By: Jeff Cooper
Hit and Run Morning Stock Report: April 18, 2023
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As has been the case over recent sessions, the NYSE volume has dropped off again.
Seven of the ten lowest volume days of 2023 have characterized the last seven consecutive sessions.
But low volume is not the only sign of complacency. Notably, the daily range for the SPX in this period has been the narrowest of the previous 18 months.
Additionally, we note that the VIX which tends to reflect the level of appreciation of risk in markets has dropped off to where it was when this Bear Market began -- under 17.
This is a dangerous indication of investor/trader attitude -- perhaps exceptionally so.
An even more direct measure of trader sentiment can be seen in the current Fear/Greed Meter.
These psychological measures indicate that this rally is very close to a reversal, be it hours or days away.
While the market looks like a mess and acts like Jello since the October low, making the pattern seem obscure, if you pull the lens back things clarify.
A monthly SPX close-only chart clearly maps out a progressing 5 wave decline on the monthlies -- The Sign Of The Bear.
The normal expectation following 5 waves down is an A B C counter-trend rally.
We’re getting it.
Since the 5 waves down is on the monthly time frame, the A B C countertrend will be large as well.
It has been.
The decline from the January 2022 all-time high to October was 10 months.
We are up 6 months off the October 2022 low for a 6/10 time ratio, a Fibonacci .618 ratio.
Let’s map out the big “squares” coming up off the 3491 October 2022 low using the SPX.
360 degrees up is 3730 which ties to the December low.
A key 540 degrees up is 3854. This ties to the key 3810 level where the 3 Month Chart turned down in June on trade below the May low.
This turn down in the monthlies is coming up on a 360 degree/1 year anniversary.
So this 3810/3850 region is going to be key on any decline.
720 degrees up off low is 3979. This ties to the March 22 Powell reversal day and off course Gann’s Zero Point, March 21, the Spring Equinox.
When the SPX reclaimed this 3979 region, it continued to grind higher.
900 degrees up from low is 4235. That ties to the early February high of 4195.
It may be that the SPX has an agenda to fully satisfy 4235 in this time frame.
If so, that would fully satisfy a pattern of 3 Drives to a High off the October 2022 low.
3 swings or drives to a lower high is a conspicuously bearish pattern.
Check a weekly SPX from the March 2000 top and you will see a sell-off and then 3 Drives to a Test toward that high into early September 2000.
That is where the bear came out of hibernation in earnest… for 2 years.
Notably when the SPX 3 Day Chart turned down on April 6, it defined a low.
Be that as it may, the price action since that low has NOT been impulsive.
It has been Whipsaw.
The Whipsaw should morph into Whiplash going into the eclipses, April 20 and May 5.
In summation, if I am correct about a bearish countertrend move nearly culminating, it should be followed by a devastating decline, an Intermediate Wave 3 Down.
A monthly SPX shows a parallel channel projecting a 3rd drive down to the 3200 region.
This is where the market gapped down in February 2020.
It is also the bottom of an A B C correction in the fall of 2020.
This is a logical place for the SPX to be magnetized to.