September 29, 2008 was one of the most dramatic days in stock-market history. That was the day the House of Representatives voted down the TARP, and crashed the market. And while the NASDAQ-100 has already filled its TARP gap, the S&P 500 has not. Here is what SPY’s gap looks like (click chart to enlarge):
Here is the SPX:
And if the market is able to break out of the Box of Beer, then the TARP Gap becomes a big fat target. Amazingly enough, the 23.6% Fibonacci level of the TARP Box is almost exactly where the SPX opened on September 29, 2008:
So, the upper reaches of the TARP Box correspond to the TARP Gap. On the way up there, the other levels of the TARP Box should provide varying degrees of resistance. These are the same Fibonacci proportions that the market established in the March Box at the bottom in March 2009. And the market does indeed seem to be still honoring the proportions as we can see in the performance of the Box of Beer.
Arrow #1 on the chart shows that the 1099.93 level of the Box of Beer put an end to the first breakout from the Box of Bulls. Arrow #2 shows the sell-off finding support at the 1029.21 level of the Box of Bulls. After finally breaking out, the market went into the infinite rectangle, which was bounded by the 1084.80 and 1111.82 levels of the Box of Beer (purple box and arrows).
The first breakout attempt from the rectangle stopped just short of the 1120.16 level (arrow #3), and the ensuing sell-off found support again at the 1084.80 level (arrow #4). After breaking out of the rectangle for good, the next two levels only provided brief resistance (arrows #5 and #6), which is normal for such a breakout. The kinetic energy that built up in the rectangle has been discharged as prices have hit the breakout target at 1140. So, the rectangle pattern is complete, and the market will need to find new energy from somewhere else.
The top level of the TARP box is only one point below 1227, which is one of the “octave” levels shown on page 151 of “Fibonacci Analysis” by Constance Brown. That’s where I learned this box-stacking technique. When I made the first box, I had no idea that they would stack up so close to one of Brown’s octave levels. I also had no idea that they would stack up to the 61.8% Fibonacci level of the bear market. See the blue line at 1226 on this chart:
The giant inverse head-and-shoulders pattern on the SPX also projects to the top of the TARP Box. Here is a chart of weekly closing prices showing the pattern:
So the top of the TARP Box coincides with one of the biggest crashes in history, a Connie Brown octave level, the 61.8% Fibonacci retracement of the entire bear market, and the projection of a giant pattern. That’s a very significant confluence level, and will likely turn out to be very strong resistance, if not the end of the bull market itself.
The QQQQ met its TARP Gap on July 30, 2009. See the blue arrow on the chart:
The Q’s struggled with the gap for the entire month of August and didn’t finally break out until September 9th (green arrow). And even then, the Q’s had trouble pulling away from the gap. They fell back twice in October and November (purple arrows). So, while betting against the Q’s was ultimately wrong, if you had put your short on at 41, you could have taken some modest profits, and/or had plenty of time to change your mind and get out even.
I would expect the SPX to have just as much trouble with its TARP Gap as the Q’s had.
The TARP Box levels are:
1155.52
1170.60
1182.44
1190.76
1199.08
1209.37
1226.00
I can’t believe that nobody guessed the name of the new box. It was so obvious. Hang your heads in collective shame for not minding your gaps!
Screw you! (oops time to get banned)
TARP – The Average Reasonable Person
and the average reasonable person wouldnt be up here.
Update: I added another chart. The top of the TARP Box at 1226 is also the 61.8% Fibonacci retracement of the bear market.
It’s 37 degrees and raining. Maybe it will snow in Miami tonight for the first time since the last bout of “global warming” in 1977.
Matt,
Oh, man, I’m the Gap Meister and didn’t get it. I like it.
If it snows in Miami, take a picture and send it to Gore.
Update: I added another chart. The top of the TARP Box also coincides with the giant inverse head-and-shoulders pattern on the SPX.
Taxpayers Are Really Pissed….worsening unemployment, higher income/sales/property taxes, rising oil prices, less college subsidies, worsening credit limit restrictions/credit contraction, declining/stagnate real estate market, then throw in impending interest rate increases and health deform…we are a nation that has gotten this far because accumulated wealth has saved us…but it is running out…
You might just be a redneck…if you use picnic tables for dining room furniture….
all i gotta say is that instead of gold hedge im opting for SWHC real soon.
up 8.77% for this year already shows me that people took losses and are at it again speculating of guns flying off the shelf
“health deform” LOL!
…and another zinger: “You might just be a redneck…if you use picnic tables for dining room furniture….”
We leave our Christmas tree up all year ’round, do we qualify?
“Hang your heads in collective shame…”. I guess this means we won’t get to have a group hug?
We all came close to getting TARPapered and feathered.
Los Endos
less decorating time and more stock trading time.
so nope you qualify as smartasses
http://lh4.ggpht.com/_APmrYvpA45s/S0lRdXYVcoI/AAAAAAAAGFo/psreRYracKE/s1600-h/SPXWeekly2.png
GOOD. I’m glad we qualify for something.
Time to put my charts away and sleep on it. I’ll see inverse heads roll in my nightmares.
Great post, Matt. We’ll get there.
Some fuel:
http://weygand.files.wordpress.com/2010/01/weca187.jpg
Yerk,
Great chart. Keeps my trendline drawing as a valid activity. I was beginning to wonder if it was worth it.
SPY weekly gap:
http://i45.tinypic.com/295pmgx.jpg
A look at BBT and how far it has come since the low. Note the monthly above Paula’s 20MA:
http://i49.tinypic.com/cu8v7.jpg
MATT…the weather channel this am said there were snow flurries in miami….i am in port st lucie now having sold my house and living in a homewood suites hotel until we move back up north…waiting for it to warm up in ct….hahahaha…..32 degrees in ct 38 degrees here in south fl….made a nice profit on sale of house but nowhere near the insane prices of 2005…tax free profit is good!!!……i havent ranted about the global warming hoax here but it was freely available info that the earth was cooling for several years and that was a BIG problem for gore et al…no worry….ignore the facts and keep pushing your agenda with lies….stay warm MATT ….it will be 80 degrees by this saturday….