednesday post employment
  • Feb 2015 – Just fell on the first day of Feb (a Monday) which is too early for an employment report turn and then rallied until after February opex – though there was a minor top at 3 day 31pt pullback post the February employment report
  • Jan 2015 (late report) – Fell to the Tuesday before employment, bounced in to the employment report, topped near the open and fell in to Jan opex.

Essentially, unlike previous years, 2015 has seen early month weakness and then rallies of varying degrees in to opex week (except for January)

  • There have been three post employment bottoms (March, June and July) that were preceded by post opex tops and one pre employment bottom that was preceded by a post opex top (April)
  • There has been one late major pre employment bottom (May)
  • There has been one early month major bottom that led to a minor employment day top (Feb)
  • There has been one bounce from the Tuesday before employment in to a Major late employment day (ie. Friday before opex) top (Jan)

The primary point being that we have seen a lot of beginning of the month bottoms: 5 of the 8 months (Jan, March, May, June, July and August) in 2015 have seen excellent buying opportunities on the Tuesday or Wednesday after the first Friday of the month and then rallies in to opex. January had a rally, but it ended on the late employment day. February and April bottomed on the first trading day of the month and rallied in to opex.

September Employment Reports

A MIXED edge – while very important, there is more variability than most months as there have been a number of rally continuation after lows or dips at the end of August or in early September – which occurred in 2010 ( 31-Aug), 2012 (30-Aug and 4-Sep: Double bottom) and 2013 (28 – Aug)

  1. 2007: Major bottom on the Monday after
  2. 2008: Major top on the Monday after – a nice bounce from employment day low, but the gap up on the Monday post employment was sold immediately
  3. 2009: Major bottom on the Wednesday before
  4. 2010: Rally continued – there was a dip on the Tuesday before, but we had already made a MAJOR low post opex
  5. 2011: MAJOR BOTTOM on the Tuesday after
  6. 2012: Rally continuation – ECB cut rates the day before and we soared for another week
  7. 2013 – Rally continuation – after major bottoming the day before Labor Day weekend for the SPX and the day after the holiday for the MID and the RUT, the market exploded higher in to September opex
  8. 2014 – minor top – after an extended August rally minor topped on the Thursday before employment and fell just 32pts in to opex Tuesday

What happens when there is an employment report followed by holiday weekend
Labor Day: The key is the first few days of the week before employment. If the market has hit the upper bollo band during August, but then corrected in to the week OR the market has hit the lower bollo band during August or early September then a rally in to and through the report is likely.   There is only one year where the market did not touch the lower bollo band during August or correct in to the week before employment and the holiday – this was 2006 and we topped on the Tuesday post employment / post holiday and pulled back in to opex.

It should be noted that 1998, 1999 and 2011 saw significant volatility around the holiday and the report.

Labor Day

  • 1998: Volatile, but the lows held – Summer collapse ended on Tuesday, 1st of September below lower bollo band. The lows were re-tested on employment day, but held and the market gapped and went on Tuesday post employment
  • 1999: Bounced in to the report and topped on Tuesday after: After topping post August opex and correcting sharply till Thursday, 2-Sept, the market experienced a 3 day bounce, but then topped near the open on the Tuesday post holiday (note hit lower bollo band in early August and upper bollo post August opex)
  • 2000: MAJOR TOP on employment Friday: After rallying all of August, the market peaked for the year just above the upper bollo band and fell relentlessly in to October
  • 2004 – NO TURN – Rally continuation – after bottoming in the second week of August below the lower bollo band, the market started a slow, steady rally that did not end till post September opex
  • 2005: No turn – Rally continuation – After sliding all of August, the market bottomed on Tuesday, August 30th at the lower bollo band and began a rally that ended at the upper bollo band on the Friday before September opex
  • 2006: Minor top on Tuesday post employment / post holiday – after an extended summer rally from the July opex low, the market briefly pulled back from the Tuesday post holiday till opex Monday (note the market briefly exceeded the upper bollo band during August opex)
  • 2009: MAJOR BOTTOM on Wednesday before – After a sharp three day 42 pt correction from above the upper bollo band, the market bottomed on the Wednesday before employment and the holiday and rallied until post September opex.
  • 2010: RALLY Continuation – After correcting for most of August, the market bottomed post August opex at the lower bollo band and then after re-testing the low on the Tuesday before employment, the market took off and rallied until early November
  • 2011: VOLATILE – after bottoming post August employment at the lower bollo band, the market began a 3 wave rally (opex top and post opex bottom) that ended on the Wednesday before employment – there was then a 90 pt correction until the Tuesday post holiday /employment, a 2 day 64 pt bounce and then a 3 day 68pt fall till opex Monday.

Labor Day holiday

Overall, a holiday to watch carefully, but not a great one

  • The Tuesday after has been a turn day in 2008, 2011 (low), 2012 (low) and 2013 (low after for MID and RUT, day before for SPY)

The key for the Labor Day turn is the end of Aug / beginning of September. Both the last Tuesday in August and / or the first Tuesday in September have become key turn times (mostly minor ones). In bullish years (ex 2008), there has been an end of August pullback that has ended between the last Tuesday in August and the first Tuesday in September. 

Current Conditions

Like July – but with a much bigger range – the SPY is still trapped in its late August range. It actually looks similar to the end of June / early July – though clearly things have changed a lot.   On a daily technical basis, the market is neutral and provides no edge.

The SPY is MFI Oversold (MFI 14 below 25) on a weekly basis for only the 4th in the last 10 years. The other periods were Q1 2008, Q3 / Q4 2008 and Aug 2011. The other three periods saw sustained weakness for extended periods of time. On a daily basis, the SPY was daily MFI OS for just one day – Monday, August 24th.

  • This daily MFI OS condition has occurred 30 times since Jan 2007- there have only been 8 times where we made an oversold low and never re-tested it – either with a second instance of being oversold or either a test of the low price day or new lows. Many of these failures to re-test have occurred recently (Aug 14, Feb 14, Oct 13, Nov 12). The last daily OS period was in Jan 15. The low was broken on the first day of Feb and then a strong rally ensued.

 

September 2015 Turning Point Preview (as of cob Tuesday, September 1st):

 The following is my monthly turning point preview that touches on important and interesting historical information about the upcoming month.

September is definitely the most challenging and data rich month of the year in terms of turning points and also historical tendencies.

I have looked at September in many different ways and provided all of the details down below for two reasons – the first is that I wanted to provide you with a full view of the possibilities for this month. The second is that with the exception of a preview of the employment report and Labor Day, I may not be able to post any further previews until late October as I am undergoing shoulder surgery next week (the 8th).

Here are the key highlights:

  • Beginning of the month bottoms: 5 of the 8 months in 2015 have seen excellent buying opportunities on the Tuesday or Wednesday after the first Friday of the month and then rallies in to opex.
  • September employment – more variability than most months, but fresh lows on the week post employment would provide a strong edge
  • Labor Day Holiday – not the strongest edge historically, but holidays have been working well in 2015 for turns. The last two turns have been on the Tuesday after the holiday.
  • September QUAD opex and FOMC – Since 2003, September opex has always seen rallies in to the opex period with the exception of 2005 and 2012 that saw peaks on the Friday before opex week. March and June quad opex weeks both saw lows post employment and then MAJOR tops on the Monday post opex. When the FOMC is during opex week, there is almost always a MAJOR turn – generally tops – post FOMC.
  • End of September / October: There is a tradeable long side bias that comes in to play for a rally during the last 3 days of September and the first 3 days of October.
  • Septembers to remember – covers the two ways that September has generally traded since 1998 (though 2014 was a slight exception)
  • Special Research – Here I covered some of the most significant downtrends that have occurred that share similarities to Aug 2015 and I outline the two highest possible scenarios.

Bottom Line:

The reasonably tranquil trading range period that started in November 2014 has ended. The market can and will do many things to confuse and hurt the most people. It will take time for investors and traders to adjust to the new market situation. While it seems a cliché, the earliest this period is likely to end is in October – which has seen so many significant bottoms through the years (2014, 2013, 2011, 2008, 2005, 2004, 2002, 2000, 1999, 1998, 1997 , 1994, 1992, 1990, 1987)

While it is possible that Tuesday, September 1st provided a solid first Tuesday of September low – something that has occurred quite a lot (with the most significant one occurring in 1998), the scenario with the highest probability turning point trading edge for this month is a bottom post employment / post Labor Day next week and then a rally in to opex week and the FOMC.

The other possible, but less likely scenario is a decline through the FOMC and opex week. While this has been seen in other Quad opex months, September has not seen declines in to the opex period since the four years between 1999 and 2002.

Definitely, super interesting and challenging right now,

-D 

Detailed Turning Point Comments for September 2015

 First trading day of the month

  • The dynamics of the market have been different in 2015. The usual pattern of rallying from a post opex pullback in to the employment report – that has been so prevalent for MOST of the bull market since 2009 is no longer occurring. Instead we are seeing early month weakness. 5 of the 8 months in 2015 have seen excellent buying opportunities on the Tuesday or Wednesday after the first Friday of the month and then rallies in to opex.
    • January – opened up strongly, but sellers stepped in and market continued falling until Tuesday, Jan 6th and then bounced in to a late employment report
    • February – Market fell to new lows for the year on Monday, the 2nd and then rallied strongly for the rest of the month
    • March – Closed at the highs on Monday, March 2nd and looked ready to make new all time highs – gapped lower the next day and fell through the employment report until Wednesday, March 11th
    • April: Fell sharply on Wednesday, April 1st – that was the low for the month and the market was strong in to opex week
    • May: Monday, the 4th (2nd trading day) was a strong gap up that held all day – market gapped lower and fell 45 pts for two days before making the low for the month on Wednesday, the 6th before a late employment report
    • June: Nothing special occurred – market was in a very tight range from Tuesday, May 26th until it started breaking down a bit on Thursday, June 4th. Bottomed for the month of Tuesday, June 9th post employment
    • July: After closing on the lows on Monday, June 29th bounced until the open on the employment report on Thursday, June 2nd, then made low for the month on Tuesday, July 7th

o   August: Gapped up and fell on Friday, July 31st and then bounced around until the initial extreme of the month was hit on Wednesday, August 12th – then rallied 53pts in to opex Tuesday

 Last Tuesday of August / First Tuesday of September

(Apologies – if this is irrelevant after the fact info, but I decided to post as it is good to know about) We did see a low close on the last Tuesday of August last week. We also saw some extreme selling on Tuesday, September 1st.

  • The last Tuesday in August or the first Tuesday in September have been notable turn days since the MAJOR BOTTOM on Tuesday, Sept 1st
  • There have only been 6 years out of the last 17 that have not seen a turn on one of those Tuesdays (2000, 2001, 2002, 2009 and 2014)

 September Employment and recent employment reports:

  • Recent employment reports
    • While it has not happened with every employment report in 2015, the strong trend has been for the market to BOTTOM for the employment report turn – this has been a change from the market behaviour from 2009 to 2014
    • Strongest edge has been to wait for a low on the Tuesday or Wednesday after the first Friday of the month
  • September Employment:
    • A mixed edge – there is definitely more variability than most months
    • In 2010, 2012 and 2013, there were rally continuations after late August / early September lows

o   2007, 2008 and 2011 saw MAJOR turns on the trading day after the employment report

 Labor Day Holiday and Recent Holidays:

  • Recent Holidays – 2015 has been the year of the MAJOR Bottoms around the holidays. Bottom for MLK was on opex Friday, the day before. Good Friday – cash low was on the Wednesday before, futures low was on the day – thanks to the employment report. Memorial Day (28pt 1 day bounce) and July 4th (low for the month and 91pt rally) were both the Tuesday after.
  • Labor Day – Overall, it is a holiday to watch carefully, but not a great one in terms of consistency of turns, especially when post employment. There have been three holidays post employment since 2007 – Only one (2011) saw a post holiday bottom. The other two (2009 and 2010) saw rally continuations after lows during the week before the employment report.

 September Opex and FOMC (Opex Thursday), recent QUAD opex weeks:  

  • September opex – There is almost ALWAYS a rally in to it or a significant rally during the week – 2011 and 2014 did see fresh September lows on Opex Monday, but then rallied during opex week. 2014 topped at the open of Opex day while 2011 made its turn on the Tuesday post opex / pre FOMC. With the exception of 2005 and 2012 when the market made highs on the Friday before opex, the last true declines in to Sept opex were in the four years between 1999 and 2002.
  • QUAD Witch option expiry has a BAD reputation – but it is actually a great time for traders. Interestingly, it is much more likely for QUAD opex to produce a MAJOR turn (move of greater than 50 SPX points) than a minor turn. Amazingly, there is an equal split between TOPS and BOTTOMS and turns of the major variety outnumber minor turns by close to 3 to 1. Latest MAJOR Turn was the Monday post Opex day top in June 2015
  • FOMC: Oddly, the final day of the FOMC meeting is on opex Thursday – normally it is the Wednesday. The only other time I can recall there being a Thursday meeting and press conference was in 2012 – when the fall top occurred on the Friday post FOMC – though this meeting occurred the week before opex.     The open of opex day should be very interesting!
  • Key things to remember:
    • Markets generally have rallied in to opex in 2015 – only exception in 2015 (so far) was January 2015

o   There is a tendency for counter trend moves to occur in to opex / FOMC in the month after strong moves – (See special research below)

 End of September / Early October: One other little know occurrence for September is the regular occurrence of either bottoms or at least one large up day that occurs on one of the last three days of September or the first three days of October. Four times, it has marked a major low since 1998. The most recent one was the 2011 low on the 2nd trading day of October. In 2013, there was a 21pt SPX bounce from the 30th of Sept to the 1st of October. In 2014, there was a strong 53pt bounce from the 2nd day of October (the day before employment) until the Monday post employment.
Septembers to Remember

While there is great fear of the month of September, it has been a remarkably consistent month in terms of how it trades – at least until post opex / post FOMC – there have just been two primary approaches to the month.

  1. Trend established in late August or early September and then rally / decline till either post FOMC or post opex (10 years since 1998)
  2. Less Trend – more of a trading range with a change in trend occurring between the 9th and the 12th (6 years since 1998)

The most interesting thing is that a new trend is established or the end of a pullback in the primary trend seems to almost always occur on either the last Tuesday of August or the first Tuesday of September. There really are only three significant exceptions since 1998 (2000, 2001 and 2002). 2009 (Wed low) and 2013 (low for MID and RUT, but not SPX) are minor exceptions.

Note: 2014 slightly broke the pattern with a high on Thursday, the 4th and a low on opex Monday, the 15th – but the primary turn occurred post FOMC with a top on Friday, September 19th at the open.

 SPECIAL RESEARCH

There are many things to consider with the current market – two that seem of particular importance to look at are post opex bottom and bounces (what happens next?) and what has occurred after extended trends have ended since the bull market began (2010, 2011, 2012).

In looking at all of the post opex bottoms since 2007, the end of prolonged rallies since 2009 and some of the notable sell offs, there seem to be two scenarios that would provide traders / investors with very strong trade-able edges. In the end, anything can happen, particularly during a Quad opex month, but here are the two scenarios that provide traders with the strongest edge:

  1. Bottom post September employment and rally till late in the opex period with the highest probability days for a high being opex Friday and the Monday post opex
  • Analogs / partial analogs – May 7June 2012, Jul / Aug 2011, Aug / Sep 2011, May / June 2010
  1. All rallies are sold and market makes new lows during September opex before finally finding a bottom and rallying strongly some time during the Sept opex week
  • Analogs / partial analogs – April /May 2012 May 2011, Sept 08,
  • The current market is following the characteristics of most post opex bottoms (only 3 out of 17 since 2007 started enduring rallies) Here are notes from the 14 post opex bottom bounces
    • Aug 13 – made new lows after the bounce, but then rallied strongly until the Thursday of opex week / post FOMC – then corrected in to early August
    • April 12 – May was a down all month until opex day – there was then a brief bounce and a final low post June employment
    • Aug 11 – The high before the final end of the correction was on 31-Aug. September opex was a squeeze higher from a low on opex Monday to the final top turn on the Tuesday post opex / pre FOMC on Tuesday, Sept 20th – then fell to final lows in early October
    • July 11   – Bottomed on Tuesday post August opex and bounced in to start of August opex
    • May 11 – Market was down, down, down through the June employment report until bottoming on opex Thursday in June.
    • April 11 – bounced till first trading day of May and then down, down, down (see above)
    • Jul 10 – Rally peaked on Monday post August employment and fell to a final (higher) low on Wednesday post August opex
    • May 10 – re-tested the opex low on Tuesday post employment then staged a countertrend rally throughout opex until peaking post June opex and falling until the final corrective low on Thursday, July 1st.
    • June 09 – Final low was on Wednesday post employment and post holiday in July. Market then blasted higher
    • Feb 09 – After bounce fell to new lows and the bear market bottom on Friday, March 6th
    • Jan 09 – Bounced until Monday post Feb employment and then essentially fell relentlessly until the final March bottom
    • Jan 08 – peaked on employment report and fell for 6 days. Market then stalled before resuming its move down in early March

o   Oct 07 – Peaked on October 31st and fell relentlessly until Monday post Thanksgiving

  • The August 2015 post opex bottom and bounce share similarities to a number of the other periods during this bull market that saw the end of prolonged rallies. The months of particular interest are as follows:
    • May 2012 – Spring peak was on first trading day of April and the secondary high was on first trading day of May. Market then fell hard till opex day. There was a brief bounce and then a final low for the year on the Monday post June employment.
    • August 2011 (below 200 day MA)– very volatile period – initial low was post August employment with a secondary low post August opex. The high before the final end of the correction was on 31-Aug. September opex was a squeeze higher from a low on opex Monday to the final top turn on the Tuesday post opex / pre FOMC on Tuesday, Sept 20th – then fell to final lows in early October
    • May 2011 (above 200 day MA) – Spring top was on Monday, May 2nd. Had a brief bounce post May opex, otherwise trend was down, down, down until corrective bottom on opex Thursday in June

o   May 2010 (primarily below 200 day MA) – Flash Crash month saw a post opex bottom and bounce and then a low re-test on the Tuesday post June employment. Market then squeezed higher until Monday post June opex / pre FOMC where it topped and fell in to its 2010 lows on the Thursday pre employment / pre holiday in July (1-Jul-10)

  • For interest, to see if I could learn something, I also looked at
    • Nov 00 – first extended break from 200 day MA ended on opex Wednesday in October. Market then bounced in a 3 wave move to the 200 day MA with the next high occurring on Monday, November 6th below the 200 day MA and then the market was down till the end of November
    • Aug / Sep 1998 Bottomed on Tuesday, 1st of Sept and had a choppy up trend in September – peaked at 200 day on 28- Sept, fell till final lows on 8-Oct
    • 1997 – not relevant – sharp fall, but above 200 day MA

o   1990 – Sharp break from 200 MA – bottomed on Friday, August 24th and bounced till Monday, 10th of September and fell till Friday, Sept 28th. After sharp bounce until October 2nd, fell till final lows of the correction and the year on Thursday, October 11th

 Current conditions as of COB on Tuesday, September 1st

The SPY is MFI Oversold (MFI 14 below 25) on a weekly basis for only the 4th in the last 10 years. The other periods were Q1 2008, Q3 / Q4 2008 and Aug 2011. The other three periods saw sustained weakness for extended periods of time. On a daily basis, the SPY was daily MFI OS for just one day – Monday, August 24th.

  • This daily MFI OS condition has occurred 30 times since Jan 2007- there have only been 8 times where we made an oversold low and never re-tested it – either with a second instance of being oversold or either a test of the low price day or new lows. Many of these failures to re-test have occurred recently (Aug 14, Feb 14, Oct 13, Nov 12).  The last daily OS period was in Jan 15. The low was broken on the first day of Feb and then a strong rally ensued.

 

Opex preview for August 2015 (as of close of business on Wednesday, August 19th, 2015):

In this preview, I have included a lot of detailed research. The SPX is currently range bound – so its actions within that range need to be the primary scenario. For the SPX in opex during 2015, the primary turns have been spike low bottoms on opex Friday in January and April and tops post opex in the other five months.

