By: Jeff Cooper

Hit and Run Morning Stock Report: April 28, 2023

Bear Hugs

The SPX spiked up 80 points on Thursday.

The lion’s share of that gain is from a handful of mega-caps, all representing significant weighting in the SPX, NDX, and even the DJIA which was up over 500 points.

History shows the biggest one and two-day gains have occurred during decline phases of Bear Market cycles.

A daily SPX below reveals recent sharp declines that came after such spikes and the current spike.

Just as signals that telegraph higher in bull markets are different than those in bear markets, so up-spikes in bear markets typically represent exhaustion and a buying climax versus continuation in a bull market.

Not many understand this.

The learned behavior of markets from the previous cycle dies hard.

These up-spikes are associated with last hurrahs or short-squeezes in bear markets... just as sharp shake-outs in bull cycles often define a buying opportunity.

One memorable example of spike prior to a collapse was in late September 1987 -- just a few weeks before the Black Monday crash on October 19th that year.

The DJIA rallied a huge 75 points on September 22, 1987 which was I believe the largest POINT rally in history to that point in time.

You think maybe that rally got market participants a little bullish?

You think maybe the mindset of the vast majority of players following that rally was to look to buy pullbacks?

On the above chart, notice that when the DJIA violated the low of the big September 22 rally, the crash started.

Yesterday on the private twitter feed we noted that today would be critical because trade above Thursday’s high would put the SPX in my daily Minus One/Plus Two sell position.

If this occurs, the subsequent behavior will be critical to observe.

Be that as it may, trade back below Thursday’s low in coming days/weeks should be a blaring sell siren.

Monday morning’s report will walk through the significance and synchronicity  of the May 19th 2023 time period.

There is a large confluence of factors that point to this time frame.

I don’t know if it’s a high, a low or an acceleration but if we start to rollover soon, “sell in May” is going to take on a whole new slant.

In summation, if my interpretation is correct, there’s an event on the horizon, sooner rather than later,  that will take the SPX down to the 3300 region.