Special Alert from MMA
To All MMA Subscribers
Issued: January 10, 2009

It is not often that I issue a special alert, but the technical formation of a weekly “Pat’s Combo Down” in all three U.S. stock markets we track necessitates such an alert, especially given the fact that last week’s SOS Report was issuing bullish signals at the time it was written last Tuesday, January 6.

The high and low of the DJIA, SPH, and NDH were above their respective lows and highs of the prior week. And then all three closed below a proprietary support level. This is known as a “Pat’s Combo Down,” and is usually an indication of a sharp decline to follow. It is not a 100% indicator (nothing is), but I would guess it works 90% of the time. As an example of previous instances of this indicator on the weekly charts, observe the Nikkei cash index on the week ending September 26. The high of that week was 12,264. It closed at 11,893. That index then crashed, with a bottom not completed until the 6994 low of October 28, five weeks later. The opposite indicator, a “Pat’s Combo up,” occurred in the Euro currency on the week ending December 5. The low of that week was 1.2548. Two weeks later it made a high at 1.4719.
 
Named after the late Patrick Shaughnessy of Scottsdale, AZ, from whom I had the pleasure of studying with about 20 years ago, this is one of the most reliable indicators that I am aware of. As you can see from the examples above, the formation of such a set- up usually leads to a very sharp move that usually lasts 1-6 weeks.

The other thing to note is that Mercury goes retrograde this weekend, through February 1. The last instance of this geocosmic phenomenon coincided with the heart of the market meltdown in late September through mid-October 2008. We must also keep in mind that technical signals under Mercury retrograde can be false signals, so that is the one factor that may lead to this being a false signal. But don’t discount it. This is a powerful and quite reliable signature historically. If the market does crash down hard, it may last into our January 23 three-star critical reversal zone, or perhaps even into the next Saturn-Uranus opposition date, which is February 5, the date of the next Employment and Payroll report. A retest of the November lows, or even lower, is possible if last Wednesday turns out to be the primary cycle crest. If it was only a half-primary cycle crest, then this move could be completed with a half-primary cycle trough by the January 23, +/- 3 trading days, critical reversal zone. In that case, a decline that only tests - but does not take out the November lows - could be a good buying point.

If long, traders and investors need to be very careful this coming week. If not long, aggressive traders could look to sell short if trading under Mercury retrograde. Once again, we may see huge price movements for the next two weeks, reminiscent of September and October. Once again, we may see great stress and strain in the efforts of our government and economic – and maybe even military - leaders to demand decisions before their time is ready. The gridlock and polarity of positions may once again result in lack of faith in the government, and roiling of the financial markets.