For now, that must remain the primary outcomes, but there are three points that I cover below in my detailed research that provide support for a late in opex or post opex bottom well below the 2080 SPX closing level. These three points are:

  • Opex Wed buy – normally see late in opex or post opex bottoms
  • Opex Wed bottoms – except for Oct 14, produced late in opex or post opex bottoms
  • SPX below 200 day MA during opex since July 2009   (plus a note on Aug 2009)

In my August preview, I noted the following:

There have been a number of significant declines related to external crises (Asia, sub prime, etc…) in to opex that have produced significant selling early in opex week that have resulted in major opex bottoms. When China had its major sell off event in February 2007, it produced a major bottom in the subsequent opex week during March of 2007 – it is early days to highlight this possibility, but given the China news (noise?), it is something to keep in mind.

While the SPX has not broken down yet, emerging markets and commodities are certainly under the type of extreme pressure that I noted at the beginning of the month is the type that produced significant opex bottoms. Many of these bottoms have occurred during opex week.

August opex – when it is in bottoming mode – tends to produce post opex bottoms (see 2010, 2011 and 2013). For 2015, the two opex bottoms have occurred on opex Friday.

Bottom Line:

The market can bottom and rally at any time – maybe it stays in its range and just moves higher to touch the top of the range later in August or September or even just post opex next week. Until the range is broken with force, one must assume that is the highest probability scenario.

Still, the scenario – which is an outlier – that is possible – and which I will wait for – is a more dramatic slide in the next few days that will produce a significant major bottom well below the 200 day MA and the lower bollo which will be good for at least a solid rally, particularly in the RUT, in to late August or early September.

It is the low probability scenario that we last saw play out in October 2014 when the market broke the 200 day MA with force on opex Monday and bottomed on opex Wednesday.

Ever interesting,

-D

Detailed Research

Pre market on Tuesday, I posted the following:

  1. The high for opex week is rarely on Monday. The last opex Monday high for the week was during the very bearish period of Oct 14 when we MAJOR bottomed on opex Wednesday. Prior to that, the last Monday high for Opex week was in April 13 (when we MAJOR bottomed on Opex Thursday). The opex week low has been on Monday the last two months when we have major topped on the Monday post opex.
  2. Last Wednesday’s spike low at SPX 2051 is similar to the lows we have experienced in a number of periods during the week before opex. The most recent one was in May** (post opex top). There was also one in March (post opex top). In August 2014, we had a similar low the week before opex and then did not see another turn until the first week of September.
    • **nb – I did not include the June 2015 low as it was closely re-tested on opex Monday

The market is still range bound. Within the context of the range, we have had two spike down lows on opex Friday in January and April. The other 5 opex months have seen well bid markets during opex week that did not top till the Monday post opex (3 times) and the Wednesday post opex (2 times)

(note: The high so far this week has been on opex Tuesday….)

Opex Wednesday Gap downs

5 instances where we created MAJOR Bottoms during the opex period – but tough to read when they might occur

  • Jan 09: Market gapped down and ran to lower bollo, next day it opened higher and traded below lower bollo, but then rallied in to opex day… MAJOR BOTTOM was at the close on the Tuesday after opex / post holiday
  • May 09 – Gap and Go… closed at the lows… bounced all day Thursday… but then reversed again to have an opex day bottom and bounce in to the week after….
  • Aug 09 – Gap Fade… gapped down to the Monday lows was faded and we ran higher till the end of August….
  • Jun 11: (Gap and Go) – Had bounced hard on the Tuesday and then fell hard on the Wed creating the MAJOR BOTTOM on the Thursday – we were quite daily OS
  • Nov 11: (Gap and Go) – This marked a real market BREAK from the 20 day MA and we just plunged all week in to the MEGA bottom post opex and post Thanksgiving
  • Apr 13: (Gap and Go): Like in Jun 11 – had bounced hard from an all down day on the Monday, but totally reversed on the Wed in to the MAJOR bottom on the Thursday
  • Nov 13: (Gap Fade): TOTAL FAKE OUT – gapped below the lows of the previous two days – just above the 20 day MA and we rallied VERY HARD in to a small post opex top on the Monday after
  • May 14: (Gap Fade) Made new all time the day before. Gapped down, but did not go far on the Wednesday. Market then gapped down on the following day, the Thursday, sold off strongly and then reversed in the middle of the day and that was the opex low and we were off on another strong V reversal rally
  • Oct 14: (Gap and Go) VERY powerful gap down and sell off with the market way below the lower bollo.   Selling exhausted itself and there was a strong bounce – Market formed a MAJOR BOTTOM on this day – though the lows were tested on the following day.

Hourly Buys on Opex Wednesday

  • Always seems to bottom later in the week or early the following week – EXCEPT for Oct 14!
  • 7 winners – 4 of which were 2nd buys!
    1. May 09 – opex day bottom, (2nd signal of the week)
    2. Jun 09 – bounced till the Friday, Tues after bottom, (2nd signal of the week)
    3. May 2010 – very volatile, Tues after bottom, (1st signal of the week)
    4. Dec 2011 – Monday after bottom, (2nd signal of the week)
    5. April 2013 – 2nd Signal (for the week) – nice bounce and then bottomed on Thursday at 3pm!
    6. Jul 14 – oddly just a bounce that was a winner while the 2nd buy was a flat – bottomed the next day
    7. Oct 14 – NAILED A MEGA BOTTOM
  • 2 Flat
    1. Dec 11 – Low was Monday after (1st signal of the week)
    2. Jul 14 (2nd buy) – Bottomed the next day and ran higher for a week
  • 2 LOSERS
    1. June 2013 –post FOMC collapse – MASSIVE LOSER (1st signal – Bottom on Monday after)
    2. May 2014 – BIG loser as we had topped the previous day at new all time highs…. But then bottomed the next day

August opex Detail

  • Used to be a major turn every year– but has not been one since 2011
  • 2008 and 2009 – Major top and Major bottom were the Monday of opex week 2007 was the Thurs of opex week
  • Since 2009, the bottoms that have occurred have occurred post opex – two MAJOR BOTTOMS 2010 (Wed after opex) and 2011 (Mon after opex) and one minor bottom in 2013 (Wed after opex)
    1. 2007: MAJOR Panic Bottom on the Thursday of opex week
    2. 2008: Major top on the Monday of opex week
    3. 2009: Major bottom on the Monday of opex week – this really was the end of a post employment correction and then the rally resumed
    4. 2010: MAJOR Bottom on the Wednesday after opex –
    5. 2011: Major bottom on the Monday after opex
    6. 2012 – Just a minor top on the Tuesday after with a 3 day 28 pt pullback
    7. 2013: Had topped on August employment day and a slow rollover accelerated during opex. We minor bottomed on the Wed post opex, but just bounced for 5 days and 31 pts
    8. 2014 Rally continuation – market got quite oversold in to the low for the month on the Thursday before opex week – market then rallied and kept going all opex week and onwards in to early September – unexpected given the usual August opex tendenciesOpex when below the 200 day MA since July 2009
    9. Since the bull market left the 200 day MA behind in July 2009, the market has not spent very much time below the 200 day MA. Here are the instances since July 2009 when the market spent at least some time below the 200 day MA during opex.
  • Oct-14 – first went below the 200 day MA on opex Monday. MAJOR bottomed on opex Wednesday well below the lower bollo band and 85pts below the 200 day MA. Then rallied till late November
  • Nov-12 – First breached the 200 day on the Thursday of the week before opex. Broke away hard from the 200 day on Opex Wednesday. MAJOR bottomed on Opex Friday just below the lower bollo band and 39pts below the 200 day
  • Jun-12 – Below 200 just for employment – major bottomed post employment
  • Dec-11 – had been below 200 day almost the whole time since July. MAJOR bottomed on Monday post opex 58pts below 200 day MA
  • Nov-11 – Below 200 day for almost whole month. Started falling on opex Wednesday – just 12 below the 200 day MA. Did not stop till forming a MAJOR bottom on the Friday post Thanksgiving and post opex a bit below the lower bollo and 109pts below the 200 day MA
  • Oct-11 Major correction low was on Tuesday, October 4th. There was a bull-bear battle during opex that resolved higher into a late October top
  • Sep-11 – Squeezed higher all of opex week due to very bearish sentiment. Topped on Tuesday post opex till some 63 below 200 day MA and fell in to October’s final low
  • Aug-11 – The US credit downgrade mini crash formed the low for the month on Tuesday, August 9th. Market bounced until opex Wednesday, the 17th and then bottomed on the Monday post opex 162 pts below the 200 day MA and 20pts above the August 9th low
  • Aug-10 – the summer low had been made in early July, but the market had failed from just above the 200 day in early August. The market rode the lower bollo lower until bottoming on the Wednesday post opex 77pts below the 200 day.
  • Jul-10 – had bottomed in early July – just had an opex Thursday to Tuesday post opex pullback before heading higher in to August
  • Jun-10 – Actually bottomed on Tuesday post employment and squeezed higher until topping on Monday post opex just above 200 day. Then fell in to early July employment / holiday low
  • May-10 – Fell through 200 day on Opex Thursday, market was choppy until falling Tuesday post opex when it bottomed 60 below 200 day and 17 below lower bollo. Market then moved higher in a choppy fashion until post June opexAugust 2007 should also be noted as it was the first extended period below the 200 day near the end of the last bull market. After topping during July opex, the market fell hard until bottoming on the Monday post employment below the 200 day MA. After a powerful bounce, the market then fell strongly below the 200 day on opex Tuesday. The slide continued until the market MAJOR bottomed on Opex Thursday, 84pts below the 200 day MA and 27pts below the lower bollo

Current Conditions ( as of cob on Wednesday, August 19th)

The SPX is still caught in its extended range. It is right on top of the 200 day. There is no strong edge with the current SPX conditions. The RUT and MID have been falling since post June opex, the RUT more significantly. It is continuing to probe its lower weekly bollo band – which did produce a MAJOR bottom and bounce in the May 2014 opex. The Wednesday hourly buy signal in the MID and the Wednesday opex gap down are all indicative of a market that is currently under pressure, but should bottom later during opex week or post opex.

 

August 2015 Monthly Turning Point Preview and August 2015 employment preview      (as of cob on August 3rd, 2015):

(note: as I am returning to Zurich from the US on Wednesday, I will not be able to produce an employment turning point preview later this week)

August is the leanest month of the year in terms of turning points – just two. There is some blogosphere speculation that the Jackson Hole Fed conference is a significant turning point, but I can not detect any discernible evidence of clear turns for most years around the conference dates. There have been a few significant end of month / early September buying opportunities, but these do not seem to be related specifically to the Jackson Hole conference dates.

While August may be a lean month, both August employment and August opex have produced many significant turns through the years.

Here are the key points for August

  • Trends almost always occur until after employment report ending on the Mon or Tues post employment
  • Opex is almost always very good for turns
  • Price action at end of month can yield pre Labor day turns
  • August has produced more major bottoms than tops
  • If the market is rallying, the market may produce just a trading range top and pullback.

Employment:

  • In 2015, the employment report has produced a lot more major turns than has normally been observed during this bull market.
  • Most of these turns have been bottoms post employment – in July 2015, the low for the month was the major bottom on the Tuesday post employment / post the 4th of July.
  • August – more than most months has produced almost all of its employment returns post the employment report with the Monday or Tuesday post employment being the normal turn dates.
    • The only year that had a pre employment turn was during 2012 when the August bottom occurred on the Thursday post FOMC / pre employment
    • In 2014, a number of the indices bottomed on employment day, but the SPX made its final bottom on the Thursday post employment (there was a 27pt 3 day bounce before the slightly lower low
  • The full details for the August employment reports since 2007 are below. There have been 6 MAJOR employment related turns during the month of August since 2007

Opex:

  • Opex has been producing a lot of major turns in 2015 – all of the MAJOR tops have occurred post opex (June and July’s major tops occurred on the Monday post opex) while the two major bottoms in January and April occurred on opex Friday
  • Between 2007 and 2011, August opex always produced a major turn, but this streak was broken in 2012 when there was just a minor post opex top. The last two year’s have been equally un-exciting with a minor bottom post opex in 2013 and a somewhat surprising rally continuation in 2014.

There have been a number of significant declines related to external crises (Asia, sub prime, etc…) in to opex that have produced significant selling early in opex week that have resulted in major opex bottoms. When China had its major sell off event in February 2007, it produced a major bottom in the subsequent opex week during March of 2007 – it is early days to highlight this possibility, but given the China news (noise?), it is something to keep in mind.

Bottom Line:

The market is still in a trading range. If the market continues the decline that occurred on Monday through the end of the week, a high probability buying opportunity could be setting up for post the employment report.

Overall, given the fact that August tends to produce more significant bottoms than tops, the bears may need to wait for September for a break lower if that is the market’s plan. Though, just watch for a possible panic move lower in August – it may not happen – but it just feels like it is going to happen one of these months.

Two more weeks of my kids’ summer vacation remain – once that is over I will be fully back to my normal commenting.

ENJOY this fun summer month!

-D

August employment detail

  • 2007: MAJOR BOTTOM on the Monday After – but only for a sharp bounce as we then fell in to opex
  • 2008: Major Bottom on the Monday after and another sharp bounce
  • 2009: Minor top on the Friday and a pullback that lasted in to opex
  • 2010: MAJOR TOP on the Monday after pre FOMC
  • 2011: THE CRASH on the Monday after and a MAJOR BOTTOM on the Tuesday after – which was FOMC day
  • 2012 – FOMC was before employment and it looked like we might fall heavily post FOMC, but we MAJOR bottomed on the Thursday before and never looked back – given the previous years, it was a high risk low
  • 2013 (Post FOMC): After the all month rally in July, the market surged on 1-August on the day after the FOMC, the market peaked near the close on the employment report and declined 79pts over the course of the whole month of August
  • 2014 (post FOMC) – major slide from the end of July in to the August employment report stopped on employment day – but the initial bounce was just a minor one of 27pts – there was a slightly lower low on the following Thursday which was the bottom for the month of August and the market took off higher.

August opex detail

  • 2007: MAJOR Panic Bottom on the Thursday of opex week
  • 2008: Major top on the Monday of opex week
  • 2009: Major bottom on the Monday of opex week – this really was the end of a post employment correction and then the rally resumed
  • 2010: MAJOR Bottom on the Wednesday after opex –
  • 2011: Major bottom on the Monday after opex
  • 2012 – Just a minor top on the Tuesday after with a 3 day 28 pt pullback
  • 2013: Had topped on August employment day and a slow rollover accelerated during opex. We minor bottomed on the Wed post opex, but just bounced for 5 days and 31 pts

o   2014 Rally continuation – market got quite oversold in to the low for the month on the Thursday before opex week – market then rallied and kept going all opex week and onwards in to early September – unexpected given the usual August opex tendencies

FOMC Turning Point Preview for July 2015 (as of early morning on Tuesday, July 28th):

This July FOMC meeting is the first summer FOMC meeting that has NOT coincided with the July employment release since 2003.  Generally, it has only been the January, April and October meetings that have NOT been combined with either employment or opex to create a powerful turning point combination.

While I would love to have been able to identify a clear pattern to these non press conference, non combined FOMC meetings, there just does not seem to be one, except to say the following:

  • If the market has been rallying for some time, then a minor top post FOMC is likely (eg. Oct 14, Oct 13, Jan 11) – though these minor top pullbacks could just be a function of the market being OB after extended rallies
  • If the market has been falling for some time, then bottoms have occurred around the turn of the month (eg. 30-Apr-15, 2-Feb-15, 3/5-Feb-14), but again like the tops, this may be more of a function of the turn of the month and the market being oversold.

When considering this current market, two points come to mind after Monday’s 8.5% China fall –

  • the first is Feb 2007, which commentators noted was the last time China had such a big fall. Back in 2007, the market continued lower until the employment day in March, then bounced and made its final low during March opex
  • The second is the MAJOR July opex tops in 1998, 1999 and 2007. In those three years, the market continued to fall in to early August until at least the employment report (2007 – Aug 3rd) or post employment (1998 – Aug 5th and 1999 – 10th of Aug)

Overall, I have no strong views on any potential analogs for the current market price action, but the above two points are worth keeping in the back of your mind when considering the markets and your positions.

Bottom Line

Until 2040 or 2135 are decisively broken, the SPX is still in a trading range. This particular FOMC meeting does not seem to present any strong turning point edge. From the perspective of initiating fresh positions, history suggests that early August till possibly as late as post the employment report may be the best time to consider long positions with strong historical edges.

I am sorry, I can not be more insightful – it is just the way things are with this current FOMC meeting schedule.

-D

FOMC:

Generally, FOMC meetings are times for turns – except for occasionally the January meeting

  • The window of opportunity for a FOMC inspired turn point is from 2 days before to 3 days after.
  • Here is what has occurred in the last few FOMC meetings that have NOT had a press conference or been combined with the employment report or opex
    • Apr 15 – minor bottom on day after Fed day
    • Jan 15 – MAJOR BOTTOM on Monday post Fed day – first trading day of February
    • Oct 14 – minor top on Tuesday post FOMC
    • Jan 14 – Continued falling with largest down day occurring on Monday, Feb 3rd – though final low was on Wednesday, Feb 5th.
    • Oct 13- minor top on Fed day

July / August FOMC meetings

  • Until date change, this meeting was very much driven by employment dynamics – with the date change in the late July / early August – less certain
    • 2007: Markets had been falling sharply since the July opex top, but the fall stopped the day before FOMC – there was a HUGE bounce for FOMC, but then we topped the next day and continued down
    • 2008: MAJOR Bottomed post employment on the Monday and then had a BIG one week bounce in to OPEX Monday
    • 2009: Had peaked on employment day (the Friday before) then bottomed at the close on the day (Tuesday) before and had a decent bounce till the day after before falling hard in to OPEX MONDAY and bottoming!
    • 2010: Gapped up and topped on the Monday post employment / pre Fed and then fell, fell, fell in to opex
    • 2011: THE AUGUST CRASH – fell hard on the Monday post employment and bottomed on Fed day and had a HUGE bounce in to opex week
    • 2012: Pre employment – topped on the Monday as it was VERY OB after a huge 6 day post opex bounce and then fell through FOMC till the day after where it bottomed and bounced – different dynamics than usual possibly due to the date change
    • 2013 – MAJOR TOP After a relentless rally that barely paused all of July, the market continued to run post FOMC in to the employment day, but topped near the close and fell for the whole month of August
    • 2014 – minor bottom on employment day – two days after FOMC. Market had peaked on the Thursday, the week before and had pulled back a bit. The market was unchanged on Fed day, but then fell sharply (-39pts) the day after Fed day.

CURRENT CONDITIONS

While the current SPX daily RSI (9) of 38 is quite low (9th lowest out of 68 meetings since Jan 2007), there is no super strong edge for a bottom occurring right here at these levels. There have certainly been many more bottoms than tops at this SPY RSI level, but some times the lows – like in Jan / Feb 2014 do not occur for quite a few more days and at much lower levels.

 

Opex preview for July 2015  as of close of business on Monday, July 13th, 2015):

There are a few key things to remember about opex overall and opex specifically in 2015,

  1. We have always rallied in to opex week in 2015
  2. We have turned every opex in 2015
  3. If the opex turn has been a top, it has been post opex and if it has been a bottom (just two instances), it has occurred on Opex Friday (Jan and Apri)
  4. The low on Tuesday, July 7th below the lower bollo band has some of the characteristics (though not quite as oversold) of the lows that we have seen during months where there was NO OPEX turn and simply a rally continuation (eg Aug 2014)
  5. Opex Monday gap ups are a frequent occurrence, There have been 21 in the last 6 years. There is no set pattern for an opex week with a Monday gap up. There are a few instances since the bull market began that the Monday gap up marked a significant new leg higher in the bull market, but there are quite a few others – such as March 2015 where the market topped during the opex period.

