By: Jeff Cooper
Hit and Run Morning Stock Report: April 10, 2023
Need help? Check out the Hit and Run Success Guide.
Metals Melt Up
Our forecast in early March that USO should bottom coincident with a square-out at 58 played out as oil corrected its strong ascent from 2020-2022.
USO peaked at 92.20 in June 2022 so the March 2023 low marks a 270 degree or 9-month cycle.
We made this forecast based on USO being a full 360 degree price cycle below the 92 peak.
So there was some solid synchronicity with USO down 360 degrees in price in 270 degrees of time.
As well a daily USO shows the Trap Door below horizontal support.
USO declined below the well-defined 62 support region but then Jackknifed back up through 62, triggering my Boomerang buy signal.
In effect, we had a convergence of Time, Price and Pattern, marking a Selling Climax.
There is a strong likelihood that this low marked the end of the respite in energy cost.
The aforesaid 92 and 58 price levels square April 27, which is the mid-point of the upcoming Solar Eclipse on April 20 and the Lunar Eclipse on May 5; consequently, the presumption and expectation is for the end of April to mark some potentially dramatic/intense price action in oil.
And that’s not going to exist in a vacuum.
It is interesting that this convergence is occurring at a time when the SPR has been drained.
This has not gone unnoticed by geopolitical adversaries.
Based on other natural cyclic influences, and War Cycles, I would not be surprised to see China-Taiwan-U.S. Tensions explode around this time frame.
With crude’s long-term trend being up, supply prospects constrained, and Large Speculators holding their most meager net long positions since the big low seven years ago, we should respect the potential for an upside surprise in energy prices.
Hit and Run members capitalized on the setup with longs in VLO and CPE.
Such was the setup in energy names when Saudi Arabia announced an output cut last Monday causing crude to spike to the topside.
As I often repeat, the news breaks with the cycles, not the other way around.
The potential for an extension in oil prices dovetails with our play in new battery technology company ENVX.
Hit and Run has been long ENVX for a few months and sold out near 15 last week.
We started to reload on Friday on a Combo buy setup.
Sharp gains in crude oil often occur in tandem with moves in precious metals.
The persistence of the 2020-2022 rise in energy prices continues to foreshadow further gains in gold.
Elevated energy costs would feed through the entire supply chain to keep inflation higher than currently imagined.
They will also reduce precious metals supply at the margin by directly increasing costs for mining operations.
In the current environment, rising crude prices might also reflect gold-price ramping due to geopolitical tensions and challenges to the petro-dollar.
Since late February Hit and Run has been steadfastly bullish on the precious metals.
Below are some of the charts backstopping our bullish stance and holdings in GDXJ, JNUG, AGI, MUX, GOLD, GLD calls and AGQ.
The current runaway move started with a weekly Soup Nazi buy signal on the week of October 31st.
A weekly Soup Nazi buy is triggered by a new 20-week low that is at least 4 weeks from a prior swing low (to avoid against a continuation move versus an undercut/test low).
That weekly Soup Nazi entailed a large range outside up week from the 150.50 region.
Follow-through is key and importantly, GLD exploded the following week.
The pullback low into the week of February 20 coincided with a turn down in GLD’s 3 Week Chart the prior week and a test of the rising 20-week moving average for a weekly Holy Grail buy signal Another upside explosion ensued exemplifying GLD’s bullish character.
A daily GLD shows the runaway move since the March 10th up-gap defined by no more than 1-day reactions against the uptrend.
Wednesday, GLD left a Gilligan sell setup (a gap up to a new 60 day high with a close at/near session lows followed by trade below the prior day’s low) on Thursday.
It will be interesting to see if this price action precipitates a meaningful pullback as GLD seems to be on a fast track for new all-time highs as reflected by the above weekly GLD.
GLD has ramped 270 degrees or 3 squares up from its 150.57 low to 189.
Clearing and sustaining 189 opens the door to a full 360 degree move which is 203 which would satisfy a new all-time high.
At the same time this week aligns with 200/201 on my Square of 9 Wheel.
A Measured Move of the October/November low thru January peak projects to 199.
So this week could see GLD magnetized to a spike to new all-time highs or pull back the rubber band first before a new high is satisfied.
One factor in favor of an immediate breakout is that silver has driven through a downtrend channel which has contained silver for the last two years.
It is important to keep in mind that gold’s structure in March is consistent with the possibility that we are already in a powerful Wave 3 of 3 launch. Once that ascent ignites, it will be very difficult psychologically to climb aboard and I suspect there are many players looking to buy a pullback.
Markets don’t exist to accommodate, so gold may blow through prior double tops in the heart of a 3rd wave meltup…the length and range of which are posted this morning for members of the Hit and Run Private Twitter Feed.
Pullbacks notwithstanding, the long term view is that a major advance is in progress in keeping with the 1986 to 1980 rally.
NDX has been leading.
Thursday it reversed to the topside after tracing out two consecutive lower daily lows while the 3 Day Chart is pointing up, satisfying my Plus One/Minus Two buy setup.
The pivots are the Rule of 4 Breakout on March 16 (black ellipse) and the blue ellipse which now forms a short-term 3 point rising trend line.
Notice last week's high tagged the top of an important trend channel.
Breakage below the blue trend line opens the door to the purple bottom rail at 12,500.
Below that opens door to 12,100 and the 2023 trend line.