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[Tor]

TREND & CYCLE 1987 REPEAT…OR ALL CLEAR? Summary & Discussion: In the lead-up to this week’s FOMC meeting, a lot of attention has been drawn to the striking similarity between today’s S&P chart and the days immediately preceding the Crash of 1987. The charts are illustrated for comparison on the next page. While the price pattern similarities are quite evident, our proprietary Quadrant Balance data (bottom panels) suggests that, beneath the surface, things are quite different this time around. In fact, the Quadrant Balance data for the TSX, S&P and NDQ100 all registered “mechanical” buy signals on Friday, September 14. This suggests that the intermediate risk window has already closed, and that the prospects of revisiting the mid-August lows are becoming increasingly remote. What’s Different This Time:
Quadrant Balance data is already turning up and signalling an “All clear” for the TSX, S&P and NDQ100 (Exhibits 2 & 3).
Interest Rates have been falling since June, whereas they ran up sharply in the 9 months immediately prior to the ’87 Crash (Exhibits 4 & 5). Key Confirming Price Levels: • The S&P (1516.78) closes above the August 8 recovery rally high at 1503.90 (Exhibit 1). • Amex Broker/Dealer Index (234.94) closes above its August 8 high at 235.69 (Exhibit 8). • US 10-yr Rates turn back up and break their June-Sept. downtrend (Exhibit 6). • The TED spread stays below the mid-August highs (Exhibit 7). • Copper (3.49 - nearby futures) breaks above its August 7 high at 3.53 (Exhibit 9).