The move down in to the July 7th low is a reasonably rare occurrence, as the market normally rallies in to early July. Since 2007, there have been two major bottoms in early July – 2009 and 2010. The current market shows a number of similarities to the 2010 period. In 2010, the market topped post June opex (same as this year) and then fell in to early July until there was a strong move higher from the employment / 4th of July low. In 2010, the market then stalled in the middle of opex week and had a sharp pullback which re-traced just under 50% of the rally and ended on the Tuesday post opex. The market then moved higher in to early August. In July 2009, the market did not look back after the post 4th of July / employment low and powered higher in to early August.

In March, May and June 2015, the market made lows in the week after the first Friday of the month and all produced post opex tops. In August 2014, the market made a low on the Thursday before opex week and there was NO opex turn – just a rally continuation in to the major September top (in early Sept for MID and RUT and opex day for SP500).

Bottom Line:

Unlike other opex months, such as June 2015, where the strong possibility of a major post opex top existed, the possibilities for this opex period are more balanced. There has not been a rally continuation for an opex period since November 2014, and last week’s low and the sell off since the major top post June opex have increased the probability that July opex does not have a turn. A post opex or late in opex top is still the most likely outcome for this opex period, but I would not be surprised if the market continued higher through the opex period in to later July or early August.

Lastly, given the volatility in the last two weeks, one should not forget the July 2010 analog, which saw a sharp sell off from opex Thursday to the Tuesday post opex and then a rally in to early August.

My posting will be light in the next few weeks, as my kids are on their 5 week summer vacation, so the ‘Mr. Mom’ aspects of my job are more substantial. ENJOY your summer holidays!

-D

Detailed Research

GAP ups to start Opex week?

There really is NO set pattern for the week when we have a strong gap up to start opex week. In 2014 and in 2015, the Monday gaps (except Dec 14) have been quite bullish with rallies occurring for at least a few more days.

  1. Mar 2015 – Almost the standard story. Market had bottomed the previous week and it ran higher with just a few wobbles until the Monday post opex and post FOMC – it then gave up all of the gains!
  2. Dec 2014 – Market appeared to have bottomed the previous week, but this gap up was sold and the market fell very hard for two days before the FOMC – it bottomed on the close of opex Tuesday and never looked back until late December.
  3. Aug 2014: Just like May and Jul 2014, the market had made a post employment corrective low – (quite oversold) the previous week. This time the market pulled back on opex Tuesday to fill the gap, but then really never looked back until early September
  4. Jul 2014: Market had corrected to the Thursday before opex and then bounced strongly, but peaked on Opex Wednesday and had a HUGE down day on opex Thursday that tested the previous week’s lows. Opex Thursday was again the low for the week and the market rallied for another week
  5. May 2014 – a strong gap and go that ripped higher all day – market then stalled on the Tuesday and had a significant pullback which made new lows for the week and tested the previous week’s low on opex Thursday. Opex Thursday was the low and the market took off higher.
  6. March 2014 – for a LONG time this gap looked like it would not fill as we had a HUGE rally on Monday and Tuesday…. It finally filled over 3 weeks later – CRAZY
  7. Dec 2013: Gap got filled in the crazy one minute spike down post FOMC, but then the rally was back on – Monday was up, Tuesday opened slightly higher than Monday’s close, but then was down all day…. Then came the minute long spike down to new lows for the month post the FOMC on Wednesday.
  8. Sept 2013: Gap was NOT filled that week – but we topped on Opex Thursday and finally filled the gap at on 27-Sep
  9. July 2013: Gapped up on the Monday – closed the gap up on the Tuesday, but rally kept going until a minor top on the Wednesday after opex.
  10. June 2013: Did not close the gap on the Monday, but MAJOR TOPPED on the Tuesday and closed the gap on the Thursday with a HUGE Gap and GO DOWN – MAJOR Bottom on the Monday after
  11. Dec 2012: MAJOR Topped on the Wednesday for SPY and Thurs for MDY / IWM – collapsed o/n on Thursday, bounced on Friday, but then down till the following Friday –
  12. June 2012 – GAP was filled that day and we traded down to Friday’s low – we made a slight lower low on opex Tuesday and then rallied till peaking the following week on the day before FOMC
  13. Feb 2012: Monday was a hammer day, but the markets closed the gap on Tuesday, had a decent red candle on Wednesday, but rallied Thursday and rallied until the 1st of March
  14. Jan 2012 (Monday Holiday): Tues low of the week, Thurs high of the week – Minor top from the Monday after with a 16 point pullback – we were up 27 points on the week – the gap was not closed until June 2012.
  15. Aug 2011: This was a BIG GAP and GO – we closed almost at the highs – pulled back on Tuesday, made a slightly higher high on the Wednesday and then collapsed on Opex Friday and made a post opex low and rallied on the Monday
  16. Sep 2010: Wed low and Fri high in a week where we did nothing – topped out the Tuesday after and pulled back for 2 days and 25 points   – we were up 17 points on the week – the gap was closed in August of 2011!!!
  17. June 2010: 9 pt SPX gap was filled on the day, but we had a GAP and GO on the Tuesday as well and the market kept going until a gap up on the Monday post opex (pre FOMC) failed and the market slid to fresh annual lows in early July
  18. May 2010 (flash crash month): Gap up failed, but after falling hard during the day, there was a late day rally and the market closed unchanged…. There was another gap up on the Tuesday, which failed as well and then we slid almost 70pts in to the post opex low on the Tuesday post opex
  19. Feb 2010 (Monday holiday): This was coming out of the SUPER OS bottom in early Feb and we had a Tuesday low (Monday was a holiday) and a Friday high with a top on the Monday after and a 25pt pullback from the Monday after to the Thursday after. We were up 31 points on the week – the Gap up was closed during the flash crash in May 2010
  20. Dec 2009: (FOMC during opex week): Hammer day on the gap up – gap filled on opex Tuesday and then we made a slightly higher high on opex Wednesday (FOMC day) and then we fell till just over 22pts till noon on opex Friday and then we were off until January opex
  21. Nov 2009: Gap and Go…. But hit the upper bollo and faded… Monday was the high for the week and the month…. We then fell for the rest of the week…. And did not bottom until the post Thanksgiving Dubai bottom….

Current Conditions ( as of cob on Monday, July 13th )

On a weekly stochastic basis, the market closed last week at its lowest level for a week before opex since November 2012, which shows the slow deterioration the market has had since the MAJOR TOP post May opex. The hourly and daily conditions of the market are not particularly noteworthy after Monday’s rally.

July opex Detail

  • STRONG record for turns – only 2009 missed one and that is because it turned strongly post holiday / post employment the previous week
    • 2007 Major Summer top on Opex Thurs
    • 2008 Major Bottom on opex Tuesday as we had been sliding for weeks and were very oversold
    • 2009: Made a very strong bottom the week before and just rallied the rest of July with opex having ZERO impact
    • 2010 Major Bottom – Tues after at opex
    • 2011 Major bottom on Monday post opex and a strong 3 day 51 pt bounce before the summer slide resumed
    • 2012 – Was a MAJOR TOP on opex Thursday and a MAJOR bottom on the Tuesday post opex – very volatile
    • 2013 – Just a minor top on the Wednesday after opex, which was a surprise as we were up relentlessly all of July, but the market only pulled back for 3 days and 25 pts before topping on August employment day
    • 2014 – Minor bottom on Opex Thursday – a strange week with a Wednesday high and then a sharp move lower in to a Thursday low and then a bounce for a week – topped on Thursday post opex and fell hard in to early August.

July 2015 Employment and HolidayTurning Point   (as of early afternoon on Wednesday, July 1st ):

There is a lot of detailed research below, as this particular holiday and employment report has lots of different ways to look at it.

The market has seen early month bottoms (and at least bounces) every month this year. Tuesday’s low, as it occurred on the last day of the month does not meet that criteria. We did hit a low on April 30th and then bounced for two days, but then fell further in to a low on Wednesday, May 6th

Unlike previous years, the employment reports in 2015 have been producing lots of bottoms – 4 months in a row right now – the bottoms have occurred between two days before (April and May) and three days after (March). Tuesday’s low, if it holds, would meet the criteria for an employment bottom

As for the holiday, the 4th of July has produced turns every year since 2008 from the day before the holiday (2012, 2013 and 2014) to up to 3 days after (2009). For 2015, the holiday turns have been occurring as would be predicted – all have been bottoms – with two before (MLK and Good Friday) and one after (Memorial Day) that just produced a strong 1 day 28pt bounce.

Bottom Line   

An employment bottom looks likely. It is possible that it already occurred on Tuesday, June 30th at SPX 2056, but the history of July 4th and July employment reports would suggest otherwise – with fresh lows and a bottom likely either on the employment day or early next week (as late as next Wednesday).

Unfortunately, the history does not provide a strong clue as to whether it might occur pre employment or post employment, so if there are fresh lows on the employment report day, we could still go lower in to next week. Sorry about that.

Definitely much more interesting than July 2014!

-D

July EMPLOYMENT DETAIL

Recent employment reports

Will not focus on the most recent reports (look at June’s report for that), instead want to look at when we have bottomed this year when we have traded down in to the employment week, Unusually, there have been moves down in employment week every month this year

  • June 2015 – Minor bottom – market Topped post May opex and ultimately fell until the Tuesday post June employment and then bounced for two days and 44pts
  • May 2015 (late report) – MAJOR BOTTOM on the Wednesday before a late employment report. Bounced 70pts in 14 days
  • April 2015 – MAJOR BOTTOM on the Wednesday before a Good Friday holiday report – low was tested, but held – bounce lasted 14 days and 65pts
  • Mar 2015 – MAJOR BOTTOM – market topped post Feb opex and fell through the employment report in to a major bottom on the Wednesday post employment
  • Feb 2015 – Just fell on the first day of Feb (a Monday) which is too early for an employment report turn and then rallied until after February opex – though there was a minor top at 3 day 31pt pullback post the February employment report
  • Jan 2015 (late report) – Fell to the Tuesday before employment, bounced in to the employment report, topped near the open and fell in to Jan opex.

Essentially, unlike previous year’s, 2015 has seen early month weakness and then rallies of varying degrees.

  • There have been two post employment bottoms (March and June) that were preceded by post opex tops and one pre employment bottom that was preceded by a post opex top (April)
  • There has been one late major pre employment bottom (May)
  • There has been one early month major bottom that led to a minor employment day top (Feb)
  • There has been one bounce from the Tuesday before employment in to a Major employment day top (Jan)

The primary point being that there has been early month weakness in every month this year and 3 out of 6 times (March, May and June), the primary low did not occur until the second week of the month, which would be post employment and the holiday for July.

July Employment Reports

  • LOTS of turns occurring – in fact, we have had one every year since 2007 with many of them being major ones. Quite unusually in four of the last five years (2010, 2011, 2012 and 2013) we have turned the day before the report
    1. 2007: Minor top on the Monday after
    2. 2008: Minor bottom on the Friday amidst relentless selling that did not stop until opex week
    3. 2009: A MAJOR bottom post holiday on the Wednesday after – these were the last lows of 2009
    4. 2010: A MAJOR BOTTOM on the Thursday before and these were the last lows of the year as well
    5. 2011: Got VERY OB pre employment after a relentless rally and we had the SUMMER TOP on the Thursday before
    6. 2012: A similarly relentless rally as in 2011 and a MAJOR top on the Thursday before, but this move only lasted 6 days
    7. 2013: (post holiday): MAJOR BOTTOM pre holiday – after a two day 22pt pullback, the market rallied hard on the employment report and rallied for most of the rest of July
    8. 2014: (pre holiday) – minor top – closed at the highs on employment day after a steady, persistent rally in June – market pulled back 32pts until the following Thursday

What happens when there is an employment report followed by holiday weekend

4th of July: There is no strong tendency – highly dependent on what has occurred in June with respect to the upper and lower bollo bands – if we have bottomed at some point during June at the lower bollo band then a rally continuation is likely (1998, 1999) (ONE Exception where we just continued lower– 2008). If we have hit the upper bollo band, then a correction is likely that ends at the lower bollo band either pre or post holiday (2003, 2009 and 2010) – (One Exception is 2004 where we hit the upper bollo band and then the lower bollo band, but the fall then continued)

  • 1998: NO TURN – Rally continuation Had bottomed at the lower bollo band on Opex Monday in June and a strong rally started that did not end till Monday post July opex
  • 1999: NO TURN – Rally continuation – After a 3 day 43pt post June opex correction, the market began a strong rally that paused on the Monday post employment post holiday, but did not stop until the Monday post July opex   (note: hit lower bollo in early June)
  • 2003: MAJOR pre Employment bottom on Tuesday 1st of July: After falling from opex Tuesday, the market bottomed on the 1st just below the lower bollo band and then rallied through the report and the holiday before peaking on opex Monday in July
  • 2004: No turn – Fall continued – after peaking on the Wednesday post June opex after hitting the upper bollo band, the market slid with no turns until late July
  • 2008:   Minor two day bounce post holiday – after the relentless fall all of June, the market briefly bounced for a day from the lower bollo band, but then continued going down until Opex Tuesday
  • 2009: MAJOR BOTTOM on Wed post holiday: Having corrected since post June employment (having hit the upper bollo band), the market experience a week long bounce that ended on July 1st, the market then proceeded to fall sharply and make new correction lows until bottoming at the lower bollo band on the Wednesday post holiday / post employment
  • 2010: MAJOR BOTTOM on Thursday before: After topping post June opex at the upper bollo band, the market fell 120pts from the upper bollo band to the lower bollo band and bottomed for the year on the Thursday pre employment
  • 2014: Minor top on employment day – closed at the highs before the long weekend and then fell 32 pts till the following Thursday – the lower bollo band was not hit prior to the correction ending

July 4th holiday

The 4th of July is surprisingly good for holiday turns (see above when employment report is followed by the holiday weekend). The only year since 2007 that did not produce a turn was in 2007. The challenge is figuring out when the turn might occur.

In 2008 through 2011, the turn occurred from one to three days post the holiday. In 2012, 2013 and 2014, the turn occurred the day before the holiday.

Overall, it is quite good for MAJOR low turning points (2009 and 2010), but in 2008 the selling continued for another week and it was only a minor low. In 2013, we had a small pullback in to the holiday pre employment and then continued rallying

Current Conditions

If today’s condition holds, SPY will have experienced 9 red candlesticks in a row – I can not remember when that last happened, but it must have been quite a long time ago. That definitely indicates selling pressure.

The SPY is definitely nearing oversold relative to previous employment reports. The daily RSI at 39 compares to the three recent employment bottoms that had sub 50 RSIs (June – 41 – Tuesday post employment, May – 46 – Wednesday before, April: 45 – Wednesday before)

The only lower employment report RSI in the last two years was in Aug 14 (27) when there was a minor employment day bottom and then a final bottom for the month of August on the Thursday psot employment.

Opex / FOMC preview for June 2015  (as of start of business on Tuesday, June 16th):

A MAJOR TURN this Opex / FOMC period is HIGHLY likely. That is the easy part. WHEN? will it be and will the primary turn be a top or a bottom? are the much harder questions.

The reasonably rare gap down on opex Monday and the even rarer Opex Monday hourly buy signal have certainly provided some more historical context that suggest a late in opex or post opex bottom is the most likely outcome for this opex period, but the FOMC and Yellen’s press conference could clearly change that scenario.

I noted last week that the Thursday before June opex week was frequently a turn time (normally a bottom). We did in fact get a turn last Thursday which was a top. June 2009 was the only other time, the Thursday before opex was a turn top. Then we bottomed on opex Wednesday bounced till opex day and then bottomed on the Tuesday post opex (pre FOMC)

Also, in that note, I highlighted that opex Tuesday was quite frequently one of the extremes for June opex week, so that is something to keep in mind on Tuesday given that SPY has exceeded its high from Monday.

One other June opex quirk to remember – we almost ALWAYS rally in to Friday’s open from Thursday’s close (it is actually a quad opex edge, but most evident in March and June)

As for the FOMC, we almost always rally in to the press conferences. (reminder – March 15 saw one of the larger FOMC rallies ever thanks to Yellen’s dovish tone)

In the detail section below, I provide all of the historical info which supports the reasons behind why the primary turn is most likely post FOMC and why it will be a MAJOR TURN.

Bottom Line:

WHEN? This QUAD opex is almost certain to bring a MAJOR TURN. The odds favor that the primary will be post FOMC and most likely post opex too.

TOP or BOTTOM?:   For now, certain sentiment measures seem too high for a bottom, but the post FOMC price action could change that in a hurry. While the RUT (which has barely gone down) seems closer to a top than a bottom at the 1261 level (with the all time high at 1279)

There are times when the early opex week price action provides an edge. For now, this is not one of those weeks. Instead it is similar to Sept 2014 and June 2013, as examples. In Sept 2014, there was a low on opex Monday and then a MAJOR TOP on opex Friday and in June 2013, there was a MAJOR top on Opex Tuesday, but the primary turn was the MAJOR bottom on the Monday post opex

For me, there is simply no evident edge right now, and I will be waiting until post the FOMC and probably late in opex / post opex to position myself for the primary turn.  Once I see a potential edge, I will provide more info.

Definitely the most interesting period we have seen since March!

-D

Detailed Research

Key points about June opex and Quad witch opex weeks that have an FOMC meeting (some repeats from March 15 September 14)

  • Quad opex week with an FOMC meeting almost always produce major turns with 50 plus SPX pt moves (June 2013, Sept 2013, Dec 2013, Sept 2014, Dec 2014 and March 2015) are recent examples. BUT JUNE 2014 and MARCH 2014 did not have major turns – though the 43 pt 6 day move from the opex Friday high was a decent pullback
  • With FOMC during opex week, the primary turn generally occurs post FOMC – there was a major top on the day before FOMC in June 2013 (though the primary turn was a bottom on the Monday post opex) and the market bottomed the day before in Dec 2014)
  • There is an FOMC press conference on Wednesday that should help produce some volatility – we generally rally in to the press conference. As a reminder, in March of this year, we had one of the larger Fed day rallies as we closed 25pts higher.

GAP downs to start Opex week?

Per yesterday’s comment, this one points to a likely MAJOR bottom late in opex or early next week.

  • Really just as would be expected – market is generally BEARISH Most of the week and tends to make a MAJOR LOW at the end of opex week or post opex – only a few exception August 2009 (had been correcting for a week – Monday low), September 09 (Major top post opex) and Oct 2013 – total head fake – market soared after a down Tuesday
    1. Apr 09: Gap Fade Closed strong on the Friday at the upper bollo and made new highs and closed .01 higher but then fell away to the Wed – final outcome was a MAJOR buying opportunity on the Tuesday post opex
    2. May 09 – Gap and GO – closed at the highs above the upper bollo on the Friday… opened down and ran…. Final lows were on opex Friday…
    3. Jun 09 – Gapped down and went… breaking the recent range… there was a Wed to Fri rally… but did not minor bottom till the Tues post opex….
    4. Aug 09 – Gap and Go… Had a down Friday…. A BIG gap down on the Monday…. But that was the low for the week… did re-test the low on the Wednesday with another gap down… but the low was in and we rallied to near the end of the month
    5. Sep 09 – Gap Fade – after a doji Friday… a gap down was bought – it was the low for opex week and we rallied strongly till getting above the upper bollo on the Thursday for a MAJOR TOP…. Then the pullback began
    6. Aug 2010: Gap Fade at 9:35am – Strong all day bounce that continued in to Wednesday – market then fell hard and made final correction lows post opex and then the rally was on. (Gap was filled on the Monday)
    7. Mar 2011: Gap Fade at 9:30am   bounce lasted 2 hours – day ended as a doji – Japan Tsunami trade – we bottomed on opex Wed and took off (Gap was filled on Monday post opex)
    8. May 2011:   Gap Fade at 9:32am bounc lasted 2 hours and 20 minutes and then we headed lower in to opex Tuesday before bouncing in to opex Thursday where we got OB and headed lower till the Wed post opex (Gap was filled on the initial Monday bounce)
    9. July 2011:   Volatile – opening extreme not till 11:03am – bounce lasted an hour – then we really had a trading range for the week with Wed being high of the week and Thursday being the low – post opex we bottomed on the Monday after and bounced till the end of the week   (Gap was filled on the Friday after opex)
    10. May 2012:   Gap Fade at 10:27 am lasted 4 hours – but then we headed lower all week and got quite OS on opex Friday – we bounced for a week afterwards before heading in to the final June low (Gap was not filled till after June opex)
    11. April 2013: Down till 2:30pm bounced for 30 mins and then kept going – closed at the lows on Monday – HUGE inside day bounce on the Tuesday, but then down again on the Wednesday in to the final Thursday low (Gap was filled post opex)
    12. Aug 2013: Initial bounce at 9:30am for 2 hours and 10 mins on the Monday   – we bounced in to Tuesday – made our high then and fell till the Wed post opex – had a BIG GAP and GO down on Opex Thursday.   (Gap was filled on Monday)
    13. Oct 2013: Fiscal Cliff excitement – Market bottomed the Wednesday before – closed the week very strongly – gapped down on Monday and rallied to new highs – down all day Tuesday…. But reversed and gapped up on the Wednesday and OFF we went to a land far away…. With just brief pullbacks post opex and for the FOMC

Hourly Buys on Opex Monday

There was an hourly buy signal yesterday (Opex Monday). The signal produced a FLAT result like in Sep 2014. What has that meant in the past?

