Monday, August 24, 2015

S&P Index 'White Monday' In the Heat of August?

What is ‘White Monday’?

·         White Monday is (a self-termed) S&P Index higher on the Day following a 7+% correction
o   In contrast with Oct ’87 Black Monday, it is a capitulation and same day recovery
o   It releases those from waiting for a ‘significant correction’
o   Rewards risk-taking – this morning and hereafter
o   Puts Fed back in play – If they were out of play
o   Says ‘Can Do’ with a $Trillions recovered voice
o   Reminds us to be sensible in positioning
o   Candlestick analysis is called a ‘Bullish Hammer’

The S&P had formed a ‘Bearish Three Dark Soldiers’ in the three sessions ending Friday.  There was a gap lower on Sunday night, which in Candlestick analysis is recognized as a bearish open window, offering resistance above up to Friday’s closing level of 1971.50 for ESU5 (Sep Emini 500 Index).  For now, that ‘open window’ and the ‘three dark soldiers’ are powerful bearish forces and together account for the sell-off this morning. 

A recovery in the S&P today, which at this point is still a very aggressive call, but appears increasingly likely, would leave many would-be longs without positions.  It will change the psychology of market participants in general and propel households to loosen purse strings and begin to spend (on items other than auto) as they haven’t since 2008.   Even without a full recovery or better today, ESU will form a bullish hammer with a settlement of 1917.75 or higher.

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