Put on your steel helmets and fasten seat belts again

Fresh record highs there are whatever the rapturous stock-market bull might look at. Since my last S&P 500 view 2 weeks ago that one has risen by another 2%. Then, my advice to you was – inter alia - to buy any little consolidation or correction because the stock market uptrends are far away from exhaustion, so they will keep on running till early 2014.

"Buy stocks, buy stocks, buy stocks", is what my brief credo says today again. It’s an almost safe, 100% winner trade. Here we go! Some fresh GUNNER24 Buy Signals are newly confirming price and time targets for this S&P 500 uptrend. The euphoric phase has been on since Wednesday. The exaggeration phase has started, also known as exhaustion move. It’s really going off now! In addition, on Monday the "very best time for American stocks" is beginning. The keyword is Thanksgiving. Traditionally the stocks use to trade extremely steady until or shortly after Thanksgiving. Furthermore the 2nd half of November nearly always turns out to be extremely positive in post-election years.

By virtue of the November expiry of last Friday, on Monday/Tuesday it might get to a mini-correction in the stock markets again – during no more than 2-3 days. Buy there! It’s a possible entry into the S&P 500 for the current run that is likely to last till 11/29 (day after Thanksgiving) or 12/02. Buy more during any 1-2 day correction in the Thanksgiving rally!

For gold- and silver-bulls it will be advisable to put on the steel helmet mentioned in the Re line. The bears’ bullets are in the air already, the impact will follow soon. In the course of next week or the week after next a huge sell-off wave might start lasting till the end of X-mas. The downtrend seems to accelerate again. There’ll be the threat of new year-lows if the October lows are fallen short. See concretely the possible course of this negative euphoria, the sell-off wave in the today’s silver analysis further below…

But at first I’d like to go again into the coming exhaustion high in the S&P 500. I’d like to comprehend still better – seen from the timing as well as from the pricing points of view. For that we are going into the past, as usually. Past price moves determine the future after all. Let’s rummage a little bit in our voluminous GUNNER24 Building Kit. So we meet with the following monthly S&P 500 setup that starts at the 2007 high providing us some extremely concrete clues for the exhaustion!  

The last time I presented you this 5 candle down in detail was the end of April. Please read up here the analysis of then.

The old analysis I always keep in stock for you to look up, mostly contain many clues or lots of evidence confirming the validity of the respective setups.

That is why now and here I am not going into the validity of the setup, but I just say that the actual bull has been orienting by the 1st and the 2nd double arc since its medium phase – about from 2010. The first double arc is resistance, and from the 2nd – support – the market has to bounce up. A look at the 2nd double arc is technically sufficient to realize that this one is chasing the market upwards. Thus this bull cannot come to an end before the influence of the 2nd double arc finishes. Not before that the market will be "allowed most officially" to fall over several months and to consolidate, to correct or to start a new trend being in this case a new downtrend.

Half a year ago, in April/May, the S&P 500 was exactly at the upper line of the 2nd thus reaching the first important possible turning point in the bull market. In May the upper line intersected the time axis, so the bull would have been allowed to top or to turn. Then I prognosticated that a correction of a 10% would have been due, because the market is so to speak frequently "forced" to go into the opposite direction, correcting in this case, when important double arc lines cut the time line thus announcing the end of the previous trend:  

Finally the S&P 500 corrected but by a 7.5% down to the June 2013 lows. It just fell into a little hole before the space between both lines of the 2nd double arc turned out to pull the market up again. It’s often very difficult – sometimes merely impossible – to apprehend in advance how a market wants to perform in the space between both double arc lines:

Frequently the space between the lines of a double arc forms a vacuum. In there, depending, the price may fall or rise extremely because there’s nothing above or beneath that may keep or detain it. The different market energies (up or down but also some infinite sideways moves – thus less energy) may let off steam without being disturbed.

In the current case of the SP 500 for all of us it becomes visible that the powerful up-forces are effective within the lines of the 2nd. The market is being pulled up irresistibly… And...:

This up-energy cannot be "switched off" officially, i.e. come to an end, before the lower line of the 2nd newly intersects the time axis. This is going to be the case in December. But before the market is able to fall the lower line of the 2nd will chase it up. This line is a magnet that forces the market upwards making it exhaust – probably since Wednesday. The closer the market gets to this lower line, the faster it will rise – till the extreme and till exhaustion. That was the theory, so far.

When the market trades first time after 2nd double arc influence is over – hence in January – it will be "allowed" to fall. That’s why my betting is an exhaustion-high to happen in January 2014 being expected to lie closely above the December high. Afterwards the market will correct at a high level for at least 3 but rather for 6-8 months!! This is my presumption. To correct means in this case that in the course of those 6-8 months it should correct a 15-20% at most. The confirmation for this thesis cannot ensue before the exhaustion-high is in.

So, we’ve nailed down the time for the exhaustion-time: January 2014.

Let’s go now to the pricing for the expected top. In the chart above you find a Gann Angle that cuts the market from left below to the right above. I named it the Target Angle because I suppose that this angle will have to be reached compellingly during the current exhaustion. From my point of view it is the magnet with the highest attraction power for the S&P 500. Prolonged upwards the lower line of the 2nd December will cut the Target Angle at 1854, and January 2014 will meet it at 1864. Thus we’ve got the first two targets for the top.

Now follows the derivation of the Target Angle. It springs from the July 1996 low, an important one. This 07/1996 low is narrowly below the bear-low of 2009. Thus it is defined as an extremely important support low of the last 17 years:  

Illuminating closely now the history of the Target Angle we see that this angle has played an important part during the last decade.

