By: Jeff Cooper
Hit and Run Morning Stock Report: April 21, 2023
Need help? Check out the Hit and Run Success Guide.
A Conspicuous Change In Character
An hourly SPX shows the index gapped down on Thursday below its 20 hour moving average, backtested the 20 day, and in a change in character, sent the “stick save” that we’ve come to expect in the last few weeks to the wood chipper in the last two hours.
Today squares out with 405 (4050) and 425 (4250) on my Square of 9 Wheel.
Can we get a 75 to 100 point move today?
It’s a monthly Opex so if a big move starts to the downside I don’t think “they” can cap it if someone has an axe to grind because volatility has been sold for the last month.
Theoretically we could see a big Gamma Squeeze unwindb-- a squeeze of those that have shorted Gamma.
VIX, after sinking to its lowest level since January 4, 2022, the beginning of this bear market, moved back above 17 on a surge in momentum yesterday.
It “feels” like the rally since the mid-March low has become stretched and exhausted.
With VIX advancing it may signal that if a big move is afoot this monthly options expiration, a trend change is imminent. That trend change should be to the downside given we been rallying for 7 weeks, a time zone to expect a change in trend in Gann methodology.
If we get a rollover, there are two ways to count the structure.
Either the rally from the October low is completing an Intermediate Wave 2 correction or Wave 2 culminated on February 2 followed by a Wave 1 of 3 to the downside with the current rally a corrective Wave 2 of 3.
The latter would mean a dramatic Wave 3 of 3 to the downside is on deck.
The former would mean Wave 1 of 3 to the downside is soon to unfold.
Either way, caution is warranted.
May 2 is 90 days degrees from the February 2 high so theoretically if the agenda is a rollover we could hold up until the end of April.
Note that 90 days/degrees prior to February 2 is November 2 which marked a pullback low prior to upside momentum.
From the January 4th, 2022 all-time high, it was 9 months to the October 2022 low.
9 months from the October 2022 low is early July 2023.
On the Square of 9 Wheel, early July is 180 degrees straight across and opposite 349 (3490), the October 2022 low for the bear (so far).
My expectation is that we test 3500-3600 into early July… at the latest.