Ah, the holidays. A
season celebrating food comas, Christmas decorations before Halloween, cards
sent to people we haven’t spoken to in a year, and pure market insanity. My favorite time of the year is back again.
It is no secret that I love looking at historical patterns
and this year Stock Market Santa appears to be flying down from the North Pole
a month early. November 2011 seems to be
repeating itself all over again. Below
is a chart with some numbers and lines on it, read the text below and I promise
it will make more sense.
1. Represents a
significant cloud of support. Remember
the whipsaw action of last August-October?
Well, the market delivered exactly that again this June-August. 2.
Triple top with declining peaks.
The end of October/start of November 2011 delivered a compressed version of
what the market experienced this September-October. 3.
Failure from the triple top leading to a perfect 61.8% retrace of the
major bull run up. 4. Incredibly violent rally stemming from “nowhere.”
I fully admit that last year’s pattern occurred in a
compressed timeframe. That can be directly
attributed to the VIX. Last year’s
action occurred during a time where the VIX ranged from 28 to 50. Simply, the market was moving much
faster. Right now we have a VIX at 17.50
meaning this pattern will take a bit more time to play out.
Lastly, there are two interesting non-confirmations occurring. First, Treasuries do not seem to be screaming
“panic” at the top of their lungs.
Secondly, AAPL appears to be repeating last year’s pattern all over again. For your enjoyment, another chart with
numbers.
1. V bottom reversing
above prior lows. 2. New recovery high. 3.
Selloff to the prior V bottom.
While last year’s action in AAPL was smaller in amplitude, the pattern
and percentages are close enough to pay attention. If AAPL turns the rocket engines back on, the market will certainly feel the effects.
As always, calling bottoms or tops can be a risky
business. But I simply can not ignore
the striking similarities of last year’s and this year’s holiday season.