  • Just 10 signals – 3 had lows for the week on Thursday –
  • Signals in Oct 14 (Wed), Dec 14 (Tues) and Jan 15 (Fri) all indicated MAJOR bottoms later in opex week
  • 6 winners
    1. May 2011 was 12 bars and -3.28 – but there was a BIG Bounce – Bottomed on the Wednesday after
    2. May 12 it was a gap down open that produced a decent bounce, but that was it. We bottomed on Opex Friday
    3. Jan 2014: Post employment – a big winner as it was the low for the week, we then rallied in to a post opex top
    4. Oct 14: Very volatile – a nice bounce, but then ran down in to a MEGA bottom on Opex Wednesday
    5. Dec 14 – Very volatile – again a nice winner – bottom was on opex Tuesday and we exploded higher
    6. Jan 15 – another volatile week with a strong one day rally – final bottom was on opex Friday
  •  3 losers
    1. 1.  Apr 11 – BIG Bounce on the Thurs and Friday, but final bottom was not till Monday after – Low for the week was Thursday
    2. Jul 11 – Volatile week that bottomed on the Monday after Low for the week was Thursday
    3. Apr 2013 – Major Bottom on the Thursday – a Wednesday signal worked for a bounce
  • 1 Flat
    1. Sept 2014 – Low for week was on opex Tuesday and bounced in to Friday for a MAJOR TOP

July and April 2011 – the low for the week was on Thursday, we bounced on opex day and then made a major bottom on the Monday after.

Note the hourly buy on Monday was also a buy two days before FOMC – these are VERY RARE – just 5 since 2009. All 5 bottomed within one day and rallied in to the FOMC meeting.

Short rallies after employment bottoms

In my employment analysis last week, I highlighted that there were three equally likely scenarios

  • Rally is short and ends before opex week
  • Rally ends between Monday and Wednesday of opex week
  • Rally ends post opex week

So we ended up having the short rally, which gives us four post employment bottoms to look at for potential clues:

  • Aug 07 – Significant fall in to an opex Thursday MAJOR Bottom
  • Mar 08: Bear Stearns bottom on Opex Monday
  • Sep 11: Down in to opex Monday and then a relentless rally until the Tuesday post opex (pre FOMC)
  • Jan 08 – The Kerviel opex with major selling until the Tuesday post opex / post holiday

ALL four instances produced major turns – but all were significantly different, so not a lot more insight

Current Conditions ( as of cob on Monday, June 15th)

  • No extremes are currently present.
  • The CNN Fear / Greed index has been noted as being quite low at 25, but it can certainly go lower (at the Dec 14 bottom it was 12)
  • What is surprising is that the Stocktwits sentiment for SPY, IWM and QQQ is still so high despite the pullback. They are all near 60% and decent bottoms have only been seen with sentiment levels around 40% or lower. It is not essential to see this measure at super low levels for a bottom to form, but 60% appears optimistic and not near the levels associated with major bottoms

June opex Detail

  • MAJOR turns in almost every year – 2007 (opex day), 2008 (Tues), 2010 (Mon after) and 2011 (Thurs), 2012 (Tues after / pre FOMC), 2013 (Monday after)
  • 2009 there was a decent Tuesday after bounce for 8 days and 41 pts. 2014 was just a super minor Tuesday post opex top
  • Definitely watch the Monday and Tuesday after for potential turns.
    1. 2007: MAJOR TOP on Opex Day – fell for 12 days and 56pts before heading higher in to the Major July top
    2. 2008: Major top on opex Tuesday – was trending lower in to opex and then had a good 4 day bounce in to opex, but that was it and a long slide in to July
    3. 2009: Minor Bottom pre FOMC on the Tuesday after and then a one week bounce
    4. 2010: Against the trend, rallied all week and then MAJOR topped on the Monday after and fell to its MAJOR Low in early July
    5. 2011: MAJOR Bottom on the Thursday of opex week – was weak all month and then bounced strongly in to July employment – BUT it should be noted that the strong bounce initially stopped on the Tuesday after pre FOMC and then the low was re-tested, but held and then we soared
    6. 2012 A very choppy week that ended strongly with a MAJOR TOP on the Tuesday after that lasted for 6 days and 54 pts before surging in to July
    7. 2013; MAJOR BOTTOM – a volatile week with a strong rally in to opex Tuesday (the day before the FOMC) we then major topped and fell hard until the Monday after opex where we major bottomed and rallied strongly the whole month of July
    8. 2014: minor top on Tuesday post opex – strong market all month – FOMC during the week had no impact and market kept pushing higher till the Tuesday post opex and then had a short 24pt pullback

QUAD OPEX WEEKS

I have not reproduced the info on QUAD opex – it is available in the March opex preview. In March 2015, there was a MAJOR TOP on the Monday post opex which produced a 70pt fall in 3 days. June 2014 was the last QUAD opex that did not produce a major turn.

June 2015 Employment Turning Point  (cob on Thursday, June 4th):

We are in a range still, BUT for only the third time since Jan 2014, we are trading down in to employment – the other two times were March 2015 (Monday before high and Wednesday after bottom) and Aug 2014 (had been selling off for a while and was quite OS – bottomed on employment day and bounced a bit before making final low on the following Thursday)

While one must assume that the boring and tedious trading range will continue, a further slide, ideally in to next week would set up an intriguing long side opportunity in to June opex – just like March 2015 opex.

We are not particularly OS right now, but a further move down on employment day and in to next week – could see the market then have a strong bounce in to FOMC and quad opex. This bounce in to FOMC / Opex tends to happen during almost every Quad opex – though it can take some time to materialize and did not occur in Sept or Dec 2014 opex weeks. If that possibility sets up next week, I will provide much more detailed info on the possibilities

June employment is the most consistent employment report for a turn – there has been a turn of at least 50 SPX points every year since 2007 except for 2014!

Bottom Line  

We are in a tedious trading range where turns are occurring, but not in low risk and highly probable set ups. This could change with a further strong move lower on employment day and in to next week – emphasis on the COULD!

There is no edge right here at SPX 2095 – but one could emerge next week at lower prices…. One analog to keep in mind is March 2015. Market bottomed on the Wed post employment and bounced in to opex / FOMC and finally topped on the Monday post opex.

Will post more, if I see an edge develop.

-D

June EMPLOYMENT DETAIL

Recent employment reports

  • May 2015 (late report) Major Bottom on the Wednesday before and a rally that did not end till post opex – good for 70pts – there was a 33pt two day pullback from the Monday after employment and then the market moved higher
  • Apr 15 (Good Friday holiday) – MAJOR Bottom on Wed before (65pts) Cash market was closed for the employment report – so while there was activity in the futures market on the employment report – the SPX bottomed on the Wed before the employment report and rallied until Opex Wednesday
  • Mar 15 – MAJOR Bottom – Wed post employment (67 pts) – a rare occurrence of a Monday before high (first trading day of the month) and a slide until the Wed post employment and then a strong rally in to opex
  • Feb 15 – Minor top (30pts) – 2 day 30pt pullback that started on employment day
  • Jan 15 – MAJOR TOP (79pts) on employment day – SHARP DECLINE in to Opex Friday
  • Dec 14 – MAJOR TOP (106pts) on employment day – sharp decline in to Opex Tuesday MAJOR Bottom
  • Nov 14 – NO TURN – Rally continuation
  • Oct 14 – Major top (157 pts) on Monday after
  • Sept 14 – Minor (32 pts) top on Thursday before
  • Aug 14 – Minor bottom (27 pts) on employment day
  • July 14 (pre holiday) Minor top (32 pts) on employment day
  • Jun 14 – Minor top (29 pts) on Monday after
  • May 14 Minor top (31 pts) on employment day
  • April14 – MAJOR TOP (84 pts) on employment day
  • Mar 14 minor top (45 pts) on employment day
  • Feb 14 – MAJOR BOTTOM (160 pts) on Wednesday before employment
  • Jan 14 – minor top (29 pts) on LATE employment day

June Employment Reports

  • Definitely lots of turns!
  • IN FACT, has produced a MAJOR TURN every year – except for 2014!
  • Thursday before and Tuesday after have been important days in a lot of years
    1. 2007: (holiday week) MAJOR TOP on employment day and a sharp fall to the lower bollo band
    2. 2008: MAJOR TOP the Thursday before and a sharp sell off for 6 days, but we really kept going until an ultimate bottom in July
    3. 2009: Major top on the Thursday after and then down until post opex
    4. 2010: (holiday week) MAJOR BOTTOM on the Tuesday After
    5. 2011: (holiday week) Peaked post holiday on the Tuesday before and then fell until the Thursday of opex week
    6. 2012: (holiday week) MAJOR BOTTOM Fell sharply post holiday and bottomed the Monday after – these were the last lows of the year
    7. 2013: MAJOR BOTTOM After declining from post Memorial Day major top, there was a MAJOR bottom on the Thursday before that produced a 4 day 52pt bounce
    8. 2014: Minor top on Monday after for a 29pt 3 day pullback – very strong market from Thursday of May opex

 Current Conditions

The current conditions are normal and not showing any extremes – though it is rare to trade down in to the employment – we are not at any extremes technically.

A significant gap down on the Thursday before employment is SUPER RARE – only two previous instances Dec 14 (gap filled and the market rallied) and Jul 14 – gap did not fill and the SPX fell 40pts on the day. It briefly bottomed the next day – 14pts lower and bounced in to the Monday, but then continued lower in to the Thursday post employment and pre opex.

TREND DAYs DOWN on Thursday before employment –RARE

  •  Jul 09 – with a holiday thrown in – bottomed on the Wednesday post holiday and post employment
  • Oct 09 – Bottomed on employment day – but had been selling off for some time and was quite OS
  • Feb 10 – Again had been selling off for quite some time – bottomed on employment day and market was off higher
  • May 2010 – FLASH CRASH – lows were on this day
  • Sep 11 – fell hard through employment and bottomed post Labor Day holiday
  • May 12 – Had peaked on the Tuesday before (at the start of the month) and essentially kept falling until opex day
  • June 2015 – ???

Interestingly, we had a trend day UP on the Thursday before June employment in 2014 (we topped on the Monday after and had a minor pullback).

June 2015 Turning Point Preview (as of cob on June 3rd, 2015):

Sorry for the delay in producing this – I had a 10 hour delayed flight on Monday for my return from the Big Apple and then my dodgy shoulder needed a procedure in the hospital that required two hospital visits and about 7 hours in total of wait and travel time on Wednesday….

June is normally an excellent month for both employment and opex turns (especially when FOMC is combined with opex like this month). June 2014 was a touch disappointing as there were just two minor turns post employment and opex – it was definitely not a normal month of June.

The turning points are still working right now, but not in a particularly inspirational or high probability way.

Employment:

  • May employment – MAJOR Bottom on Wednesday before employment and a 2 week 70pt rally
  • April – Major Bottom on the Wednesday before and a 14 day 65 pt rally
  • March employment – Major Bottom on the Wednesday after and a 67pt 12 day rally

June employment has shown lots of turns – some times MAJOR turns both before and after. The Thursday before the report and the Tuesday after have been particularly notable as turn days for June employment.

Opex:

  • May opex – Minor top on Wednesday post opex – good for 36 pts in 6 days
  • April opex – MAJOR Bottom on Opex Friday (per April opex edge) and a 55pt 10 day rally
  • March opex – MAJOR Top on Monday post opex and a 70pt 3 day pullback

June opex combined with the FOMC has a high probability of producing a major turn (though maybe a little less likely in this market!) The opex /

FOMC combo produced major turns in the last 3 instances (Sep 14, Dec 14 and Mar 15), but not in June 2014.

Memorial Day Holiday – got very hourly oversold – good for a 1 day 28pt rally

The narrowing trading range is clearly frustrating for all involved, myself included.

Q2 normally has at least one MAJOR top and pullback of 50 plus pts – which is still missing this quarter. It is possible that we are mimicking 2013 – where we had a more significant and volatile Wednesday post May opex top and bottomed post June opex. In 2009, the top and pullback, which lasted in to July, occurred on the Thursday post June employment – June 11th. In 2007, the Q2 major top was also late. It occurred on employment day, June 1st, 2007

For now, patience seems to be the best approach – one of these days, probably when least expected, the expanded ranges and volatile will return

Still interesting, just a little bit less than usual,

-D

Summary History of June Turning Points since 2007

  •  June is normally a month that produces quite a few significant turns around employment, before opex, during opex, post opex and potentially near the end of the month. Expect at least 3 significant turns – the 5 in 2013 was quite extraordinary and was the most we have seen in the month of June since 2007.
    1. 2007 – 4 turns – employment top, Friday before opex low, opex day top, late June low
    2. 2008 – 3 turns – Employment top, Thursday before opex low and opex Tuesday top then a long slide in to July
    3. 2009 – 3 turns – Post employment top, post opex low and end of Month – 1st of July high
    4. 2010 4 turns – Day before employment top and Tuesday after employment low, counter trend rally all of opex until MAJOR TOP on Monday post opex (pre FOMC) and then the summer bottom on 1-July
    5. 2011 – 3 turns – 1st of June MAJOR TOP and then a slide all the way till opex Thursday which was the low for the month, a minor top pre FOMC and then a low day after FOMC and a rally in to July
    6. 2012: 3 turns – Major bottom on Tuesday post employment, which was the last low of the year at 1267 – strong rally to the Tuesday post opex and then a pullback till Monday, the 25th and the rally resumed
    7. 2013 – 5 turns – very volatile month – Thursday before employment low, Tuesday after top, Thursday before opex low, Opex Tuesday (pre FOMC top) and a final major low on Monday post opex at 1560
    8. 2014 – just 2 turns – minor top on Monday post employment (3 day 29pt pullback) and minor top on Tuesday post opex (2 day 24pt pullback)

It should be noted that there has NEVER been a significant multi month major top made in the SPX in June since at least 1987 – yes, there have been corrections, but no significant MAJOR TOPS that lasted for many months.

Memorial Day Holiday Turning Point Preview for May  2015 (as of  Tuesday morning, May 26th, 2015):

From my perspective, the choppy, somewhat trendless markets have limited the usefulness of most forms of technical analysis of the US equity markets.  We have still been turning quite frequently around the turning points, but the turns have not been nearly as predictable or high probability as the markets have rarely reached technical or emotional extremes since the post opex top in March.  I must admit that the market conditions have meant that I have taken very few positions this year as the high probability nature of certain turns has just not existed.

Here are a few key points that I am thinking about right now:

  • Since 2007, Q2 has always had a significant top and pullback – one is due, but can be delayed in to June (see below for details)
  • The pullback post the holiday could yield a strong bounce after a low today or tomorrow, as holidays have been decent turning points (see below for details)
  • We have seen these sharp pullbacks post holidays before and a number of them have produced excellent buying opportunities – but in most of these cases, the markets had been selling off for quite some time.
  • Employment and the start of the month (two days either side) have been good turning points lately. This coming Friday or next Monday could be key days.
  • With Tuesday’s pullback, the SPX has officially had a Wednesday post opex top for May opex– the last time there was a Wednesday May post opex top was in 2013. Back then, the market had a volatile month long pullback until it bottomed post June opex.

Until 2014, the Memorial Day holiday was one of the most consistent turn points since 1998.  Alas, there was no turn in 2014…

Prior to 2007, the Memorial Day holiday had a turn in 7 of 9 years – it was ALWAYS a buying opportunity with 1999 and 2000 being MAJOR bottoms, while all of the other years there were minor bottoms with the exception of 2002 and 2003 where there was NO TURN. Since 2007, there have been turns in 6 of 8 years (no turn in 2007 or 2014) with the day after the holiday being the turn day in each instance.

Bottom Line

Markets are not easy right now.  The post holiday pullback may yield a buying opportunity on Tuesday or Wednesday of this week for a bounce in to Friday or next Monday, but it is not a high probability turn.  There were post holiday pullbacks like the one seen so far on Tuesday post the July 4th holiday and the Thanksgiving holiday in 2014 and it took at least two days of selling off for the market to bottom and bounce.

Bigger picture, the markets are due for a larger and longer correction in Q2, so one must keep this in mind when playing the long side.

Here is to having more interesting times in the months ahead

-D

Memorial Day Turn History

With the exception of 2007 and 2014, the day after the holiday has been a significant turn every year since 2007. It has never been THE top or THE bottom of a move, but the turn has represented a good trading opportunity

  1. 2007: (employment week) NO TURN: had a hard fall on the Thursday before the holiday and (Wednesday post opex minor top) and then ran higher and topped post June employment
  2. 2008: Minor Bottom on the day after – fell in to the holiday after a post opex top and then bounced 35pts in 2 days
  3. 2009: Fell in to the Tuesday post Memorial Day and it made a MAJOR bottom as the market exploded higher on Turnaround Tuesday gaining 70pts in just over a week
  4. 2010: (employment week) Minor bottom on the day after had fallen from the Thursday before and then bounced 37 pts in 2 days till the Thursday before employment
  5. 2011: (employment week) After bottoming on the Wednesday post opex, the market bounced hard, but topped out on the day after Memorial Day and fell all the way in to June opex
  6. 2012: (employment week) After bottoming on opex Friday, the market had a choppy rally that topped out on the Day after the holiday and fell for 6 days until the FINAL LOW of the year was reached on the day after employment.
  • 2013: MAJOR TOP – this was the re-test of the post opex highs. We gapped up strongly on the day, but found sellers and down we went. Final low was not until the post June opex bottom, but the exit day for this setup was the day before employment. The result was down 75 pts in 8 trading days.
  • 2014 – NO TURN – bottomed during opex week and then a powerful rally started on the Wednesday post May opex that continued until post June employment (BUT, it should be noted that the RUT topped post Memorial Day and was weak in to early June.

Holidays in General

Holidays since 2013 have consistently met with expectations for turns – that does not mean all holiday had turns – but the ones that were expected to have turns did have them with the exception of MLK in 2013 and Memorial Day in 2014.