Coming from the 2002 low it was an important up-target that was tested altogether as many as 11(!) times from below marking 11(!) times an important monthly high. The long lower wicks in 3 successful tests also show it as to be an important support giver. It was the last time for it to play a main part when it broke finally in June 2007 thus giving the official signal for the following bear-market.

This thing is a logical target = magnet for the current bull. Regarding its history especially as a resistance magnet we may assume that the market will rebound from it during the next go in any case. A monthly close above the Target Angle in 2014 will have to be our signal for a new buy wave!

Conclusion: 1854 for December 2013 and 1864 for January will be likely to occur. But that is at least 16 index points away from the 1880 in the weekly time frame worked out in the issue before last:

And the 1888 uptarget of the monthly time frame. See the derivation here, too:

http://www.gunner24.com/newsletter-archive/november-2013/03112013/

All the 4 possible uptargets (1854/1864/1880/1888) are plausible and to be expected if we have a look at the ruling daily 21 Candle GUNNER24 Up Setup. All the 4 targets are situated at the 3rd double arc in this daily setup:

On Wednesday the 2nd double arc broke upwards finally – a new buy signal. It’s an extremely rarely showing triple buy candle, a very strong buy signal!

That’s why I think the euphoria stage is presently underway. Now it may happen very fast. The 3rd double arc is now activated as the next important up-target being reached in trend direction with a 75% of probability. Now all the 3 important time frames – daily, weekly and monthly - are showing nearl perfect price harmony. In the daily 21 candle up there are the two lower exhaustion targets, the 1854 and the 1864, at the lower-line surroundings of the 3rd double arc.

The buying zone for the possible correction till late Tuesday and early Wednesday is beginning at 1781. But the very strongest daily support is now the 1768 horizontal support. I doubt however that any coming correction will go that low.

From the current 1798 the market is expected to go easily to 1820 – till Thanksgiving. It is not only daily 1*1 Resistance Angle but also the higher weekly horizontal resistance! At 1820 the market should rest, correcting a little bit (target perhaps newly below 1800) before from there till the beginning of January 2014 the very last up-swing with minimum target 1864 is likely to start.

What positively happens to the S&P 500 is likewise occurring with silver now – just in the negative sense. Silver is situated within the lines of an important resistance double arc.

The vacuum between both lines of this resistance double arc is making silver look like a lame duck. It can’t get on its feet. It’s not moving upwards. It’s creeping downwards. Be sorry if the down move picks up speed soon. In that case silver (and gold, too, of course) may really fall till X-mas. And then they may lay down a trend-year. That means year closing near/at the year-lows.

It was on 9/15 when I last presented you the following weekly silver setup. Please read up there and above all in the issue of 08/18/2013 which way and why we can build it up: 

If the Support Angle doesn’t resist - occurring a weekly close below this Support Angle – at first heading for the downtrend lows (18.17$) of June 2013 would be preferable, and finally (merely theoretically) reaching of the 16.80-16.50 region would be possible. In case this Support Angle on weekly closing base is broken there will be a very high sell-off threat!!

This outcome is implied by the downwards directed course of the 3rd resistance double arc where silver is situated. The space between both lines of a double arc – as described above on the S&P 500 – is often a vacuum. In the interior the price rises or falls faster than usual.

Since the 3rd double arc is directed downwards the price for silver is falling now. More and more down-pressure is building up. Once it is triggered the pressure grows. The down-pressure may or even should grow more, the longer silver is between the lines of the 3rd and the more important supports are falling. Thus, in Gann term the trend accelerates.

Frequently, the maximum of a down-pressure won’t be reached before the temporal influence of a double arc comes to an end or exactly at this moment. In the case above that will occur in the week before last or perhaps in the last trading week in 2013 – when the upper line of the 3rd intersects the time axis.

Let’s zoom now into the 3rd resistance double arc as well:

We recognize that at the moment the 20.50 gap support sill resists. The second serious test of this region is running. But I think it will break, it won’t resist. The lame silver duck has only been thrashing about for weeks. The time will take care of the rest letting it fall to the important support angle within the next two weeks. This one will pass at 19.62 next week. If silver wants to perform as it did in the first test of this angle it will be fallen below closely. Next week the lost motion of the angle will be at 19.46. A weekly close below the Support Angle would trigger a brutal sell-off wave during at least until December 22. Then the upper line of the 3rd will intersect the time axis. A new contrary trend "might" start then.

But I also suppose that such an outcome is thoroughly reasonable at the moment. The money is flowing out of gold and silver. Each "idiot" is putting his money and his liquidity into stocks. On the one hand that leads to euphoria in the stocks and on the other hand that produces absolute depression in the precious metals.

The supposition that December 2013 might mirror the last December is not to be underestimated either. In 2012 gold and silver fell virtually during the whole month of December endlessly distressing and without much defense until shortly before X-mas. Silver produced its December low on 12/20/2012. Sic!

Next week the upper line resistance of the 3rd is at 21.42. Maximum short chance without much peril is there. But seen from the daily time frame silver is not likely to reach more than 21.20… regarded optimistically.

In the weekly time frame silver is going down within the 3rd. Only if silver closes above the 3rd double arc, in fact pretty unambiguously - next week that would be above 21.60… but who believes in something like that??? – The situation would alter in one go. In that case a new uptrend on weekly base could/would start.

Be prepared!

Eduard Altmann