By: Jeff Cooper
Hit and Run Morning Stock Report: April 14, 2023
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Gold and Silver were forecast to surge from cycle lows in September 2022.
We’ve mentioned in this space often how precious metals have a strong seasonality in August/September and March.
They struck important highs in August/September 2011, August 2013, a major low in August 2018, a minor high in August 2019, an important low in March 2020, an all-time high in August 2020, a big low in March 2021, a good low in August 2021, a Major high in March 2022, a major low in September 2022 and this recent acceleration started in March 2023.
Note that September and March are 180 degrees and opposite each other.
Seasonality is an important trading tool.
August/September 2023 will be critical as this is 12 years or 144 (12 squared Fibonacci months) from the Bull Market high in August/September 2011.
Yesterday we mentioned that clearing 203 opened the door for GLD to 232.
The 230’s range occupies the August/September time frame on my Square of 9 Wheel.
There is an intermediate/short-term cycle due in early May in the metals.
GLD struck a low on November 3, 2022.
180 degrees straight across and opposite is the first week of May 2023 when we have a lunar eclipse.
If the metals continue to spike/hold up into this time period, the likelihood is it will mark a short-term high.
There is always the possibility it could correct into early May, however.
With GDXJ hitting the 44 square we must be mindful of chasing here.
If 44 is cleared with authority and extends, it opens the door higher into early May theoretically.
It will be interesting to see if GDXJ Pinocchio’s 44 to kiss the 45 strike on today’s opex.
Checking the SPX for 2011 shows a significant high at the end of April/early May at 1370.
The SPX dropped massively to 1074 precisely 90 days/degrees later into early October 2011.
The mind of the market is math.
I believe the SPX is carving out an important top this April/early May.
Checking a monthly SPY shows it has traced out a triangle from August 2022.
The 3 Month Chart is still pointing down (3 consecutive monthly lower lows occurred in June 2022).
We got a monthly Minus One/Plus Two sell setup in December 2022 that elicited a drop into late December.
The index may be working on a big monthly Triangle Pendulum. This is where you get a breakout of a triangle in one direction without follow-through. Trade back into the triangle is a warning sign. Breakage back thru the other side of the triangle is a blaring signal of acceleration.
Allow me to explain, since the SPX is currently poking out the top of the triangle, the implication is a potential Triangle failure.
In other words a breakout thru the top of the triangle with a reversal back into the triangle and ultimately a failure thru the bottom of the triangle with accelerated momentum to the downside.
Right now however, obviously, the SPX is just now probing the top of the triangle so the above is calculated speculation on my part. I bring it up because the entire structure since the 2020 low looks like a reverse Pennant.
The price action since March 2020 is a good example of the principle of Reversion to the Mean.
The price action from March 2020 to January 2022 was persistent and smooth.
Subsequently, following the plumb line drop from June 2022, the market has been chop city:
A trip up to the 20 month moving average in August 2022 that perpetuated a new low into October 2022 low, a downside reversal from another kiss of the 20 month moving average again in February 2023 and now the 20 month is being tested again.
The idea of a bearish Triangle Pendulum looms large given the 20 month ma resistance and the Wave structure: the triangle/pennant hinging on the drop into June (Intermediate Wave 1 down) looks like a possible Intermediate Wave 2 correction.
Note that the October low tested the 50 month moving average with the overhead 20 month pointing down and acting as resistance.
If I am correct, then 6 months from the June internal low or late 2023 should see the market magnetized lower in the context of the 1 year cycle from the November/December ATH’s.
The short-term SPX.
The SPY held the 407 Time/Price square-out on Wednesday and capitalized on it with Thursday’s rally.
Wednesday’s multiple sell signals pointed to downside follow thru but the market squeezed the shorts.
While we do have a Reversal of a Reversal to the topside (Keyser Soze buy signal) it must be said that there is now a clear 5 waves up from the March 13 low.
As well, as offered above, the SPY/SPX may be working on a false breakout of this 6-month triangle to culminate what looks like large Wave 2 corrective structure.
Intermediate Wave 1 down lasted 10 months into October.
An intermediate corrective Wave 2 ending soon would be 6 months for a Fibonacci .618 relationship.
The SPY 407 level is the key to the door lower now.
Reports show that there are a large number of hedge fund shorts in the market coming into this week.
It would be fitting for the Talented Mr. Market in his perverseness to squeeze many of these shorts out prior to a dramatic Wave 3 decline.
Of course we must be mindful of an alternative structure and a successful breakout of the triangle.
However, within the context of a Primary Bear Market, the likelihood is that is the short straw.
A monthly AAPL sheds light. AAPL is rising against powerful resistance at the 168 region.
In a bull market, one might expect a Rule of 4 Breakout… eventually.
In a bear market, it is best to believe what you see -- resistance -- until proven otherwise… and that would be a 3rd lower weekly high.
Fast declines often come from 3rd lower highs which is why I call the pattern a Power Surge.