Reckon now with a 4-5 week rally

It’s supposed to be a countertrend rally topping in about a month and producing some lower highs in reference to the year. Then – in the course of July and August – the lows of last week will be tested at least, but they are likely to be fallen below.

Last Sunday I still reckoned with a last sell-off of the S&P 500 leastways down to its strong monthly support area that starts at 1257:

Moreover I expected some panic lows that would have led the market at least down to the important monthly support, the 2009 support Gann Angle (orange circle in the chart above) are even a little lower:

…down to the strongest monthly support, the upper line of the 2nd double arc in the actual monthly 5 candle down setup, at 1228. That’s where I intended to make a killing… But all those important monthly magnets were not reached. On Monday the index marked the final lows of that correction wave at 1266.74 turning upwards brilliantly. On Thursday the week high was produced at 1329 – almost 63 points of rising from the week low to the week high – not so bad at all…

But since not any of the important monthly magnets was worked off thus going on being the targets of this correction, the current rally can only be a countertrend rally that was triggered by a magnet in one of the lower time frames. To facilitate the "final lows" of this correction it’s urgently necessary that the monthly supports above mentioned are reached. The final rally through April 2013 cannot start before the touch with the 2009 Gann Angle or the upper line of the 2nd double arc in the monthly 5 candle down setup, respectively!

The 1*2 Gann Angle coming from the year high 2011 (1074.77 on October 4) is the magnet that was responsible for the lows of last week:

After the 1*1 Gann Angle was broken persistently on April 10, the index fought its way into the lines of the 3rd. From there until Monday it fell narrowly below the daily 1*2 support angle that didn’t break yet on closing price basis on Monday, but on the contrary it made the market rebound upwards brilliantly. By virtue of the GUNNER24 Rules # 24.1 and # 24.2 (Complete GUNNER24 Trading and Forecasting Course) with the lows of last Monday we may assume the beginning of a new up setup. At the moment it’s showing a 5 candle up impulse, but possibly it might expand until an 8 candle up, and that’s what I suppose will happen. Correspondingly the market is expected to end its initial impulse at over 1340 until Wednesday correcting from the upper line of the 3rd at least by a 50% or perhaps even by 62%. But no matter whether it’s a question of a 5 day or an 8 day initial impulse we’ll buy at 1302 MIT – market if touched. Order valid till June 18. SL at the correction lows. Daily position. Main target is the most important monthly support at 1374 (not shown). First target is 1356 (weekly resistance, not shown). From one of both resistances the market is supposed to turn down again to test its year-highs.

The actual picture for the NASDAQ-100 is looking like this:

It concerns the never-published weekly 13 Candles GUNNER24 Up. I’m swinging to this longer-term setup because it’s visible for all of us now that the index is orienting itself by it primarily correspondingly providing us with some important supports and resistances as well as the maximum lower high area for the upswing that is coming now.

The initial impulse lasts 13 weeks. On the one hand the setup becomes valid because the blue arc that is clinging to the top of the 13th week perfectly reflects the mathematic correlation with the high of the week # 11 that is exactly at the upper line of the first square, I mean. On the other hand there’s a correction high lying precisely at the 1*1 angle (15th week). Thirdly and most obviously to all of us is that by the 13 candle initial impulse the year high can perfectly be defined that is lying exactly at the double extension of the first square. The upper line of the 2nd square is lying at 2795, the yearly highs.

From this highs the market corrected down to the first double arc testing it extensively. The weekly reversal candle confirms being a strong support that cannot be broken finally either in future. The weekly reversal candle is a new interim buy signal now. At most the market can head for the lower line of the 2nd double arc now before it has to turn down from there. Whether the lower line of the 2nd will be the true main target of the now expected 4-5 week rally will be to be waited out.

Since the 2*1 was clearly broken downwards at the beginning of May, the 1*1 is the long term target of this correction. I.e. at best we’ll see a double low in the course of July/August, but more likely it’ll be narrowly lower lows here, too. From these July/August lows the market is expected to target the 2nd double arc in the setup above again breaking through it in autumn finally!

To the short term course:

We see that during the actual correction several magnets were met producing the significant rebound. On the one hand the absolute low is exactly on the lower line of the 2nd, on the other hand a new weekly support Gann Angle emerged with the weekly close of the week before last. The weekly close of the week before last was exactly on this actual effective support Gann Angle.

