By: Jeff Cooper
Hit and Run Morning Stock Report: March 7, 2023
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The SPX gapped up at the open on Monday, then spent the second half of the day reversing most of the gains.
The index closed near the open after making a new 10 day high so we got a Lizard sell signal -- a new 10 day high with a Topping Tail…with the open and close near the bottom of the day’s range.
Momentum leaders, TSLA, NVDA and FSLR reversed from intraday highs with authority.
TSLA was rejected from the 199 region noted in yesterday’s TSLA report.
NVDA and FSLR both left large-range Gilligan sell signals.
A Gilligan is a gap up to a new 60-day high with a close at/near session lows.
A Lizard is also known as a Shooting Star in candlestick charting, a pattern often times appearing a few days before a decline.
In other words, the market often backs and fills before following through to the downside after these signals. Not always, but often.
The first mouse (signal) gets the squeeze, the second mouse (signal) gets the cheese.
In this case, we would be looking for a bearish continuation cheese.
As flagged yesterday, if my wave mapping is correct, the SPX could top on Monday or it could pull back from a high on Monday for a B wave decline followed by a C wave corrective (bearish) rally.
With Powell set to speak today, it’s anybody’s guess which pattern will play out.
Expect moar Jello.
That said, the SPX 3 Day Chart turned up on Monday and the index reversed the same day.
This is the Sign of the Bear. It’s bearish price action in as much as we got a reversal immediately following the turn up of the 3 Day Chart.
We need validation/confirmation with downside follow thru, but as offered yesterday: if the trend is strongly bearish the turn up of the 3 Day Chart will define a high soon in terms of price and time.
The DJIA was stopped cold at the 50 day moving average, just as the decline last week was stopped cold by the 200 day moving average, establishing a short-term trading range.
So we have something for the bulls and the bears. Enter Jerry. Naturally. A little obfuscation music please for an FOMC Cha Cha.
The bulls had a pretty good day going for them, except for the following 9 points:
Volume was the lightest in 6 days.
The NYSE Comp fell
The SPX left a Lizard sell signal as offered above
NYMO was sharply lower
Summation Index was sharply lower
NYSE issues declining were 1981 versus 1078 advancing: breadth stunk up stonks.
NAZ issues declining wee 3036 versus 1562 advancing
NYSE down volume was 2,642,969,769 versus advancing volume of 1,407,510,499
NAZ down volume was 2,847,804,411 versus advancing volume of 2,316,850,980
In sum, it was a fragile day overall, as the data reflects.
This reinforces expectations that we are approaching a potential dramatic decline.
The drama would start on a second mouse below the key SPX 200 day moving average.
I would not expect ANOTHER “successful” test of the 200 day if we get back down there: bull market trains seldom back up to pick up passengers after speeding out of the station (Thursday, Friday).
The first sign of the train coming off the tracks was Monday’s reversal.
We twitted that breakage back below our old friend, the 4077 square, would be a warning and that INITIAL support shows up between 4040 and our old friend, the 4013 square.
It’s important to keep a note on these levels from previous reports: Mr. Market has a well-defined memory when it comes to geometry. The mind of the market is math. Mr. Market isn’t random despite what some academics would have you believe.
Conclusion. We continue to watch for a downturn that could develop immediately or come after a Cheech & Chong… one more good high.
That is… a high above Monday’s high… the C wave.
Either way, get defensive and opportunistically aggressive with shorts if we see breakage below 4000 and especially the SPX 200 day moving average (now at 3940).
That could announce that the elusive 3rd of a 3rd wave is in progress.
Remember, we have a critical cluster of turning points for March 15,16,17 as to natural and market cycles.
That is only one week away.
Theoretically, that could still be a high for the C wave.
Something that underscores the idea that a dramatic decline is on deck is Vibration or Square of the Range.
The bear market range is 1327 SPX points.
On my Square of 9 Wheel 1327 vectors/vibrates off February 15fth. This is the date the market rolled over in earnest after backing and filling from a large A B C corrective structure from the October low.
1327 squares mid-May (which by definition is 90 degrees square mid-February).
Mid-May ties to the birth of the NYSE. Mid-May was the start of the Crash of 2008 (what would ultimately become known as the Lehman Bros Crash) that fall. The market always knows first.
We are 15 years from 2008.
15 years is ¼ Gann’s Master 60 Year Time Cycle.
I believe we could get hit hard come May.
Whatever happens in March may be the warm-up.