2015: The two holidays where turns were definitely expected – MLK and Good Friday – both had turns a little earlier than expected.·        New Year’s Eve:  Fall continued – given the somewhat unexpected post Christmas top – it was not  totally unexpected that the market continued to fall until Jan 6th·        MLK:  MAJOR BOTTOM – occurred the day before – not the day after as is normal·        President’s Day : (no turn expected as it was during opex week) – No turn – market kept going steadily higher during opex week·        Good Friday:  Major Bottom – again a little earlier than expected – normally Good Friday turn is post the holiday – this one occurred two days before…·
2014:     7 of the 8 expected turns occurred – while Christmas was a surprise MAJOR TOP and Memorial Day surprisingly did not bring a turn.·        New Year’s Eve – Minor top on day before and declined for 6 days and 26pts·        MLK: (post opex)  MAJOR TOP on Day after for SPX and Wednesday after for MID and RUT – fell for 15 days and 111 pts·        President’s Day (during opex –  No turn expected) Minor 1 day 24pt pullback on the Wednesday after·        Good Friday:  (Turn expected on Tuesday after) – Minor top near close on Tuesday after that was tested on Thursday’s open – final pullback was 34 pts in 6 days.·         Memorial Day (Significant turn expected after)  NO TURN·        4th of July (post employment – turn expected) – Minor top on Thursday before (employment report) and a 7 day 32pt pullback)·        Labor Day (delayed turn on the Thursday after – super OB and market felt like it would never go down) – pulled back for 11 days, but only 32 pts.·        Thanksgiving – Minor top on Day after and 3 day 25 pt pullback·        Christmas – MAJOR TOP – 2 days after and a surprise 101 pt pullback
2013:  EXCEPT for MLK and Christmas, it was a very good year for turns with 7 of the 9 holidays producing decent turns·        New Year’s Eve – MAJOR BOTTOM on Day Before – this was the end of the opex correction and we exploded higher at the start of the year·        MLK (post Opex) – Turn EXPECTED – NO TURN·        President’s Day (post opex):  Minor top on day after holiday – declined for 7 days and 46pts·        Good Friday: Minor topped on the Tuesday after (when Europe had returned from its 4 day holiday weekend) and declined 34 pts in to the employment report·        Memorial Day:  MAJOR top on the day after – there was a sharp 2 day rally after the even sharp fall post opex. We then fell 75 pts till the day before the employment report·        July 4th  :  (pre employment) Major Bottom the day before – while this qualifies as a major bottom – in reality there was just a small 2 day 22pt pullback prior to the holiday and then we exploded higher for the rest of July on a good employment report·        Labor Day –MAJOR Bottom for MID and RUT on Day after and for SPX on Friday before – rallied 104 pts in to Septemer Opex Thursday·        Thanksgiving – Minor top on day after and declined 34 points till the Wednesday after·        Christmas – (No turn expected) – NO TURN

Current Conditions:

.On a daily, weekly and monthly basis, the markets are all due a break and a pullback rest, but none of the technical indicators for these time frames are at an extreme.  There is only one technical indicator that is currently at an extreme (as of 10am on Tuesday, May 26th) and that is an hourly oversold buy signal. If the daily stochastics were below 20, this would be a high probability buy signal, but they are not!  The last time, we had hourly holiday buy signals was in 2014 – the ones post July 4th (Thursday after bottom) and Thanksgiving (Monday after bottom) were losers.

When might we turn?

Since 2007, we have always had a significant time and price pullback in Q2. The shortest of these pullbacks in terms of time was the one week 84 pt pullback post April employment in 2014. Otherwise, all of the other pullbacks have lasted at least a few weeks.

Unless, the 2135 Wednesday post opex top (May 20th) holds for a few more days, we will need to look at 2007 and 2009 for guidance with respect to the latest spring top turns.

  • 2007: The high for June 2007 was reached on 1-June on the employment report. The initial decline was 53 pts in 6 days – then after a bounce in to opex there was another decline in to the end of June
  • 2009: After exploding higher post Memorial Day, the market stalled post employment and finally rolled over on the Thursday post June employment- there was then a three wave 9% correction in to early July.

Opex  preview for May 2015  (as of midday on Wednesday, May 13th):

The challenging trading range continues.  Will opex make a difference?  It should still provide an edge at the end of the week or early next week.  April opex turned as somewhat expected with the late in opex period bottom and March delivered as well with the post FOMC, post Opex top as well.

Overall, the May opex period tends to be the most consistent month for opex turns and tends to have the following characteristics:

  • One extreme for the week on either the Monday or the Tuesday
  • Generally trends during the week
  • Primary Opex turn tends to be on opex Friday or post opex
  • Move post opex tends to end post Memorial Day

Given that May 2014 opex was slightly different (a Tuesday all time high minor top and then a sharp pullback until just Opex Thursday and then a rally that went straight through June employment.), it is possible that the May opex period is changing character, but for now I am sticking with the strong historical track record.

A few other key points:

  • the first two days of May indicator is still valid, which would predict that the 2021 SPX high will not be broken this month.
  • Except for in extreme sell offs, the primary opex turns in the past two years are occurring late in the opex period (two on Friday and two post opex so far this year)
  • The rally in to late employment tendency continued with (at least) the Monday post employment minor top. With the 32pt, to date, pullback, there is no further insight from this employment turning point.
  • Monday we made another short term high and closed down. This is a rare occurrence – but amazingly – happened in April as well. April opex had an opex Friday bottom
  • All sell offs since the early March bottom have lasted a max of 4 trading days from high to low and in some instances, just two days – one of these days, this will change.

Bottom Line:

Given the price action this week with the Monday post employment high and the fall on Tuesday, the historical May tendencies would suggest the following as the primary scenario:

  • Minor or major bottom on Opex Friday or early next week, a bounce in to Memorial Day weekend and then at least a pullback post Memorial Day.

Right now, the market moves feel fairly random, but roughly in line with the turning points so that scenario is probably no more than 50% at best.   The trading range has definitely had its impact.

Will post more when I see an edge.

-D

Detailed Research

Current Conditions  (as of  midday on Wednesday, May 13th)

As one would expect, given the seemingly endless trading range, there is no edge to current conditions.  The gap down on Opex Tuesday (see just below) does not offer an edge.  The pullback from Monday’s high – post employment also does not offer an edge.

GAP Down on Tuesday of Opex Week

Last time we had a BIG Gap down on Tuesday of opex week was in November 2013.   Unfortunately, it is the toughest gap down to read. A number of instances saw post opex lows (Apr 09, May 11 and Nov 12), but other times, Tuesday (Jan 10, Nov 10 and Jan 13) marked the low for the week.

May Opex Detail

  • Can be a bottom or top – it all depends on the trend during opex week
  • Opex Day or the Monday to Wednesday after always seem to be the turning points (except 2014 when the low was on Opex Thursday)
  • Except for 2011 and 2014 – does seem to trend a fair amount with Friday being either high or low for the week every other year since 2007 (and Monday was the other extreme on 5 of those 8 years)
    1. 2007: (Minor Top) Minor top on the Wed after opex with a sharp 1 day 27 pt drop
    2. 2008: (MAJOR TOP) MAJOR TOP on the Monday after – A 40pt correction ended the Friday before opex and then it was an all up week and a top on the Monday after (note the 1st trading day of May low was not taken out till post opex despite the 40pt correction)
    3. 2009: (Minor Bottom) From a top the Friday before (a late employment report top), it was down all week until a minor bottom on opex Friday (but once again, the first trading day of May low was not broken)
    4. 2010 Flash Crash Month (MAJOR BOTTOM): Down all week – strong bounce from opex Day in to the Monday after, but made its final MAJOR Bottom on the Tuesday after
    5. 2011: (minor bottom) A good bounce from Tuesday to Thursday during the week, but then a long slide in to a Wednesday after minor bottom and then bounced in to a post Memorial Day top
    6. 2012: (minor bottom) Selling was strong all of May and it was an all down week – market got very OS on the Friday. The market bottomed on opex day and had an 11 day 44 pt bounce in to a post Memorial Day top
    7. 2013: (MAJOR Top) Seemed like the market would go up forever as it rallied relentlessly until Bernanke spoke on the Wed post May opex and it MAJOR topped! And fell in to June opex
    8. 2014: (Minor top) Minor top on Opex Tuesday with an opex Thursday low (which turned out to be a MAJOR BOTTOM)- Gapped up on opex Monday and ran higher, but got hourly overbought and the advance stalled after new all time highs on opex Tuesday. A mild pullback on the Wednesday accelerated on opex Thursday, but the market got hourly oversold and bottomed on opex Thursday and the rally commenced again with only the Tuesday post opex the only significant down day between the Thursday opex week low and the Monday post June employment.

Opex Turn Stats (since Jan 2013)

  • Major Bottoms (7): Apr 13 (Thurs), June 13 (Mon after), Dec 13 (Wed post FOMC), April 2014 (Thanks to Good Friday, the Friday before opex), Oct 14 (Opex Wed), Dec 14 (Opex Tues), Jan 15 (Opex Friday)
  • Minor Bottoms (2) Aug 13 (Wed after), July 14 (Opex Thurs)
  • Major Tops: (5) May 13 (Wed after with a Bernanke speech), Sept 13 (Thurs after post FOMC), Jan 14 (Tues after post holiday) , Sep 14 (Opex Day), Mar 15 (Mon post Opex)
  • Minor tops (10): Feb 13 (Tues after post holiday), Mar 13 (Thursday of opex week), Jul 13 (Wed after), Oct 13( very minor, but met the criteria on Tues after), Nov 13 (Mon after), March 2014 (Opex Friday), May 2014 (Opex Tuesday), June 2014 (Tuesday post opex), Feb 15 (Wed post opex), Apr 15 (Opex Wed)
  • None (4) – rally continuations – Jan 2013, Feb 2014, Aug 2014 and Nov 2014

May 2015 Employment Turning Point (as of cob on Wednesday, May 6th ):

NOTHING has changed since my initial employment comments in the May Turning Point Preview, specifically

  • Employment generally does have turns – quite frequently they are just minor counter trend turns after the early month extreme.

Here are the key points:

First two days of May extreme:

  • Given the May 1st low has been taken out, one must respect the historical fact that the extreme on the first two days of May is rarely exceeded. The exceptions since 2007 were in 2008 when a late month fall (after a post opex top) took out the May 1st low and in 2014 when we peaked on the 2nd day of May, but the high was taken out in opex.   This does NOT mean that the market can not test 2121 SPX high – it just means that is not likely to be broken given May’s history.

Late employment report: Only one insistence of market continuing lower through the employment report and in to opex week (January 2009)

Hourly Buys on Wednesday Before employment:

  • The full information is below, but there is a decent edge to buying on the Thursday before employment when there is an hourly buy signal on the Wednesday before employment

While the employment reports in April and March did see further weakness post the report, it should be noted that on both Thursdays before the report, the market was higher: Until there is consistent employment weakness, it still rarely pays to be short in to the employment report.

Bottom Line   

Right now, the market is looking very much like the early May periods in 2010, 2011 and 2012. The May 2010 (Flash Crash) and May 2011 markets bottomed on the Thursday before the employment report. The market in May 2012 was actually elevated until the open on the Thursday (trading just about 10 pts below the May 1st extreme)

There is a solid edge for at least a minor bottom and bounce in to May opex on Thursday or at latest Friday. May opex has a very solid edge for late in opex or post opex turns, so the best advice is to not become too committed to positions until late in opex when the market should reveal its true intentions or at least a very solid swing trading edge.

Ever interesting,

-D

MAY EMPLOYMENT DETAIL

Recent employment reports

  • Apr 15 (Good Friday holiday) – MAJOR Bottom on Wed before (65pts) Cash market was closed for the employment report – so while there was activity in the futures market on the employment report – the SPX bottomed on the Wed before the employment report and rallied until Opex Wednesday
  • Mar 15 – MAJOR Bottom – Wed post employment (67 pts) – a rare occurrence of a Monday before high (first trading day of the month) and a slide until the Wed post employment and then a strong rally in to opex
  • Feb 15 – Minor top (30pts) – 2 day 30pt pullback that started on employment day
  • Jan 15 – MAJOR TOP (79pts) on employment day – SHARP DECLINE in to Opex Friday
  • Dec 14 – MAJOR TOP (106pts) on employment day – sharp decline in to Opex Tuesday MAJOR Bottom
  • Nov 14 – NO TURN – Rally continuation
  • Oct 14 – Major top (157 pts) on Monday after
  • Sept 14 – Minor (32 pts) top on Thursday before
  • Aug 14 – Minor bottom (27 pts) on employment day
  • July 14 (pre holiday) Minor top (32 pts) on employment day
  • Jun 14 – Minor top (29 pts) on Monday after
  • May 14 Minor top (31 pts) on employment day
  • April14 – MAJOR TOP (84 pts) on employment day
  • Mar 14 minor top (45 pts) on employment day
  • Feb 14 – MAJOR BOTTOM (160 pts) on Wednesday before employment
  • Jan 14 – minor top (29 pts) on LATE employment day

May Employment Reports

The early May price action is key given the tendency to turn in early May or have the extreme for the month on the first or second trading day of May. There are almost always May employment turns, but quite frequently they are just countertrend minor turns lasting a week (2009) or less.

  • 2007: (minor top post employment) Had rallied strongly from Tuesday, May 1st and just had a minor top on the Wed after (22pt one day pullback)
  • 2008: (minor top on employment day) Had a strong rally on May 1st , but topped at new highs on the 2nd (employment day), and pulled back 38pts over a week (but did not break the May 1st low)
  • 2009: (Major top on late employment day) Rallied strongly from May 1st, but had a Major TOP on employment day (which was on the 8th) and had a one week 51pt downtrade on Employment Day
  • 2010: (Major Bottom the day before) FLASH CRASH the day before. Employment day was an inside day down. We then reversed higher on the Monday and had a strong bounce until the Wednesday after
  • 2011: (minor turns before and after employment) Had already topped on the Monday before the employment report. There was a bounce from the Thursday before employment until the Tuesday after and then we fell in to the post May opex bottom
  • 2012: (Major top on Tuesday before) Had MAJOR topped on the Tuesday before and just slid until the end of opex – this is one of the very rare downtrade continuations that have been seen with the employment report.
  • 2013: (Rally continuation) Had made a MAJOR bottom on April opex Thursday and while we were down all day on the Wednesday before employment (FOMC day – May 1st), it was a “fake out” trade and we started rallying on the Thursday and just kept going until after May opex.
  • 2014 – Fed meeting was the Wednesday before. The market rallied from the Monday before the Fed until the open on the employment day. It then minor topped and fell 32pts in 5 days

Late Employment Report

There are occasional instances of employment reports occurring on the second Friday of the month – the Friday before opex – they are rare and generally occur thanks to holidays or February’s short month. For May, we have seen one late employment report previously in May 2009.

There is ONLY ONE instance – Jan 2009 – where we fell through a late employment report and did not bottom until post opex. Otherwise there are really only two outcomes seen in the other 9 reports since 2007, as we rallied in to every report with the exception of the delayed report in Nov 2013.

  • The market has rallied in to the report and topped on the employment day (Mar 2007, May 2009, July 2011 (pre mkt)) and Jan 2014 or the Monday after (Jan 2010) (especially when hitting the upper bollo band) and pulled back during opex
  • The market rallied through the report and in to opex and topped between Opex Thursday (March 2013) and the Monday post opex (Oct 2010, March 2012 and Nov 2013)

Mar 2007: (minor top on employment day)- The market had fallen hard since post Feb opex, but then bottomed the Monday before employment well below the lower bollo band. After a 40pt rally, it then topped near the open on employment day – and made a final Q1 bottom on opex Wednesday 6pts below the previous week’s low and then rallied strongly to the June peak

  1. Jan 2009 –(Major top on Tuesday before) After a very sharp rally from Dec 29th, the market peaked on Tuesday Jan 6th above the upper bollo bar and then fell HARD through the employment report until finally bottoming on the Tuesday post opex and post MLK holiday.
  2. May 2009: (Major top on employment day) Coming out of the post April opex bottom, the market rallied strongly which culminated in 3 volatile days of price action almost entirely above the upper bollo band (strong up Wed, big down Thurs and strong up on employment day to slight new highs.) Market peaked near the close and then reversed on the Monday and fell sharply till opex Friday where it bottomed – that low was re-tested the week post opex, but it held and then the rally continued in to the June top.
  3. Jan 2010: (Major top on Monday After) After bottoming at the close on New Year’s Eve, the market rallied strongly prior to the employment report and then pressed even higher on employment day closing at the upper bollo band – it then opened at the highs on the Monday and that was the top till March…. But we were in a tight range during opex week and we did not decline until we double topped on the Tuesday post opex / post holiday
  4. Oct 2010 (rally continuation)- This market had had a very strong rally from the August lows and just had two small 25 plus pt pullbacks between the end of August and the October employment report with the final one bottoming after 3 days on the Monday before the report. This month had many similarities to May 2009 and Jan 2010 as the market was pressing against the upper bollo band – this time, we kept going through opex until we minor topped on the Monday post opex and pulled back about 25 points
  5. July 2011: (Major top on Thursday before) Super OB with prices spending at least some time above the upper bollo for 5 days in a row prior to employment report – we topped in the pre market and fell in a volatile opex week until the Monday post opex and then we had a strong bounce before the MEGA selling began in to the MAJOR August low post employment
  6. Mar 2012: (Major Bottom on the Tuesday before) The SPX had peaked on the last day of February and fell 38 pts in 5 days with most of the damage occurring on the Monday and Tuesday pre employment – the SPX bottomed at the close on Tuesday – 4 pts above the upper bollo. The market then rallied. – on employment day, we gapped higher and then continued higher until the Monday after opex where we had a minor top and a pullback for a few days….
  7. March 2013 (Rally Continuation)– the market had a sharp sell off in late Feb culminating in a bottom on the last Tuesday in Feb with a bottom just below the lower bollo band, we then had a strong rally that touched the upper bollo prior to the employment report, but kept going until peaking on the Thursday of opex week – which was the Thursday post employment
  8. Nov 2013 (due to the gov’t shutdown) (Major Bottom on the Thursday Before) – a strange one as we made slight new highs on the Thursday before and then fell all day and 29 pts before bottoming in the pre market and rallying all of opex week until we peaked out on the Monday post and had just a minor 25 pt pullback.
  9. Jan 2014 (minor top on Employment Day) – After peaking on 31-Dec, the market fell 26pts till the Monday before employment and then rallied in to employment day, but it topped then, but just fell 29 pts to the Monday after
  10. Jan 2015: market fell in to early January, but bottomed on Tuesday, Jan 6th and rallied sharply for two days, but then major topped on Employment Day, Jan 9th and fell for 79pts till opex Wednesday.

Hourly Buys on Wednesday before employment

Surprisingly few signals – but appears that patiently waiting for the next day provides an edge

  • 1 Winner
    1. May 2010 – volatile week with FLASH CRASH the next day – Thursday low
  • 5 Flat
    1. Sept 09 – nailed the low, but was stopped on a re-test and then rallied hard and kept going
    2. May 2011 – bottomed the next day and bounced until Tuesday post employment
    3. June 2013 – 1st of 2 signals – Flat as market bottomed the next day and rallied until the Monday post employment
    4. June 2013 – 2nd of 2 signals – Flat as market bottomed the next day
    5. Oct 2014 – Signal lasted for 7 hourly bars and market went down a lot – if you had waited till Thursday it would have worked, as the market bottomed at noon on Thursday and then rallied sharply until Monday post employment
  • 2 losers
    1. Apr 2013 – – First buy signal after over a month and it failed Signal was at the open and SPX did not bottom till the close and then just had a bounce the next day before low on employment day
    2. Aug 2012 – post FOMC – SPX did not bottom till the next day, but then was off much higher

Current Conditions

The current technical conditions in the SPX / SPY are still fairly neutral on a relative basis. The only index / ETF that is showing extreme weakness is the RUT / IWM which has a daily MFI (14) below 25. This does not occur that frequently. The last three instances (Sep 14, Jul 14 and March 14) were not helpful in identifying a low as the market continued lower, though there were bounces along the way

May 2015 Turning Point Preview (as of close of business on Friday, May 1st ):

The following is my monthly turning point preview. It touches on important and interesting historical information about the upcoming month.

Prior to 2014, the month of May since 2008 showed three distinct characteristics:

-Early month extremes on the first or second trading day (See special research below)

-trending opex weeks with turns late in opex week or post opex

-Memorial Day turns

Alas, in 2014, except for an opex Thursday low, May 2014 did not really conform to the normal historical patterns. It will be interesting to see if May 2015 reverts to the normal historical patterns, which has seen some significant turns during almost every month of May since 2008.

