The present timing appears to be the right fit for a reversal, or to attempt a reversal of the S&P 500. The reason for this theory is due to various timing variables that will mark a good convergence of relations, occurring later this week. They include the 61.8% time extensions of the lows in August and September, the 61.8% retracement of the highs in May and low in August, as well as measuring the August and September rebounds.
Even one of these variables is likely enough to prepare caution, although due to the proximity of time between each variable it provides an increased potential of stock reversal. The only real question in our opinion is: where will it come from? There has been a challenge with the index as the week nears the 2039/42 mark, also the fourth square root in relation to the year’s all time low as well as the second square root in relation to the year’s all time high, and the first half of the year’s range lows.
These are obvious risk factors for failure to occur. 2060/75 is another zone for potential stock reversal; this includes the 78.6% retracement of the year rage, a well as the 200-day moving average and the 261.8% extension in regards to the September ranges. In our opinion, any traction that rises above this and the opportunity of stock reversal over the following few days decreases significantly.
We like the concept of buying a short for half a position in the S&P 500 just before the 2040 mark, and then another half position around the 2060 mark for the following three days of trading. However, a daily close above the 2080 mark would make us to have to reassess this theory.