By: Jeff Cooper
Hit and Run Morning Stock Report: April 19, 2023
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Two Stealth Sell Signals
On April 12th, the SPX had a failed breakout of a triangle; however, there was no downside follow-through.
Instead the index exploded higher the next day for a Reversal of a Reversal (Keyser Soze).
Uncharacteristically, the Reversal of a Reversal pattern did NOT lead to upside acceleration as is usually the case.
Instead, the SPX has been treading water the last 3 sessions.
This suggests the market is in a corrective structure (bearish) versus an impulsive bullish structure.
Yesterday the market gapped up but found an opening high.
In so doing, the SPX left an HOURLY Soup Nazi sell signal.
This occurs when an item makes a new 20-hour high but quickly reversed back below a prior high of at least 4 bars prior and within the 20-hour look-back.
The hourly Soup Nazi led to a 30-point drop off the opening high which was down 11 points on the day, but did not lead to a meaningful sell-off.
From the March 13th low the count is a full 5 waves
The balance of the day was another episode of throwing Jello for distance. Treading water and going nowhere fast.
That said the market should be about to top, a top of significance I think.
If so it will culminate the rally from mid-March.
We have a cluster of Fibonacci relationships.
Allow me to explain.
May 1st is a Fibonacci 34 trading days from the March 13 low.
May 3rd is a Fibonacci 55 trading days from the February 14th major top.
May 4th is a Fibonacci 89 trading days from the December 22, 2022 low.
May 1st is a Fibonacci 144 trading days from the September 20, 2022 major low.
May 2nd is a Fibonacci 233 trading days from the May 20, 2022 low
May 10th is a Fibonacci 377 trading days from the November 8, 2021 major top.
Late April/early May is a Fibonacci 144 months from the major top in late April/early May 2011.
When there is a cluster of relationships such as this there is a stronger-than-average likelihood of an important turning point on the table.
In addition to the hourly Soup Nazi sell setup and the Fibonacci cluster, the SPX left a Gilligan’s Island sell signal on its dailies on Tuesday.
A Gilligan Island is a gap up to a new 60 day high with a close near session lows.
The SPX is sitting on a rising bottoms line from March 13th.
Breakage below 4137 will trigger a Rule of 4 sell signal… a break of a 3 point trend line.
Key support is at 4090 which represents a backtest of the major declining tops line from the January all-time high
In summation, recently the SPX delivered a Zweig Breadth Thrust buy signal (April).
However, not all signals are created equal.
Signals in a bull market are not going to deliver the same result as those in a bear market.
Likewise, as to the breakout of the major tops like from the January 2022 all-time high, the expectation is such a breakout would fail in an ongoing secular bear market.
A failure below the near 18-month declining tops line will lead to a sharp decline, consistent with a powerful Intermediate Wave 3 of a bear.