By: Jeff Cooper

Hit and Run Morning Stock Report: May 9, 2023

Looking Back From 2011

Last week we mentioned the significance of May 17th.

1)      It is the anniversary of the start of the NYSE

2)      It squares out the range of the January 2022 SPX all-time high to the October 2022 low.

That range is 1327 points and 1327 squares May 17th on the Square Of 9 Wheel. (we showed this square of 9 last week.

3)      When you use the number grid in the wheels as years instead of prices, you see that 1929 aligns with May 17th. (also shown last week)

On May 16th, 2023 we have a significant natural cycle as Jupiter enters the sign of Taurus. The last time this occurred was June 4th, 2011.

A daily SPX from 2011 shows the market broke support (red horizontal line) at that time testing the 200 day moving average.

That test was the first test of the 200 in a while and it perpetuated a short-lived runaway move (1).

That rip was followed by a pullback to support (2) and rallied to test the highs (3).

When the swing low (2) was violated in tandem with breakage below the 200 day moving average the market caved in.

Market participants who bought the “momentum pullback” (2) and rode the rally to the prior high,

Smelled something was rotten when the swing at support snapped and got out of Dodge on breakage below the 200 day moving average.

Now let’s take a look at the current time frame with Jupiter entering Taurus on May 16th which ties to the aforesaid May 17th pivot.

The SPX has had a sharp rally and pulled back last week creating a double bottom (red).

On Friday it ran up toward the recent highs (the key 4187 square).

It may push higher for a complete test.

That said, Monday left an N R 7 Day. This is the narrowest range in 7 sessions.

These contractions are typically followed by an expansion in volatility within the next few sessions.

Breakage back below the swing low, in this case a double bottom at the 50 day ma, as in 2011 when the swing low was broken, will likely send the SPX down to a test of the 200 day moving average (blue).

Checking back to the 2011 pattern, when the prior swing low AND the 200 broke, the market accelerated to the downside.

What’s interesting this year is that the 200 day ties to a Close Only trend line connecting the October and March lows.

Consequently, there is double support in the 3970 region---the 200 day moving average and the October/March trend line.

If this double support fails we will see accelerated momentum to the downside…in keeping with the Hindenburg Omen on deck.

In summation, the last few day’s FOMO in names like ZS, BILL, CYBR, PANW and CRWD to mention a few mirror the spike into the high into May 2, 2011.

In 2011, the SPX dropped to test the 200 day which in today’s market equates to a 160 SPX move.

In 2011 the market rallied off the 200 day in June, mirroring the late April rally.

When the 200 day ma broke the second time around the second mouse got the cheese for the bears.