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Jeff Cooper: Is This the Pinocchio Market?


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Today is monthly options expiration, and Fridays in a bull run usually close at their highs.

However, based on many measures multi-year extremes in bullish sentiment equal to the extremes of tops over the last 3 years the SPX may carve out a relatively quiet day.

Additionally, the futures ran up overnight on Wednesday with the e-mini hitting its high tick at 6 a.m. and closing on Thursday 10 points off that high  with each rally being sold yesterday for a potential distribution pattern.

A pre-opening high tick with every rally being sold often indicates a program is over.

Heavyweight stocks like INTC show the bowling for strikes squeeze from the Brexit Break into today's option expiration with the stock running from 30 to 35.

Likewise, IBM shows a run from just above 140 to just above 160 in a matter of days.

I always say markets play out in 3's: note the triple bottom on IBM prior to the rocket higher and the extension higher after clearing triple tops.

At the same time, the SPY has run from just below the 200 strike to nearly 220.

In fact, a Measured Move in the SPY ties to 219.50.

That said, the cash SPX has already satisfied a Measured Move and a full rev of 360 degrees up from the Brexit low.

This is occurring on a possible low to high to high cycle. In other words, from the January 20 low to the April 20 high is 90 degrees/days and another 90 degrees/days gives July 20. Of course, July 20 was the pre-crash pivot high prior to the largest 1 day point break in history last August.

As we've been pointing out, July 20 plus or minus a few days is a potential major turning point for many reasons, one being that it is the 9th anniversary of the 2007 primary high prior to that crisis.

Interestingly, this August is 34 Fibonacci years from the major bear market low in August 1982 and a Fibonacci 89 months from the March 2009 bear market low.


The above daily SPY shows a push above an idealized potential Megaphone Top pattern.

However, the market is not a fine Swiss watch and often ‘Pinocchio” idealized levels with undercuts and overthrows.

For example, the Brexit low undercut the May low flushing out longs and as below may be so above.

Trade back through the breakout pivot at around 214 SPY that sticks puts the idea of a buying climax on the table.

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