Recent Observations of the 24 Hour Trading Clock

It would behoove traders to pay attention to divisions and multiples of the 24 hour clock for swing trading. It may not always work like ‘clockwork,’ but when it is working, we should take note. In particular, we want to note 12 hr, 6 hrs, 3 hr, (and in the final analysis 90 to 120 minute divisions for intraday countertrends). Let’s begin with the 130 pm low on Thursday August 12 following 8.30 morning low set on hour after Thursday August 12s bearish jobless claims report. From 1.30 pm, the SP500 rallied 12 hours peaking at 1.20 am around the time of the bullish German GDP report. The SP500 sold off for 6 hrs into the neutral 7.30 am retail sales report on Friday Aug 13. Then the mkt rallied for 90 minutes into the bearish Michigan Sentiment report. Another 90 minutes later the mkt found a higher morning low at 1030 am, setting a 3 hr cycle low to low. Thereafter, the mkt rallied for another 2 hours to set a lower high than the bearish Michigan Sentiment high at 1240 pm. Subsequently the mkt sold off into the close. Let’s stop here for a moment because that ended the week. On Sunday night selling pressure resumed from Friday’s close in response to the bearish GDP report out of Japan. The cycle low on Sunday night bottomed at 8.20 pm, 36 hours after Thursday August 12’s bearish jobless claims. Overnight on Sunday, the SP500 rallied off Japans bearish GDP low for 6 hours, peaking at 2.20 am. Subsequently, the SP500 sold off for another 6 hours into 8.30 am. This time the weakness was in response to the 7.30 am bearish report NY Empire survey on Monday morning. The NY Empire survey low comes 12 hours after the Japan GDP low earlier Sunday night and 48 hours after Thursday’s jobless claims low. Notably, we have seen some short-covering in the SP500 following the bearish NY Empire survey. While data points on balance are expected to be somewhat bearish through the second half of August, we have to ask ourselves if the bad news hasn’t been priced in with Monday’s bearish NY Empire low. If the SP500 takes out the globex 2.20 am high, the pattern of lower highs and lower lows following the bullish German GDP report on Friday August 13th will have been broken. These developments will bear watching closely, because the NY Empire low at 1066 is very close to the key floor to investor confidence, the July 21 1064 ‘unusually uncertain’ close gap and the 1065 50% retracement to the year low. Below the 50% retracement and below the 1064 unusually uncertain closing price, we have to consider investor confidence is eroding badly and may accelerate selling pressure considerably. Since the data points in the second half of August are not expected to be friendly, the key question to ask yourself is whether the SP500 is setting higher cycle lows or lower cycle lows on each bearish data point. This will clue you into whether the stock market still needs to discount the bearish headwinds we face in Q3 or whether they have been priced into the mkt already. Because, at some point, the market will learn in short order whether more downside is required or more upside and that will trigger a price breakout to either the downside or upside.