By: Jeff Cooper
Hit and Run Morning Stock Report: April 11, 2023
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“You can run, you can run…
And I’m standing at the crossroads
Believe I’m sinking down”
One week ago on April 4, the SPX rallied to 4133 finding the intersection of two trend lines.
The first trend line is a declining tops line connecting the August 16 and the February 2 high.
The second trend line is a rising bottoms line connecting the October 13 so-far low for the bear and the December bottoms.
The intersection rejected the SPX, turning its 3 Day Chart down in the process.
The 3 Day Chart turns down with 3 consecutive lower daily lows.
Likewise the 3 Day Chart turns up with 3 consecutive higher daily highs.
These are intraday highs and lows… not closing.
Now the index is attempting to rally back to test the big intersection where it was rejected.
The pattern is remarkably similar to the early February pattern high which was followed by a 367 point decline in 3 weeks.
The SPX opened down on Thursday and rallied to close at session highs. Monday it opened down and tried to rally again closing on its highs.
The above daily SPX shows Intermediate Wave 1 bottomed in my interpretation in October with 5 smaller waves down from the January 2022 all-time high.
Following the October low, we got a corrective A wave up into early December 2022, a B wave down into late December, and a C wave up into early February to complete Intermediate Wave 2 correction up.
Wave 1 of Intermediate 3 down ended in March followed by a corrective wave 2 rally early April 2023 that backtested the broken trend line connecting the October/December trend line.
The next decline should commence a powerful wave 3 of 3 decline.
Interestingly, the “return to normal” rally following the horrendous 1929 crash ended in April 1930.
The assumption is the vast majority of market participants at that time thought things had returned to normal.
It was the farthest thing from the truth.
Now, following the Comeback after the 2008-2009 debacle and the stunning Comeback after the Covid Crash, Mr. Market indeed seems like the Comeback Kid.
I think it is the farthest thing from the truth.
It must be said that on March 23, 2000, the bottom of the Covid Crash, I stated that I thought the SPX would rally to above 4,000.
So I’m not at all a dyed in the wool bear.
Far from it.
Hit and Run called the bottom day in 2009 thanks to a Time/Price Square-out identified by my Time/Price Calculator pictured below.
Ditto the Christmas Crash in 2018.
Tomorrow’s report will go into the cycles as to why I think rallies notwithstanding this decade contains beaucoup risk.
But right now allow me to explain the significance of the square-out and crossroads we are dealing with this week…especially when dovetailed with the wave pattern described above.
The so far low for the bear was October 13, 2022 at 3490 SPX. Moving the decimal point to work within The Square of 9 Wheel we get 349.
349 is square October 13, the day of the low. Price confirmed with a large-range reversal.
Now here we are 180 degrees straight across and opposite October 13, 2022 with April 11 (or this week) being square the low of 349.
The way “The Calculator” works is that Time points to Price and Price points to Time.
When they meet, or balance out, or square-out WD Gann wrote to look for a change in trend.
We are at a crossroads.