The highs of the last two weeks are closely above the resistance Gann Angle that will newly allow slightly higher highs at the beginning of next week. Perhaps the market will be able to reach even the next higher weekly horizontal resistance at 2605. From there the index is supposed to put a 3-4 day correction on the floor being expected to correct the actual daily upswing by at least a 50% - as in the S&P 500. Any weekly close above 2605 will activate the main target of this correction rally – 2685!

Let’s still have a concluding look at the two precious metals we consider, gold and silver:

The nerves of the precious metal bulls keep being strained extremely even though everything points to a very important low that was produced on 5/16 at 1529.30 – the 55th day (!) of the previous correction move. With their short-attacks the market determining Big Players continue having the hang of everything. After the daily downtrend channel for every chart-technician was "officially" broken upwards on Wednesday being signaled an official "buy signal", on Thursday very punctually with the beginning of the Bernanke speech the market was flooded with sell-orders of thousands of contracts:

Ok. Each ascent has got to be corrected, but the incidents that were rid of at the beginning of the Asian trading on Friday demonstrate us the way the precious metal markets are constructed. They are narrow markets where the Big Players – with their deep pockets - easily succeed in fishing up the stop-losses of the underpowered market participants.

Here’s an eyewitness report:

Source: http://www.tfmetalsreport.com/blog/3885/last-desperate-acts

We mustn’t ever forget: Stop-loss fishing is a "business model" of the banks and the hedge funds who know where SL clusters are to be found in the market. The analysts always question how stupid one must be who sells thousands of contracts in one go since much better fills can be achieved by graduated orders?! But in this case it’s never a matter of the good fills but it’s all about to fish the SL clusters (buy stops/sell stops) above and below in order to take the contrary position there, at those clusters. With this simple technique, for decades the money has been wandering to the Players who are technically well-equipped to recognize exactly these clusters. Being small payers we are always being taken to a ride because technically we always have to set SL to avoid large losses.

We always have to avoid setting the direct SL if – being investors - we’re convinced of a short-, medium or long-term trend. It’s so simple. But that’s only apropos of nothing.

Which stop-loss marks are appropriate depending on the respecting market situation and trend state – and whether anyway – is shown to you by the

Complete GUNNER24 Trading and Forecasting Course

Well, the whole story – and this is very important for the actual up swing now – reminds me on May 2, 2011, the day when the silver sell-off really started. In the early trading hours of that day silver was swinging around the 5$. I witnessed myself how the bids and asks disappeared in my trading mask. Something stamped itself in my mind then - something I’m not going to experience again (as likely as not) – between one bid and the next ask there was a distance of about 1.30 US$...

The short conclusion of a long story: There’s a clear parallel between the May 2, 2011 silver event and the Friday gold sell-off. At that time in silver a lower daily exhaustion high was produced. Might the Friday gold sell-off have been a matter of a significant exhaustion higher daily low?! The huge bid/ask spreads are each showing exhaustion unambiguously!!

A strong clue to an exhaustion is given by the further Friday price course and the resulting hammer candle. In addition there are the higher daily highs. Purple stair steps!

Furthermore the actually existing down pressure of the determining 3rd double arc in the actual weekly 13 candle up might be left soon, somehow…

The close of the last candle is narrowly above the upper line of the 3rd. Is it the last test of this upper line?? I hope, next week will definitely bring clarity whether the relief rally was "officially" triggered by the Friday performance. As analyzed last week, the 1670 are a medium-term target until the end of June 2012. Then, at the purple downtrend line the next strong hammer blow will be threatening.

We always have to look at and analyze gold in a context with silver.

As long as silver doesn’t give a sign of life gold will not be able to end its weekly downtrend significantly, or respectively gold will have to follow silver downwards in the medium term. Now silver is in a stage in the actual very long term monthly 21 candle up so we can use it as an additional signaler:

Watch the current June highs and lows. They are marvelous signalers on daily basis. The actual monthly candle touched the lower line of the 2nd double arc from below on Wednesday. Resistance is at 29.865! The actual monthly low – delivered at the first trading day of this month, June 1st, is lying at a double GUNNER24 Magnet (intersection point of the horizontal support and the 2009 Gann Angle) at 27.17. If silver on daily basis either closes above the monthly resistance or it falls below the important monthly June support we’ll have a signal we can trade. GUNNER24 will either go long in case of a daily close above 29.95 (target is the upper line of the 2nd near 33) or short in case of a daily close below 27.05 with first target 26.11 and main target 22 (1*1 Gann Angle).  

Be prepared!

Eduard Altmann