It is important to remember that with the exception of 2014, when there was just a one week 65pt pullback, Q2 since 2007 has always seen multi week pullbacks of at least 50 plus SPX pts, but, except for 2011, the month of May has never been the high for the year. (See Sell in May research below)

May employment report and Late Employment Reports

  • There have been 10 late employment reports since Jan 2007. Except for the sharp one day fall before the delayed Nov 2013 report and the relentless selling of Jan 2009, the market has always rallied in to late employment reports and either topped on the employment report day or the Monday after OR the market rally has continued until late in opex or post opex.
  • There was a late employment report in May 2009 – we topped on employment day and fell 51pts until opex Friday.
  • The early May price action is key given the tendency to turn in early May or have the extreme for the month on the first or second trading day of May. There are almost always May employment turns, but quite frequently they are just countertrend minor turns lasting a week (2009) or less.

 Opex – very good for turns

  • Can be a bottom or top – it all depends on the trend during opex week
  • Opex Day or the Monday to Wednesday after always seem to be the turning points
  • Except for 2011 and 2014 – does seem to trend a fair amount with Friday being either high or low for the week every other year since 2007 (and Monday was the other extreme on 5 of those 8 years)
  • May 2014 opex was a Tuesday high and a Thursday low and the market then accelerated higher on the Wednesday post opex.

Memorial Day Holiday

  • Has been very good for turns – almost always the day after. Pre 2007, it produced a bottom in 7 of the previous 9 years. Post 2007, there have been turns in 6 of the last 8 years – with just 2007 and 2014 being the exceptions. Turn type has always been dependent on the post opex price action.

 Current Conditions

  • No significant observations other than to highlight that the SPX is currently showing significant strength relative to the RUT (and to a lesser extent the MID) which is a reverse of the trend that was seen in the last six months.

 Bottom Line

The relentless bull has slowed down in the first four months of 2015. The downside corrections have all been short and sharp which may continue again this month given the late employment report and the reasonably consistent history of employment, opex and holiday turns during the month of May.

Here is a summary of the turning point edges for May 2015:

  • Watch for early month extremes on the 1st or 2nd trading day of the month
  • Employment generally does have turns – quite frequently they are just minor counter trend turns after the early month extreme.
  • Opex: VERY strong history of opex turns – particularly late in opex or post opex.
  • Memorial Day – generally good for a solid turn – especially on the day after (though there was no turn in 2014)

 Here is to hoping the normal May turning point characteristics return in 2015.

-D

 Summary of Special Research

Sell in May? – there are always a few articles about it. The key thing to remember with respect to sell in May , is that the period from late April to early June has been an important time for major tops (50 plus SPX pts) every year since 2007 EXCEPT for 2014, BUT 2011 is the only year since 1987 that the high for the year occurred in May. Otherwise, there have just been Q2 sell offs (except for 2014) that ended in June or early July.

  • There was a MAJOR TOP two days before the FOMC in late April 2010
  • There were MAJOR TOPS early in the week following the late April FOMC in 2011 and 2012 (both the first trading day of May)
  • There were two post May opex MAJOR tops in 2008 and 2013
  • There were two major tops in early June in 2007 and 2009
  • 2014: Just a sharp one week pullback in early April – otherwise, market was generally higher in to early July

May: Watch for market extremes on the 1st or 2nd trading day of the month

  • Interestingly, the 1st or 2nd trading day of May has been one of the extreme days for the month in almost every recent year since 2007– just 2008 and 2014 were not.
  • 2007: (the low) Was down all day on 30th of April, had a hammer day and it was the low of the month
  • 2008 – (almost the low) Had a very strong up day on the 1st of the month – that low held on the post employment dip, but then after soaring to a new monthly high post opex, the market came down hard and broke the low
  • 2009 (the low)– market had a red candle on April 30th and traded a bit lower on May 1st, but then caught a bid and rallied strongly for a week in to the employment report – May 1st low has held ever since – though it was tested in July 2009
  • 2010 (the high) – Flash crash month – after being down all day on Friday, the 30th, the market reversed and had a trend day higher – closed at the highs on Monday, the 3rd only to reverse the next day and down we went in to the Flash Crash and down for the month
  • 2011 (the high) Market had a super strong move out of the post April opex bottom – but optimism peaked and we formed the Osama top on Monday, May 2nd and we were down all month
  • 2012: Amazingly, we had the same script for the third year in a row – with a post April opex bottom and a strong rally that peaked on Tuesday, May 1st and we were down all month
  • 2013: After a very powerful rally out of the April opex bottom, the first corrective day was FOMC day, May 1st, where we were down all day in a trend day down – SPX gapped up the next day and never looked back
    • 2014: While there was a brief pullback from May 2nd, the employment day of 4 trading days and 32 points, the market moved higher during the month and started a powerful run higher post May opex.

Opex preview for April 2015 (as of midday on Tuesday, April 14th):

So far, April 2015 is a strange month. Already in the first 14 days is doing some historically unexpected things for the month of April. The price action between the Wednesday before employment, the employment report on Good Friday and the Monday after rally was not anything that has been observed before in the 6 instance of the employment report occurring on Good Friday since 1990.

Now we have the market rallying in to opex week, making a higher high for the rally on opex Monday, but then closing down for the day. This is a rare combination , as it has only happened 5 times since 2007. All 5 previous instances saw the market moving higher during opex week and topping some time between opex Thursday and the Tuesday post opex. Only one of those instances then also produced an opex buying opportunity – March 2009.

Per the April turning point preview, we have consistently seen the market making bottoms during the April opex period and setting up for a very nice rally in to at least late April (2010), if not a lot longer. Prior to 2013, we were consistently making bottoms on the day after (2010, 2011 and 2012) or two days after (2009), but now we have during the week bottoms in 2008 (Tuesday) and 2013 (Thursday) and a special Friday, the week before bottom in 2014 when the market was closed for opex day. (Good Friday)

Given last week’s rally in to Friday, the historical expectation for April opex would have been for the market to continue to rally until Tuesday (2012), Thursday (2010) or Friday (2009) and provide a good buying opportunity on the Monday post opex (2010, 2011 and 2012) or the Tuesday after (2009).

The picture has now changed and is murkier given the price action on Monday and early Tuesday. While I do not intend to track them actively, maybe Wednesday’s ECB meeting will help clarify the picture. The announcement and press conference are before the open.

Primary opex turns on opex Monday are very rare, but given the early week price action, one must respect that high until it is taken out. There have only been three opex Monday primary turns since 2007– bottoms in March 2008 (Bear Stearns) and August 2009 and the summer top in August 2008.

Major tops during April opex are reasonably rare. 1998 – Wednesday post opex. 1999 – opex Tuesday top – fell 78pts until a great Tuesday post opex buying opportunity

Bottom Line:

Right now, there is no opex edge evident. Monday’s high could be significant and must be respected. The historical April opex edge still remains a buying opportunity late in opex or post opex that would then see a rally until at least Monday, April 27th (AAPL earnings and two days before FOMC) if not in to early May. (note: we have a late employment report on May 8th)

Sorry for not being more insightful. Monday’s high and lower close is a rare one.

-D

Detailed Research

Market trading up, but down on opex Monday?

  • Monday was a very strange day. The markets made a new high for this latest upswing on Friday – that normally means that we will make a higher high during opex week (generally on opex Monday unless it is an inside day), which also means that opex Monday will be an up day.
  • There was an SPY new short term high on the Friday before opex and on opex Monday, but the market closed down – this is so rare that I needed to go back and review the data to see if this means anything. (note: I use SPY as SPX is not always accurate near the open)
    1. Feb 13. It was just a .01 higher high and the close was just .03 lower. Made no difference. Markets continued to rally until a post holiday / post opex top and then pulled back for 6 days and 45 pts. High of the week was Wednesday. Low of the week was Monday.
    2. June 2012 – The spring correction had ended on the Monday post employment and the market surged in to opex week and it made a new high on the Monday, but then stalled and treaded water till opex Friday where it got renewed energy and moved higher till the Tuesday post opex and then it pulled back 54 pts over a 6 day period. The low for the week was opex Tuesday just below the opex Monday low. The high for the week was on Friday
    3. June 2010: The market had bottomed on the Tuesday post employment and surged in to opex week, but after making a new 14pt high for the move, it closed slightly down on the day, but the upswing then continued until the market major topped on the Monday post opex and fell in to early July. Monday was the low for the week and Friday was the high.
    4. March 2009 – Market made a 10pt new high on the Monday, but then closed down slightly. The market made a lower low on the Tuesday, but then surged higher till opex Thursday before becoming OB and selling off strongly in to Friday’s close. Low for the week was on Tuesday. High was Thursday. Opex Friday’s close was a great hourly OS buying opportunity
    5. July 2007 – a marginal new high on opex Monday and an ever so slight .02 close lower on the Monday. The market did nothing all week and made a final summer MAJOR top on opex Thursday and fell hard in to August. Opex week low was Friday and high was Monday and Thursday.
  • Interesting to see that in all of the noted instances the market continued higher later in opex week and topped between opex Thursday (July 07 and March 09) and the Tuesday post opex (June 2012 and Feb 13). Except for March 2009, where the market sold off very hard on opex Thursday and Friday, all of the primary turns were tops. With three of the four tops being major (50 plus pt tops)

Current Conditions (as of midday on Tuesday, April 14th)

The current condition are neutral. Only thing to note is that the market has not closed below the 20 day MA since March 27th. SPX is in a range. RUT is in a low energy uptrend having made new all time highs on opex Monday.

April Opex Detail

  • We have consistently seen the market making bottoms during the April opex period and setting up for a very nice rally in to at least late April (2010), if not a lot longer. Prior to 2013, we were consistently making bottoms on the day after (2010, 2011 and 2012) or two days after (2009), but now we have during the week bottoms in 2008 (Tuesday) and 2013 (Thursday) and a special Friday, the week before bottom in 2014 when the market was closed for opex day.
  • Hourly signals have worked well from Wednesday onwards – but signals early in the week have been losers
    • 2007: Very minor top on the Monday after opex for 14 pt 1 day pullback – basically a rally continuation
    • 2008: MAJOR BOTTOM on Opex Tuesday – last chance to buy was the Tuesday after opex
    • 2009: Very hourly OB on opex day and fell 49pts in to a MAJOR Bottom on the Tuesday after opex
    • 2010: Minor bottom on the Monday after and a week long 37pt rally rally
    • 2011: MAJOR Bottom on the Monday after and a 14 day77pt rally
    • 2012: MAJOR Bottom on the Monday after and an 8 day 57pt rally
    • 2013: MAJOR BOTTOM on the Thursday and a MEGA rally that let no one in – ie. almost no pullbacks until the Wednesday post May opex.
    • 2014: Good Friday on Opex day – Sold off HARD from employment day to the Friday before opex week and consistent with the Good Friday study, the SPX bottomed on the Friday before opex week and the MID, RUT and NDX bottomed on the Tuesday. SPX had 6 green candlesticks in rallying 71pts and topped on the Tuesday post opex and pulled back 34 pts

April 2015 Turning Point Preview (as post the open on Thursday, April 2nd , 2015 )

The following is my monthly turning point preview. It touches on important and interesting historical information about the upcoming month.

Normally, some clues for what might occur during April can be gleaned from the March price action. Alas, the MAJOR  post opex top last month (last seen in March 1999, 2000 and 2002) and the February high at 2118 do not offer much insight. The last two times there was a significant high in February was in 2007 and 2011 – both of those years the market declined in to March opex, made a major bottom and then rallied strongly. With the one week post employment pullback in March 2015, the 2007 and 2011 analogs do not seem to provide any useful insight. Neither do the tops in 1999, 2000 and 2002, given the current market structure.

The only month of March that I could find some similarities to the month of March that we just experienced was March 2014 as we had a similar choppy month last year with turns occurring every week. In April 2014, we topped on the employment day and traded down hard for one week before reversing and heading higher with just minor weekly turns occur roughly every week until the rally really took off on with a bottom on Opex Thursday in May.

 Employment and Good Friday

  • Until March’s Wednesday post employment bottom, the recent employment turns had all been on the employment day or the Monday after. With the employment report being released on the Good Friday holiday, a turn on employment day is not possible.
  • In most years, there has been a rally in to early April and the employment turn has been a top on or post employment. There are two recent exceptions (2012 and 2013) both saw early April highs and then employment bottoms (2012 on the Tuesday post the Good Friday holiday) and on employment day in 2013.
  • As for Good Friday, except for 2012, we have always rallied in to the holiday since 2007 and if there is a turn, it is almost always post holiday, particularly on the Tuesday post holiday as Europe is closed on the Monday too.
  • GOOD Friday and employment day on the same day: Six instances since 1990. Always had a turn. Twice the turn occurred the day before, once it occurred on the Monday after and the three most recent instances turned on the Tuesday after (2007, 2010 and 2012)       (I also looked at the data in the 1980s, but as I could not confirm for certain that the employment report was on those Fridays, I am not using those Good Fridays in my research.

 Opex

  • We have consistently seen the market making bottoms during the April opex period and setting up for a very nice rally in to at least late April (2010), if not a lot longer. Prior to 2013, we were consistently making bottoms on the day after (2010, 2011 and 2012) or two days after (2009), but now we have during the week bottoms in 2008 (Tuesday) and 2013 (Thursday) and a special Friday, the week before bottom in 2014 when the market was closed for opex day.

 FOMC (April 28th – 29th)

Given the propensity to make a bottom during the April opex period, we are almost always rallying in to the FOMC report. The only year that there was a MAJOR TURN prior to Fed day was in 2010 on the Monday before. Otherwise, the April FOMC has seen minor turns right around the report or MAJOR TOPS for the two FOMC meetings where the rallies continued in to to early May in 2011  and 2012.

 Current Conditions

Right now, we are in the middle of a trading range with very neutral hourly, daily and weekly indicators.

 Bottom Line

April could be a more challenging month than usual given the two deep March corrections (which are historically unusual and unexpected).  Per my comment above, March 2014 seems to be the one March since 1998 that shares similar characteristics to this past March. If the similarity continues, then expect more choppiness in to early May.

Here is a summary of the turning point edges for April 2015:

  • Post employment, post Good Friday – highest probability turn day is on the Tuesday after the holiday – likely to be just a minor turn, if there is a turn.
  • Opex: VERY strong edge for a good opex period buying opportunity – Dates have been variable with opex Tuesday in 2008 to as late as Tuesday post opex in 2009. Will post more closer to the opex period.
  • FOMC – Given the opex edge, there is generally a rally in to FOMC and then a minor turn right around the meeting with the potential for a MAJOR turn in early May if the rally continues.

 I will follow up early next week once we have seen the impact of the employment report.

Enjoy the long weekend,

-D

Summary of Special Research 

GOOD Friday and employment day on the same day: Six instances since 1990.  Always had a turn. Twice the turn occurred the day before, once it occurred on the Monday after and the three most recent instances turned on the Tuesday after.

    1. 6-Apr-12:   minor bottom on Tuesday post employment and holiday rallied till opex Tuesday
    2. 2-Apr-10: minor top on Tuesday post employment and fell for just two days
    3. 6-Apr-07: minor top on Tuesday post employment and fell for two days
    4. 2-Apr-99: End of quarter pullback ended the day before, on Thursday, April 1st, and market exploded higher
    5. 5-Apr-96: Market topped the day before and pulled back almost 5% over the course of a week
    6. 1-Apr-94: Market had fallen over 7% from March opex day top and bottom on the Monday post employment, post Good Friday.
  • Could not confirm these as employment reports
      • 1-Apr-88: Re-tested the Monday, March 28th low on Thursday, March 31st and then exploded higher in to April opex
      • 5-Apr-85: Topped on Tuesday, 2nd of April and fell 2.7% to Monday post holiday
      • 1-Apr-83: Topped on Thursday, March 31st and fell 4.8% until Wednesday, April 6th post holiday
      • 4-Apr-80 – Topped on Tuesday April 2nd and fell 4 ½% to low on Tuesday post holiday

Opex / FOMC preview for March 2015  (as of start of business on Thursday, March 19th):

I wrote yesterday:

  • I have not published my FOMC / Opex preview – as I do not think it will be helpful at this juncture. It is ALL ABOUT how we react in the next two days. March opex / FOMC has a tendency for MAJOR bottoms or minor tops. The challenge here is that the MID and RUT are essentially at their all time highs and might suggest a top is NEAR, BUT the all time most reliable opex bottom indicator of SPY 14 day MFI below 25 is at near giving a long signal…. As it is at 28
  • In almost all cases, the primary turn for the FOMC / Opex combo is post the announcement of course, December 2014 (day before at the close) was the exception that proves the rule.
  • I have all of the data for my preview pulled together – but feel that the market is so finely balanced – that after tonight’s close, I might be able to provide some more useful context. Till then, for me, it is a total toss up.

SO FED DAY – the ninth largest rally since 2007. Most recent larger rally was Dec 14 when we rallied 39pts – from a more oversold position, but then continued to rally. Here are the stats on the 10 largest rallies on FOMC day

  • Major Bottoms (5) – All Fed day or before (Aug 11, Mar 08, Dec 14, Aug 08, Dec 13)
  • Major Top (2) – Fed Day – Jan 09 and Day after Dec 08
  • Minor top (2) – Sep 07 – Day after 39 pt 6 day pullback and Mar 12 – 4 days after 27pt pullback

Slightly greater support for a minor top comes in the form of the overall rally this week – at 54 pts from last week’s close to Thursday’s high, we are currently looking at the 7th largest move (so far) since 2007. Interestingly, the 8th largest was Apr 08 (minor top on Tuesday post opex and 6 day 34 pt pullback) and Mar 14 (opex Monday Gap up – like this week – Friday at the open minor top and 6 day 43pt pullback).

There is NO EDGE from the March opex data as to when there might be a minor top and pullback as March opex minor tops have occurred on Opex Wednesday (2009), Opex Thursday (2013), Opex Friday (2014) and Monday post Opex (2012)

How about recent rallies (don’t forget Monday’s Gap up rally) during Quad witch opex week?

  • Sept 2014 – we major topped on opex day
  • June 2014 – we minor topped on Tuesday post opex and fell 24 pts in 2 days
  • March 14 – We minor topped at the open on opex day and fell for 6 days and 43pts
  • Sep 13 – we major topped on Opex Thursday after a 20pt rally on Opex Wednesday – FOMC day.
  • March 13 (FOMC the following week) – Minor topped on Opex Thursday
  • Dec 12 (FOMC the previous week) topped on Opex Wednesday and fell in to year end.

The last time we major topped during the latter half of the month of March either during or post opex was 2002. Per my March preview, March has been a month that has generally been higher with the highest probability turn being a minor top post FOMC during opex, though there also is some support for a minor employment turn as well.

Lastly, if we did top yesterday – which is possible given the early Thursday pullback, in general, Fed Day tops are minor tops that last for a few days and 25 to 40pts.

I have looked at (and provided here https://pugsma.wordpress.com/denalis-turning-points-2/denalis-turning-points-2015/   ) lots of detailed data on the possibilities for this Opex / FOMC quad witch week. On Tuesday and Wednesday, nothing stood out to me in terms of providing a strong edge, so I postponed making a post. With Wednesday’s strong rally, the odds are now high for a minor top and pullback of 20 to 45pts lasting 3 to 6 days. We could have already seen that top yesterday at 2107 or we could see it (which is quite normal for QUAD opex) during an expiring futures squeeze near the open on Friday.

Bottom Line:

The divergences in the market with the MID and RUT at all time highs and the SPX, NDX and DJIA still below their early March / late Feb highs leaves me in a very neutral stance on the market. A minor top (and 3 to 6 day pullback) – which could easily occur at the open on Friday – if it did not occur on FOMC day is the most likely outcome for this March opex / FOMC period.

From the perspective of my turning point work, the markets are definitely more challenging in terms of predicting highly probable turning points. Sorry for the late post – just did not see a lot of compelling evidence of an edge prior to yesterday’s move.

