Pump and Dump II

In a post on this thread on August 21, I mentioned Mercury Retrograde and an historical pattern in which the DJIA has a habit of ending the period within 1% of where it started. I also mentioned it had a habit of doing a rollercoaster act between the two dates.

Well, since it started, we zoomed downhill and then zoomed uphill. If the Mercury Rx period does its normal pattern, the price of the XJO on September 13 will be 1% either side of 4450 … or 1170ish on Pollyanna.

It means we’d be back inside a planetary price congestion zone on Auntie.

Of course, if what we’re in is a rooly, trooly genuine rally – as discussed in Part I – we’ll be at 4750 in no time. If you consult the red downtrend line on the monthly chart in the previous article, it too comes into effect at about 4730.

And it would be in line with the 350ish range of the two previous Big Green Rally months during the past year.

Now, “something big” is going on … and that’s obvious from the fast-contracting Bollinger Bands on weekly charts.

With rapidly contracting BB’s, we should remember that the first move is usually in the wrong direction! In short, price goes into an exhaustive rally or nosedive – and then changes direction and rapidly goes to the other extreme, with expanding outer Bands.

Now, the only warning sign from the oscillators on this chart is the fast, blue CCI is under the red CCI line – and if this rally is real, it ought to be the other way round. We also have a very ambivalent MACD signal line, even though the faster MACD on the previous chart is positively-aligned and rising.

So, let’s take a look at what’s happening on daily charts.

The positive divergence signal on the CCI daily chart produced a strong rally and not a continuation of the sharp decline that the Bears had been hoping for. As yet, we have no significant divergence, though again we see the faster, blue CCI line has already moved to the downside of the red line, giving early indication that the rally phase is already stretched and in need of some near-term consolidation, or backtracking.

It is, of course, possible to continue rallying – but not at the same pace.

However, even if price comes back down into the Mercury Direct station on September 13, that may not be the end of positive prices … a more significant time period seems to be September 19 to 22, when Jupiter conjuncts Uranus and the Sun opposes both planets.

Then, in early October, we have the Sun conjunct Saturn on the 1st and Venus Retrograde on October 8. That week is likely to be very significant in terms of a significant trend change.

I would expect further weakness to start creeping into Auntie by midweek, preferably at a higher price with divergent CCI. Meanwhile, Rudy tells me he hopes to have a Weekly Wrap out in time for Monday and the week ahead.