By: Jeff Cooper
Hit and Run Morning Stock Report: March 15, 2023
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Pick Your Poison
Hope is eternal in the throes of a bear market.
Perhaps that is because markets spend more time in bull markets than bear markets.
That said they can spend a lot time going sideways where the Primary Trend is range-bound.
Such was the period from 1966 to 1982.
The rest of the decade could mirror that episode.
Hopeful bulls began to assume the narrative that the banking crisis was just what MD’s (Money Doctors) needed because it took the pressure off the Fed to raise rates sooner, faster and longer.
In celebration of that new narrative, markets experienced a sharp rally on Tuesday.
I’ve learned the hard ways over the years to let the market itself dictate its future course, not the opinions from economists, pundits and the financial press.
That means assessing the structure of the market based on Elliott Waves (to some degree), pattern, cycles,
Trend channels and moving averages.
I do not use indicators per se as most all indicators are descriptive, not predictive.
There is ONE indicator that I do use. More on that below.
Nothing has changed in that regard as to what we’ve been saying---in particular about Wave 3 of 3 to the downside being in progress.
Time-wise, the Gann Panic Zone is on the radar and culminates from March 24th through 27th.
This is 49 to 56 calendar days from the important February 2nd pivot high.
Gann wrote that 7 is the number of time. Consequently, 7 squared is 49 days.
The human body is symbolic of God’s creation. Man was created in God’s image.
The ORB of the head is symbolic of the 350 degree circle (or course there are those whose heads seem square).
The sphere of our head has 2 eyes, 2 ears and 2 nostrils and the 7th is the mouth and everything goes DOWN.
The time period from 7X7 to 7 X 8 days is the so-called Gann Death Zone.
This is 48 to 56 days.
Note that 55 is the ninth number in the Fibonacci series (without repeating the # 1)
9 is the last prime number. All things are based on the first 9 integers. All things.
Is it an accident that October is infamous for crashes when everything goes down with October being the 7th month from March 21st, the Spring Equinox, the natural beginning of the year?
As you know May is a Panic Cycle in my work. There is a vibration with the start of the NYSE on May 17, 1792.
As well this May is 15 years from May 2008, the start of the Lehman Brothers Crash. 15 years is ¼ of Gann’s Master 60 Year Cycle.
This May is 7 months from the mid-October 2022 “so far low” of the Bear Market.
The SPX low for the Bear is 3491. In order to work with the Square of 9 Wheel, I move a digit getting 349.
349 squares April 9…(which is 180 degrees straight across and opposite the mid-October 2022 low).
April 9 purple
So this entire time period from February 2 to May 17 or so is one where the cycles can exert extreme downside influence ….if that is their manifest destiny.
Remember February 2 is the start of Intermediate Wave 3 down (until proven otherwise).
As to the one indicator I use… it’s the McClellan Oscillator. It measures market internals.
On Monday, the McClellan Oscillator closed at -108.
Today it turned up.
Below is where we were in February 2020 when we reached this point of NYMO greater than -100 and then turning up on March 2.
The two charts look very similar don’t they?
Here is what followed that setup in 2020:
The SPX fell 25% in the three weeks following as NYMO produced positive divergences to the SPX price.
While the lag times vary from roughly 2 to 6 weeks, and the amplitude of the drop varies according to the intensity behind the downtrend, this has been a persistent pattern for the last 100 years.
By 2 to 6 weeks, I mean the time from when the NYMO turns up from -100 to the price low for that cycle.
Interestingly, 2 to 6 weeks from today takes us smack into the late March Gann Panic Window through April and right into early May.
Pick your poison.
As to the current short-term structure, a 10 minute SPX shows a new low for the move is on deck, a little wave 5.
Since our recent low tagged the 3800 level based on a “close-only” trend line from 2020/2022, breakage below that 3800 trend line opens the door to 3700.
Here is the setup shown last week.
The message is clear: if the Panic Cycle that I expect to exert its downside influence is severe, the wheels could come off with a drop to 3100-3200 SPX.