Still, ever interesting.

-D

Detailed Research

Key points about March opex and Quad witch opex weeks that have an FOMC meeting (some repeats from September)

  • Quad opex week with an FOMC meeting almost always produce major turns with 50 plus SPX pt moves (June 2013, Sept 2013, Dec 2013, Sept 2014 and Dec 2014) are recent examples. BUT JUNE 2014 and MARCH 2014 did not have major turns – though the 43 pt 6 day move from the opex Friday high was a decent pullback
  • With FOMC during opex week, the primary turn generally occurs post FOMC (but we did top on the day before FOMC in June 2013 and bottomed the day before in Dec 2014)
  • There is an FOMC press conference on Wednesday that should help produce some volatility – we generally rally in to the press conference

GAP Ups in to Opex week?

This is occurring more frequently. We had 5 significant opex Monday gap ups in 2014 (Dec, Aug, Jul, May and March). It can be VERY bullish if the gap is not filled during the week, but that edge has lessened. Here is what has happened in the most recent instances:

  • Dec 2014 (Wed FOMC meeting): Gap filled that day and fell in to a major bottom at Tuesday’s close
  • Aug 2014: Gap filled on the Tuesday, but then market continued to rally and never looked back till September
  • May 2014: Market topped on the Tuesday and fell sharply till the Thursday, but that was the opex low and the rally continued
  • March 2014 (Wed FOMC meeting) – volatile week – had closed at the lows on the Friday before…. Bounced around all week and topped at Friday’s open and fell for 6 days
  • Dec 2013 (Wed FOMC meeting) – spiked down for 1 minute to new lows for the month and then the year end rally was on
  • Sept 2013 (Wed FOMC meeting) – Rallied strongly all week till Thursday’s open and then topped out and fell in to October

Bottoms on the Wednesday after employment

  • Bottoms on the Wednesday after employment are very rare. There have just been two in January 08 and July 2009.
  • What happened during those opex weeks?
    • The Jan 08 bottom produced a 51 pt bounce – but it just lasted a day and we fell in to a post opex bottom
    • July 09 was a more lasting bottom as there was NO OPEX turn and we rallied until the 7th of August
    • Overall, this does not provide much insight

Current Conditions (as of Wednesday, March 18th’s close)

  • With the bounce from March 11th, the SPY is in the middle half of its range for the last 4 months, but MID and RUT are at all time highs.
  • With an RSI (9) of 58 and rising stochastics, their does not appear to be an edge in the SPY technical –
  • Prior to Wednesday, the SPY MFI was intriguing as the MFI was falling and nearing the magical 25 level. This MFI 25 level was breached in Jan 2014 and Dec 2014 and produce solid bottoms and it was almost breached in October when the market made that very significant opex Wednesday bottom.   Alas, this condition no longer exists as the MFI is now 46

Lows before FOMC (as we almost always rally in to FOMC!)

  • Wednesday, March 11th produced a decent low – particularly for MID and RUT.

2015

  • January – an odd one as the market peaked the week before on ECB day and really fell until the following Monday – not a normal FOMC pattern

2014:

  • December: Fell in to the day before and then rallied strongly
  • October – bottomed two weeks before during opex week
  • September (opex week) – Monday before
  • August (employment week) FELL! – something different
  • June (opex week) Thursday week before opex / FOMC
  • April (employment week): Monday before low
  • March (opex week): Friday before low   (Sunday night futures low)
  • January: Monday before low

2013

  • December: (opex week) Thursday / Friday before double bottom (Sunday night futures low)
  • October – no low before
  • September (opex week) – no low before
  • July – (employment week) Friday before   (Monday before for RUT)
  • June (Opex week) – Thursday before
  • May (no turn before)
  • March – Tuesday before – but after an opex sell off
  • January – No low before
QUAD Witch option expiry has a BAD reputation – but it is actually a great time for traders. Interestingly, it is much more likely for QUAD opex to produce a MAJOR turn (move of greater than 50 SPX points) than a minor turn. Amazingly, there is an equal split between TOPS and BOTTOMS and turns of the major variety outnumber minor turns by close to 3 to 1. Latest MAJOR Turn was the Opex day top in September 2014First looking at the bottoms,·         except for the Bear Stearns Monday bottom in March 08 and the pre FOMC Tuesday bottom in Dec 2014, they have all occurred from the Wednesday of opex week (twice when there was extreme selling related to issues in Asia (Mar 07 and Mar 11) to the Wednesday after opex (just once – Sep 2012). Last one was the spike low post FOMC in Dec 2013.·         The Monday after opex is slightly favoured as the most likely day for a low, particularly if it is a post opex pullback in a bullish market (ie March 2010 when we just had a minor Wed post FOMC top to Monday after opex pullback)·         On a pure price basis (as SPY goes ex div on the Friday) – all of these lows except for one, have seen SPY down on opex day but except for March 09 (down 17), there have not been any huge losses on opex day.·         Generally, but not always, the high of the week is Monday or Tuesday.   Also, at least one, if not multiple hourly buy signals will indicate that the low is near.·         The bounces out of Quad opex bottoms are almost always significant with 42·         pts being the smallest in price and 6 days being the shortest in duration·         Recent examples:o   June 2013 a MAJOR Bottom on the Monday post opex after a Tuesday opex top pre FOMCo   Dec 2013: FOMC on the Wednesday and we spiked down for 1 minute to the low for the month and then we were off – quite a quick MAJOR BOTTOM.o   Dec 2014: MAJOR Bottom on Opex Tuesday and rally till Dec 29thDetermining opex tops during Quad expiry is difficult but a lot of the timing seems to be due to the FOMC meeting being after opex – though this has started to change as more and more FOMC meetings are during opex week.·         They have NEVER occurred on the Monday of opex week and the only Tuesday top was during the extreme bear market downtrend of June 2008 and the MAJOR top in June 2013 that created a pull back and great buying opportunity on the Monday post opex.·         Also, Monday is quite frequently the LOW of the week (50% of the time) (see   June and Sept 2014 as recent examples…)·         There has only been TWO post opex tops that were NOT related to the FOMC meeting being the week after opex – that was March 2012 – a Monday after minor top and June 2014 a Tuesday after top. ie. ALL of the tops were DURING opex week except for two as long as the FOMC was not the week AFTER opex!·         The smallest pullback from a Quad opex top was March 2013 – when there was just a 20pt Thursday to Tuesday after pullback – BUT it should be noted that the FOMC was on the Wed post opex and we almost always rally in to the FOMC·         Recent examples:

o   Sept 2014: MAJOR TOP on Opex Friday post FOMC

o   June 2014 – minor top on Tuesday post opex

o   March 2014 – Wed was FOMC day and we were down on Wednesday, but back up on Thursday and then minor topped at Friday’s open and pulled back 42 pts in 6 days.

o   Sept 2013: FOMC on Wednesday of opex week – MAJOR TOPPED on Opex Thursday and fell in to October

Quad Opex Tops·         2014o   Sep:   MAJOR TOP on Opex Fridayo   June:   Minor top on Tuesday post opexo   Mar: Opex Friday – at open (minor top)·         2013o   Sep: Thursday before – Post FOMC (Major Top)o   Mar:   Thursday of opex week   (Minor top)·         2012o   Dec:   Opex Wednesday (Major Top)o   June Tuesday after (pre FOMC) – MAJOR TOP)o   Mar:   Monday after – Minor top·         2011o   Sep:   Tuesday after (pre FOMC) – Major Top·         2010o   Sep:   Tuesday after (Post FOMC) – Minor topo   June:   Monday After (Pre FOMC) – Major Top·         2009o   Sep:   Wednesday after (on Fed day) – Major Top·         2008o   Dec:     Wednesday Before (Major Top)

o   June:     Tuesday Before – (Major Top)

·         2007

o   Sep     Wednesday before – Gap up Doji (minor top)

o   June:     Friday: Gap up – Doji Day (MAJOR TOP)

Quad Opex Bottoms·         2014o   Dec – Opex Tuesday – day before FOMC·         2013o   Dec:     Wednesday before – FOMC Spike bottomo   June:   Monday after   (Major Bottom)·         2012o   Sep:   Wednesday post opex (Minor Bottom)·         2011o   Dec:   Monday After – closed at the lows (Major Bottom)o   June:   Thursday of Opex week (Major Bottom)o   Mar:   Wednesday of Opex Week Japan Tsunami (Major Bottom)·         2010o   Dec:     Thursday Before – Minimal 2 day Post FOMC correction (MAJOR Bottom)o   Mar Monday after (Major Bottom) – after minor correction but MDY Hourly signalo·         2009o   Dec – Opex Friday – midday (Major Bottom)o   June   Tuesday After (after big down Monday) – minor bottomo   Mar:     Opex Friday – at the close – Major Bottom·         2008

o   Sep:   Thursday Before – Paulson afternoon save (Major Bottom)

o   Mar:   Monday Before (Major Bottom)

·         2007

o   Dec: Wednesday Before (Major Bottom)

o   Mar:   Wednesday Before (Major Bottom)

March Opex Detail

  • MAJOR BOTTOMS have occurred during March opex week in 2007, 2008, 2009 and 2011. With the exception of 2011, all had quite low weekly stochastics and with the exception of 2009, all of the daily stochastics were quite low. The 2007 and 2011 bottoms were driven by external Asia crises, while the 2008 low was the Bear Stearns rescue
  • Only initial turn post opex was in 2012 when we topped on the Monday after and pulled back 27 pts in 4 days.
  • There have been two recent March opex weeks that had double turns
    1. In 2013, we had an OB Thursday top and then a Tuesday after bottom thanks to FOMC – pullback was 25pts
    2. In 2010, post FOMC we had an OB Wed opex top that pulled back just 18 pts to an oversold gap down on the Monday post opex that was the bottom and resumption of the relentless rally.
  • Hourly signals have generally worked except for one flat MFI sell signal in 2012 and a Wed sell signal in 2013 (Thurs top)
    1. 2007: MAJOR Bottom – Wednesday of opex week
    2. 2008: Major Bottom – Monday of Opex week
    3. 2009 Major Bottom – Friday of opex week – was very hourly OS
    4. 2010: Major Bottom – Monday after – really a dip from the post FOMC OB Wednesday minor top –then the market really took off
    5. 2011: MAJOR Bottom – Wednesday of opex week
    6. 2012: Minor top – Monday after opex – just a 4 day 27pt pullback
    7. 2013: Minor top on Thursday of opex week and a 25pt pullback to the Tuesday after pre FOMC
    8. 2014: Had FOMC week in it and we topped at Friday’s open, though it was a weird one, as we were down on FOMC day and then rallied all Thursday – nice headfake

March 2015 Employment Turning Point (as of cob on Thursday, March 5th):

Given the pullback that has occurred since Monday, there is absolutely NO EDGE in front of this month’s employment report. Quite frequently there is an identifiable edge going in to the employment report, but not for March 2015.

Caution is warranted as MDY has not had an hourly buy signal for 51 days and it is daily MFI OB. (Last instance of the extended period without an hourly buy was the July 2014 employment day minor top – no hourly buy signal for 50 days)) Plus, we have been tending to (minor) top a lot around the employment report (11 out of last 14 reports)

-Employment recently:   In November, we had a rally continuation and in August, we had a minor bottom, otherwise, we have seen a mix of minor and major tops ranging from the day before (Sept 14– minor top) to the Monday after (June and Oct 14) with Employment day being the most frequent (Mar, April, May, July and December)

In 2014 and 2015 so far, the day of the employment report has been the favoured time.

(2014: 9 tops out of 12 – Employment Report day – 6, Day Before – 1 , Day After – 2)

(2015: 2 tops out of 2 – Employment Report day – 2)

On the plus side for the market, March is not generally a bearish month and the 30pt pullback from Monday to Wednesday has calmed the technical indicators, and is something we have seen quite frequently after extended runs recently (see Nov 14, Sep 14, Jul 14 and June 14 as recent examples). The market in all of those noted instances has then continued on to make a higher high before rolling over more significantly (except for June 14 which continued in to July).

Bounces in to the employment report from the Wednesday before are not that common – last time was the major oversold bottom in February 2014. A more comparable recent example technically is December 2013 when there was also a brief pullback prior to the report somewhat similar to this week’s move. Back then, we made a minor top on the Monday post employment and fell for 3 days before bouncing in to opex.

Bottom Line   

From an historical turning point perspective, I can make reasonable arguments favouring both sides of the market. Generally, there is a likely bias (usually a minor top expectation) going in to the employment report, but not for this report given the Monday to Wednesday pullback and the recent March history (2010, 2012 and 2013) of brief or non-existent pullbacks prior to employment and then rallies in to opex.

It is good to be slowly getting back in to the action,

-D

Recent employment reports

  • Feb 15 – Minor top (30pts) – 2 day 30pt pullback that started on employment day
  • Jan 15 – MAJOR TOP (79pts) on employment day – SHARP DECLINE in to Opex Friday
  • Dec 14 – MAJOR TOP (106pts) on employment day – sharp decline in to Opex Tuesday MAJOR Bottom
  • Nov 14 – NO TURN – Rally continuation
  • Oct 14 – Major top (157 pts) on Monday after
  • Sept 14 – Minor (32 pts) top on Thursday before
  • Aug 14 – Minor bottom (27 pts) on employment day
  • July 14 (pre holiday) Minor top (32 pts) on employment day
  • Jun 14 – Minor top (29 pts) on Monday after
  • May 14 Minor top (31 pts) on employment day
  • April14 – MAJOR TOP (84 pts) on employment day
  • Mar 14 minor top (45 pts) on employment day
  • Feb 14 – MAJOR BOTTOM (160 pts) on Wednesday before employment
  • Jan 14 – minor top (29 pts) on LATE employment day

March Employment Reports

Pre 2010, March employment had a very strong edge going back to the late 90s, but 2010, 2012 and 2013 have changed the pattern and made it more neutral. The pullback till this past Wednesday could have been a similar pullback as was experience in 2012.

  • 2007 (2nd Friday): Minor Top on employment day and a pullback that led to the MAJOR bottom on the Wednesday after employment which was opex Wednesday
  • 2008: MAJOR Bottom on the Monday after, but it was just a bounce before the Bear Stearns bottom on Opex Monday
  • 2009: THE BOTTOM on EMPLOYMENT DAY
  • 2010: Rally continued relentlessly
  • 2011: MAJOR TOP at the open on the day and down in to the major low on opex Wednesday
  • 2012 (2nd Friday): Bottomed on the Tuesday before after a short sharp sell off that began at the end of February and then rallied until a post opex top
  • 2013: (2nd Friday) Rally continuation from the previous week continued until the Thursday (opex Thursday) after and then there was a small pullback
  • 2014: Minor top – this was the first turn since the Feb employment low – we had rallied hard on the Tuesday and then stalled – we peaked near the open and fell 45pts in 7 days –

Current Conditions

SPY is technically neutral – a daily RSI of 56 is very similar to the RSI in Jan and Feb and is not extreme enough to provide an edge – same with daily stochastics and daily MFI

MDY is still Daily MFI OB. The last time MDY has gone in to the employment report MFI daily OB for longer than a week was back in Jan 2014 and we minor topped on employment day and pulled back 25pts.

MDY has also not had an hourly buy signal for 51 days and the length of that streak means one must be very cautious about buying the next hourly buy signal.

March 2015 Turning Point Preview (as of midday on Tuesday, March 3rd, 2015 ):

The following is my monthly turning point preview. It touches on important and interesting historical information about the upcoming month.

While the persistent bull now seems to experience bouts of weakness every two plus months (see July-August. Sept-Oct, Dec – Jan), it also seems to be alive and well after another month of relentless rallying.

Since the bull market began in 2009, the month of February, somewhat surprisingly has been the most consistently bullish month of the year with respect to being daily MFI OB for at least some portion of the month. Feb 2015 was no exception as the midcaps (which I use for a lot of my research) has been daily MFI OB since Feb 20th. While MFI OS is very good for helping to identify bottoms, the inverse does not work for tops.

More impressively, since the bull market began, there really has only been ONE MAJOR top (and pullback of at least 50pts) in the month of February and one in March since the bull began in March 2009. They were both in 2011 when the February major top occurred on opex day in February 2011 and the March top was on employment day as the market bounced in to the employment report and then fell in to opex. March has also only really seen one Major Bottom (March 2011 opex post the Japan Tsunami), otherwise, it has been a month that has generally been higher with the highest probability turn being a minor top post FOMC during opex, though there also is some support for a minor employment turn as well.

The last three MAJOR tops during March occurred on employment day in 2004, the Monday post employment in 2005 and employment day in 2011.

In addition to the above, here are the March highlights:

 Employment

  • March employment is not always a turn, particularly since 2009 as there were rally continuations in 2010, 2012 (minor pullback ended on the Tuesday before) and 2013.
  • In March 2014, there was a minor top on employment day and a one week 45 pt pullback
  • Rallies in to employment have been the consistent theme in the last year, as the only time we have fallen in to employment was in August 2014
  • The last time the employment report saw a rally continuation was in Nov 2014. The last time, there was a rally continuation when there had not been a significant oversold bottom in the previous month was March 2013

 Quad Opex and FOMC in the same week

  • When the FOMC meeting is during Quad opex week, there is a much greater than normal probability of a MAJOR TURN. This is particularly true in September and December (see 2013 and 2014 as examples), but the edge seems to have diminished in March and June quad opex weeks (only minor tops in the last two instances for March and only a minor top for the June 2014 instance)
  • In most instances, the primary FOMC / Opex turn occurs post FOMC
  • The March 2014 Opex / FOMC week was volatile with a strong fake out down move on the FOMC day that was reversed with a gap up on the Thursday and ended with a top near the opex day open and a 43pt 6 day pullback.

 Current Conditions

  • While there are a few differences, the similarity in price action between Feb 2014 and Feb 2015 must be noted – as both months had early month bottoms and reasonably relentless advances in to early March.   March 2014 was then really a trading range month with turns (tops and bottoms) occurring every week.
  • Most primary index ETFs are daily MFI OB. The MDY ETF has been OB now for 12 days. In November, it was OB for 18 days and even after exiting OB, it did not top for another 9 days.
  • For MDY since 2007, there have been 35 daily OB instances and the longest lasted 25 days (Jan 2013). The median duration is just 7 days. While there is some edge when MDY gets OB for a second time shortly after exiting an OB period (see Sept 2014), there is no strong edge in the historical statistics and there are a few instances where no top is reached until up to a week after the exit from OB conditions occurs (Feb 2013)

 Summary of Special Research

(daily OB and no hourly buy signal during the month)

There are two pieces of special research related to the current somewhat unusual conditions. The daily OB study does not provide a strong edge, other than to suggest that if the current strength continues then there is likely to at least be a minor top during March Opex.   The other study (there are actually two related studies, but I only included one) shows what occurs when there are NO HOURLY BUY signals in a month – it does not happen very often and lately when it has happened, the bears are able to gain the initiative reasonably early in the subsequent month.

  • Daily OB in February – is there an edge in March? Sadly, there is not (see detailed research in the Denali Section here https://pugsma.wordpress.com/denalis-turning-points-2/denalis-turning-points-2015/). If there is not earlier weakness, then it is highly likely that there will at least be a minor top in March opex)
  • Month without an hourly buy signal in MDY – the statistics on this one   (as well as simply an extended period without an hourly buy signal (we are currently at 49 days) provides a much stronger edge to the bears. The last three periods have meant tops early in the following month and then weakness (April and Aug 2013 and July 2014). Generally, the first hourly buy signal is NOT a signal to buy as there is generally more weakness – some times sustained weakness for at least a week and lately it has been for a few weeks.

 Bottom Line

The extended period without an hourly buy signal means it is likely that there will be a certain amount more volatility and two way price action during the month of March – possibly similar to March 2014 (two good tops and two good bottoms) or July 2014 when there were early month tops and then a series of bottoms and tops during the month.

The history of March since 2009 argues that it is unlikely we will see a significant top this month, but the persistent bull should at least pause for a period of time.

Happy to be back, though my shoulder, sadly, is not fully healed yet and may require surgery in April.

-D

 DETAILS and OTHER NOTES for March 2015 Turning Point Preview

Daily OB In February, what happens in March:

No strong edge here – though in all instances there was at least a pause if not a pullback during March opex or post March opex (excluding the MAJOR bottom in March 2011)

  • March 2014 – OB for 2 days in late Feb. Market minor topped for a week on employment day and then rallied in to an opex day minor top and fell for 6 days.
  • March 2013 (34 day OB period ended on 11-Feb) – after a late February sell off, the market rallied in an opex Thursday minor top and then continued rallying in to early April
  • March 2012 – there was a sharp 36pt sell off from the end of Feb until early March, but the rally then continued until a post opex pullback and then a final rally which led to the spring top in early April.
  • March 2011 – Market had major topped at the end of the Feb OB period and fell in to a major March opex bottom
  • March 2010: Market had made a major bottom on Feb employment day and then embarked on (what are now commonplace (see Feb 2015)) one of those relentless rallies that briefly paused during March opex post FOMC, but then continued on until topping in late April a bit before the Flash Crash in early May.

NO HOURLY Buy signal for an entire month

There have only been 7 months since April 2009 that did not have an hourly buy signal. The last three periods have meant tops early in the following month and then weakness (April and Aug 2013 and July 2014). Generally, the first hourly buy signal is NOT a signal to buy as there is generally more weakness – some times sustained weakness for at least a week and lately it has been for a few weeks.

  •  Aug 2009 – It was 56 days between buy signals – The first signal occurred on Wed, 2nd Sept right before employment this one was a brief 9:30am RSI signal after a 4 day 48pt correction and then the rally continued for another 2 weeks before entering a more normal period
  1. Gravestone Doji candlestick – SPX bottomed that day, while MID bottomed early the next day and we were off
  • Jan and Feb 2012 – It was 82 days between between the Dec 14th opex buy signal and the Mar 5th MFI signal – we bottomed on Tuesday, Mar 6th with a 9:30am RSI signal after a 4 day 36pt correction – we then continued up for another 13 days before the markets topped post opex and became more volatile
  1. Big Gap down and GO on the Tuesday that lasted most of the day, but buying late in the day after the second signal worked very well
  • Jan 2013: Went 55 days between 27-Dec signal and 20-Feb 2:30pm RSI signal – Initially, there was just a 2 day correction and we actually bottomed the next day and then rallied sharply, there was subsequently a second RSI signal at the close on Mon Feb 25th – we made slight new lows the next day and then rallied for 16 days before becoming slightly more volatile with a minor top on Opex Thursday– though no buy signals occurred in March 2013
  1. Best strategy was buying late in the day on the day after the first signal – We gapped and ran on 21-Feb, but bottomed late in the day and then had a nice bounce
  2. Second signal – bottomed the next day and we were off
  • March 2013: Went 37 days between the late Feb and early April buy signals. We topped on the Tuesday pre employment post Good Friday and fell in to employment day, bounced and then made a final bottom in April opex
  • July 2013 – (49 days) AGAIN a long, long period between hourly buys – you would have been crushed by the one on the Wed of June opex week post FOMC…. But that was then the last one until the Wed post Aug employment. There was a minor top post July opex that was good for 3 days and 25pts of weakness
  1. This was THE ONLY TIME that the hourly buy did not result in a another run higher for a few weeks
  2. The market had a fade the open buy on the Wed post employment after a 24 point correction – the bounce lasted till the close the next day and then we sold off the rest of the day
  • June 2014 (50 days) – While the rally from May opex to the July employment report was not relentless, there were a few 3 day 25plus point pullbacks, it was persistent enough that all weakness was bought until the market peaked on July 3rd. The early July top was the summer peak for the RUT and the MID and was the start of a one week 32 pt SPX pullback as well as the start of the July topping process
  1. The MID and the RUT underperformed all of July and did not bottom until the employment day in August.

Posted 1-28-15 before FOMC Meeting:

Apologies for the RADIO SILENCE!

I am afraid January 2015 has not been my month

I have fractured my shoulder…. (My wife believes guys that are 50 plus should not place contact ice hockey….. maybe she is right…. but I LOVE IT!) so I am theoretically only supposed to be using one hand to do everything…. but I am not good at typing with one hand (especially the left)…. so, in limited instances, I am violating the doctor’s orders….

AND – the new workstation that I bought to reward myself for a good 2014 (and replace a 2009 machine) has been a disaster and I have been operating on my DR set up (ie. 2 laptops) for two weeks now – the vendor keeps being certain that they will FIX it with their supposed next day business support…. but they are 0 for 2 with today being their last chance….. then I will just return it…. and go back to the 2009 workstation….

Yesterday’s move lower was not what normally we have seen as part of the trading around FOMC in normal January’s. As January FOMC normally sees a continuation with just minor 25 plus pt pullbacks and the (so far) Friday to Tuesday pullback of 45 pts is a bit more than normal.

The only recent January where we saw short sharp moves down (with the trend still resuming higher) like yesterday’s was in 2011. There were two of them around AAPL’s earnings and at the end of the month. The market then moved higher in to Feb opex. (We also had sharp moves in 2014 around Jan FOMC – though they were in some ways the reverse of the current move with the post opex top and the Feb employment bottom.)

For now, the historical January FOMC tendencies still favor the bulls, especially with the January tendency for a mid month inflection point that worked very well with the Opex Friday bottom. I have post the Jan FOMC details below.

Shoulder and new workstation allowing, I plan to post a February preview next week that will cover ALL of the February turning points and then I will probably go reasonably silent till the end of Feb to allow my shoulder to heal and just take a break (kids are on a two week holiday In Feb as well, so it will be good to focus on them)

Sorry again for not being that involved. I am missing the markets and being involved here.,

-D

Details

JANUARY FOMC
• Generally very bullish.
• Since 2007, we have rallied in to FOMC every time though 2010 was a brief one day rally until 2014 where we were in a significant post opex / post holiday correction
• 2007: Minor Bottom – Friday before
• 2008: Major top – Monday After
• 2009: Major Top on Fed Day
• 2010: Minor Bottom – 2 days after
• 2011: Minor top – 2 days later
• 2012: Minor top – Day after
• 2013: VERY Bullish month – very minor pullback of 13 pts from Fed day to day after
• 2014 – MAJOR TOP Jan 2014 – This was a post FOMC bounce during a significant decline that had started post opex / post holiday – after a down FOMC day we had one day of misdirection on the day after – topped and fell hard in to early February

Opex and MLK Holiday preview for January 2015 (as of 9am EST on Wednesday, January 14th, 2015):

While it is a few days early to post for the MLK holiday, it is important to highlight the quite amazing history of opex and MLK since 2007. There have been 5 years since 2007 that MLK has occurred post opex since 2007. On the Tuesday post MLK, there have been TWO MAJOR tops (2010 and 2014) and two MAJOR bottoms (2008 and 2009) – ONLY 2013, saw NO TURN whatsoever and we had a rally continuation.

At the close last night, the market was not at any extremes, but the large gap down indicated for Wednesday’s open may start to lead to some oversold conditions that could provide a long side edge. (see detailed research I have just added below) The two MAJOR opex bottoms in 2014 did occur midweek, but we were at much more extreme levels technically in October and we had the FOMC catalyst in December, so, for now, patience is probably best as the January opex history strongly suggests late opex to post opex turns.

Now that we have a MAJOR employment top with Tuesday’s decline to 2008 on the SPX, the recent history has shown that it has taken 7 to 11 days for the SPX to find a bottom post a MAJOR employment top (see research below) – so that would favour lower prices later in the week.

Given the current market levels (ES 1992), the REAL edge is to look for a low late in the week or early next week.

The one BIG wildcard on the calendar is the change in the ECB meeting dates from monthly to roughly every 6 weeks. I have NO idea whether this will impact the power of the turning points, but as the ECB has boosted global markets in the past, it is certainly possible. The ECB meeting is next Thursday, Jan 22nd .

Bottom Line:

If we reach an extreme later in the week or early next week, particularly if we take out last week’s low – then we should be on high alert for an opex / MLK bottom.

If we rally, while history is on the side of a turn post opex / post MLK – the new date for the ECB meeting, the recent volatility and the 2013 rally continuation would make me quite cautious in calling for a significant top.

As of last night’s close, the potential for the January opex turn and also the MLK turn was just too soon to tell, but today’s gap down, particularly if there is follow through to the downside later today should set up for a nice opex or post opex bottom.

I will provide updates as soon as I unearth a few more clues as to what might transpire.

-D

Detailed Research

Current Conditions

As of the close on Tuesday night, January 13th, there was NO EDGE – as the market is in the middle of a range defined by last Friday’s highs and Monday’s lows – with NO extremes on the technical to help.   Wednesday’s gap down and market price action will certainly change the picture.

Large Gap downs on Opex Wednesday:

Since Jan 09, there have been 9 large gap downs on Opex Wednesday

5 instances where we created MAJOR Bottoms during the opex period – but tough to read when they might occur. Some of the lows have occurred on the Wednesday, while in Nov 2011, the selling lasted till the Friday post Thanksgiving which was 9 days later.   The last instance was in October and we bottomed on that Wednesday.

  1. Jan 09: Market gapped down and ran to lower bollo, next day it opened higher and traded below lower bollo, but then rallied in to opex day… MAJOR BOTTOM was at the close on the Tuesday after opex / post holiday
  2. May 09 – Gap and Go… closed at the lows… bounced all day Thursday… but then reversed again to have an opex day bottom and bounce in to the week after….
  3. Aug 09 – Gap Fade… gapped down to the Monday lows was faded and we ran higher till the end of August….
  4. Jun 11: (Gap and Go) – Had bounced hard on the Tuesday and then fell hard on the Wed creating the MAJOR BOTTOM on the Thursday – we were quite daily OS
  5. Nov 11: (Gap and Go) – This marked a real market BREAK from the 20 day MA and we just plunged all week in to the MEGA bottom post opex and post Thanksgiving
  6. Apr 13: (Gap and Go): Like in Jun 11 – had bounced hard from an all down day on the Monday, but totally reversed on the Wed in to the MAJOR bottom on the Thursday
  7. Nov 13: (Gap Fade): TOTAL FAKE OUT – gapped below the lows of the previous two days – just above the 20 day MA and we rallied VERY HARD in to a small post opex top on the Monday after
  8. May 14: Made new all time the day before. Gapped down, but did not go far on the Wednesday. Market then gapped down on the following day, the Thursday, sold off strongly and then reversed in the middle of the day and that was the opex low and we were off on another strong V reversal rally
  9. Oct 14: VERY powerful gap down and sell off with the market way below the lower bollo.   Selling exhausted itself and there was a strong bounce – Market formed a MAJOR BOTTOM on this day – though the lows were tested on the following day.

Employment tops – how long have they lasted?

As seems to be almost always the case, we rallied in to a late employment report. This time we topped on the employment report day – a thing we did frequently in 2014. So it is now time to look at two things – when we have had a late employment report top, when have we bottomed?   and in 2014, when we topped for employment report, how long did it take for us to bottom?

Late employment report tops since 2007: There really are only three weeks that are mirroring the current price action – they are March 2007 (Opex Wed bottom), May 2009 (Opex Friday bottom) and July 2011 (Monday post opex bottom). With the strong turn attraction of MLK, this would suggest a possible low late in opex week or more likely on the Tuesday post opex:

  • Mar 2007: Mar 2007: (minor top on employment day)- The market had fallen hard since post Feb opex, but then bottomed the Monday before employment well below the lower bollo band. After a 40pt rally, it then topped near the open on employment day – and made a final Q1 bottom on opex Wednesday 6pts below the previous week’s low and then rallied strongly to the June peak
  • May 2009: (Major top on employment day) Coming out of the post April opex bottom, the market rallied strongly which culminated in 3 volatile days of price action almost entirely above the upper bollo band (strong up Wed, big down Thurs and strong up on employment day to slight new highs.) Market peaked near the close and then reversed on the Monday and fell sharply till opex Friday where it bottomed – that low was re-tested the week post opex, but it held and then the rally continued in to the June top.
  • Jan 2010: (Major top on Monday After) After bottoming at the close on New Year’s Eve, the market rallied strongly prior to the employment report and then pressed even higher on employment day closing at the upper bollo band – it then opened at the highs on the Monday and that was the top till March…. But we were in a tight range during opex week and we did not decline until we double topped on the Tuesday post opex / post holiday
  • July 2011: (Major top on Thursday before) Super OB with prices spending at least some time above the upper bollo for 5 days in a row prior to employment report – we topped in the pre market and fell in a volatile opex week until the Monday post opex and then we had a strong bounce before the MEGA selling began in to the MAJOR August low post employment
  • Jan 2014 (minor top on Employment Day) – After peaking on 31-Dec, the market fell 26pts till the Monday before employment and then rallied in to employment day, but it topped then, but just fell 29 pts to the Monday after

As for the 2014 price action, the three major employment tops saw corrections that lasted 7 days (April), 9 days in October and 11 days in December. While the minor tops saw corrections lasting between 3 and 7 days. As we are now dealing with a MAJOR employment top, that would suggest again a low between Friday and next Tuesday.

January Opex in the past

Bottom Line – 4 of the last 5 times since 2007 that MLK has been post opex, we have turned on the Tuesday post opex.

  •  Timing of MLK day is important – we have four post holiday post opex turns in 2008, 2009 , 2010 and 2014 with 2013 being the only year that we saw NO turn with MLK post opex.
  • In 2007, 2011 and 2012 with MLK at the beginning of opex, there has been less to it
  • Hourly signals have been ok to good with the exception of 2012 and 2013 sell signals
  • January 2012 and 2013opex weeks were REAL disappointments with tiny (2012) or NO (2013) tops
    • 2007 (early MLK): Minor Bottom on the Monday after with a 2 day bounce
    • 2008: MAJOR BOTTOM on the Tuesday after post MLK holiday
    • 2009 MAJOR BOTTOM on the Tuesday after post MLK holiday
    • 2010: MAJOR TOP on the Tuesday after post MLK Holiday
    • 2011 (early MLK): Minor bottom on the Thursday
    • 2012 (early MLK):   VERY Minor top (16 pts) on Monday after
    • 2013 – Nothing just an unrelenting surge
    • 2014 – A Monday bottom and a Wed top during the week, but then rally continued until a MAJOR TOP on the Tues post holiday for SPX and the Wed for MID and RUT – down in to early Feb

 MLK Holiday

Overall ·        MAJOR turns on the Tuesday after – Almost EVERY TIME – fairly amazing – bottoms and tops equally likely
Pre 2007 ·        6 for 9 on turns·        Not as consistently good – Had Major tops in 1998, 1999 and 2000 and was ok for a few of the years but did not work well in 2001, 2003 and 2004 where the trends continued
Post 2007 ·        5 for 7 with MAJOR BOTTOMS on Day after post opex in 2008 and 2009 and MAJOR tops on day after post opex in 2010 and 2014·        The DAY After has worked extremely well every year except 2012 and 2013
Recent ·        2012:   Did not work – it was the Monday of opex week and we had a strong continuation rally·        2013:   (Post Opex) Trend continuation  – quite a surprise to have post opex no turn, but instead we had a strong trend continuation that did not stop until post Feb opex·        2014:   (Post Opex) – A MAJOR TOP for the SPX on the Tuesday post opex / post holiday while it took until the Wednesday post opex for the MID and RUT to top – we then fell very hard in to early February

January 2015 Employment Turning Point (as of cob on Thursday, January 8th):

Must admit I am surprised Pug did not have a little dig at me for my normal – but generally so true advice

DO NOT BE SHORT in to the EMPLOYMENT REPORT unless the technicals overwhelmingly favour a short (ie. July 2011 and July 2012)!

And as is generally the case, the technical do not support a short pre employment!

From a turning point standpoint, there is no strong edge here. The next super strong turning point edge comes post opex / post MLK. Still, let me go through the key points:

-Employment recently:   In November, we had a rally continuation and in August, we had a minor bottom, otherwise, we have seen a mix of minor and major tops ranging from the day before (Sept – minor top) to the Monday after (June and Oct 14) with Employment day being the most frequent (Mar, April, May, July and December)

In 2014, the day of the employment report has been the favoured time.

(9 tops out of 12 – Employment Report day – 6, Day Before – 1 , Day After – 2)

-Late employment: My comments from Tuesday still apply: it has been VERY RARE since Jan 2007 to fall in to a late employment report – the only recent time was Jan 2009 and we had peaked on Jan 6th above the upper bollo)…. In March 2007, we bottomed below the lower bollo on the Monday before and topped on employment day and then MAJOR bottomed on Opex Wednesday. In March 2012, we bottomed on the Tuesday before and then rallied through opex and in Jan 2014, we bottomed on the Monday before employment, rallied in to employment and then chopped around till a post opex peak. (we also had a late employment report in Nov 2013 – which just saw a one day down trade on the Thursday before)

January employment:   There is no strong edge for Jan employment – in 2013 and 2014, we had minor tops on employment day and in 2011 and 2012 we had rally continuations

The LAST TIME we had an hourly buy signal on the Tuesday before employment and an hourly sell signal on the Thursday before employment was back in the volatile days of 2011 – November 2011 to be precise. Back then, the market topped on the Tuesday post employment and declined in to the MAJOR BOTTOM on the Friday post opex / post Thanksgiving.

Yesterday was a trend day up, the last trend day up on the Thursday before employment was in June 14 – they are pretty rare and we minor topped on the Monday after.

As opex is next week, it is important to be aware that with the MLK holiday post opex, there have been four post holiday post opex MAJOR turns out of the last 5 times we have seen this calendar configuration. ( 2008 – bottom, 2009 -bottom, 2010 – top and 2014 – top – with 2013 being the only year that we saw NO turn with MLK post opex.)

Bottom Line   

The market has become MUCH more volatile since the end of November which begins to create a few ???s about the persistent bull, but for now, one still can not doubt the persistent bull until there is more evidence regarding its demise.

For now, flexibility in one’s positioning until the high probability post opex / post MLK turn seems to be the wisest course of action.

Glad to see such an interesting start to the year.

-D

Recent employment reports

So I was a turning point Jinx in November as I stated that employment had become the most consistent turning point this year – sorry about that…

  • Dec 14 – MAJOR TOP and sharp decline in to Opex Tuesday MAJOR Bottom
  • Nov 14 – NO TURN – Rally continuation
  • Oct 14 – Major top (157 pts) on Monday after
  • Sept 14 – Minor (32 pts) top on Thursday before
  • Aug 14 – Minor bottom (27 pts) on employment day
  • July 14 (pre holiday) Minor top (32 pts) on employment day
  • Jun 14 – Minor top (29 pts) on Monday after
  • May 14 Minor top (31 pts) on employment day
  • April14 – MAJOR TOP (84 pts) on employment day
  • Mar 14 minor top (45 pts) on employment day
  • Feb 14 – MAJOR BOTTOM (160 pts) on Wednesday before employment
  • Jan 14 – minor top (29 pts) on LATE employment day

January employment reports

  • No strong edge – definitely not worth playing aggressively
    • 2007: Minor bottom on the Monday After
    • 2008: Minor bottom on the Wednesday after
    • 2009: Fall continued – definitely not one to touch
    • 2010: Major TOP the Monday after – fell in to February – the topping process took a week
    • 2011 – Rally continued
    • 2012 – Rally continued
    • 2013 – minor top on employment day and a pullback to the Tuesday after
    • 2014 – (Late employment report) – Minor top near the employment day close and then a sharp sell off on Opex Monday of 29pts, but that was it and we rallied in to a post opex top

Current Conditions

The market closed hourly OB. The last time we closed hourly OB on the Thursday pre employment was in Nov 2014, when we just kept going. There is no edge in the daily or weekly technical as the 2 day rally has made them all pretty neutral.

 
%d bloggers like this: