By: Jeff Cooper
Hit and Run Morning Stock Report: May 10, 2023
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The SPX shows two consecutive N R 7 Days---the narrowest range in 7 days.
These contractions are usually followed by an expansion in volatility within a few days.
Today we get the CPI so it looks like we get a meaningful reaction.
The SPX isn’t giving any clues.
Since exploding higher on Thursday following a turn down of the 3 Day Chart, it has not been able to trace out 2 consecutive higher daily highs leaving a Minus One/Plus Two Sell setup.
And now the count has to start again as a higher high today is only ONE higher high.
A big rally that eclipses the circled 3 Day Chart high at the key 4187 level from April 1 could turn the 3 Day Chart up.
It would be interesting if that happened into our May 17th turning point recapped in this space yesterday.
Because rapid flipping of the 3 Day Chart often indicates a change in trend.
The 3 Day Chart has been turning up and down frequently since March 22 and the Spring Equinox.
As well remember that the all-time 4818 high (481) vectors/vibrates off May 17th.
Is there a waterfall decline setup on the table?
In addition to a Hindenburg Omen observation on the table, the Puetz Crash Window is open.
Allow me to explain.
Steve Puetz is an analyst whose work I’ve been familiar with for a long time. He attempted to discover if eclipses and market crashes had anything in common. I bring up Puetz’s work because we recently had a lunar eclipse.
This will be the deepest penumbral eclipse since February 2017 and until September 2042. What is a penumbral eclipse and why might it be important?
A penumbral lunar eclipse occurs when the moon passes through the penumbra---the lighter part of the Earth’s shadow---and sunlight falling on the moon appears to be partially cut off. The moon is visible, but with less than usual brightness.
So let’s see what Mr. Puetz discovered. S
Steve’s premise is that a full moon in general and a lunar eclipse in particular, seem to be a triggering device that somehow affects investor psychology to rapidly change from manic greed to paranoia.
He comes to this conclusion by some uniquely interesting observations.
He noted that eight of the greatest market crashes in history fell within a period of six days before to three days after a full moon that occurred within six weeks of a solar eclipse.
These great historic crashes included such events as Holland’s Tulip Mania in 1637, the Flash Crash in 1987 and the Tokyo stock market crash in 1990.
Puetz stated that “not every eclipse turns into a crash” and “you need a bubble to have a crash, but when a bubble forms, they tend to crash near the time of a lunar eclipse.”
We had a solar eclipse on April 20 which is within six weeks of the recent lunar eclipse.
Puetz stated that the greatest number of crashes start after the first full moon after a solar eclipse---when that full moon is also a lunar eclipse.
When the panic begins, it usually lasts from two to four weeks. The tendency has been for markets to peak a few days prior to the full moon. The price moves flat to slightly lower waiting for the full moon to pass. Then slightly after the full moon the brunt of the selling begins.
While this information may seem bizarre, one must also ask what are the odds that 8 of the greatest market crashes in history accidentally fell into this defined time zone? The answer is that the odds are less than one chance in 127,000.
Does this guarantee a crash now? Of course not--- all it does is confirm that the window is now open.
Just for fun, let’s look at the 1987 crash.
The charts below show how the NDX and the SPX reacted in the 1987 crash.
The solar eclipse in 1987 was on September 23. Note that the NDX made its all-time high on October 6 just one day prior to the full moon.
The SPX made a secondary high on October 2 which was 3 trading days prior to the full moon.
The SPX failed to confirm the all-time high in the NDX and the crash began just before the full moon in both cases.
The NDX fell 41% which was similar to the decline in the DJIA.
The SPX fell 34% from its secondary high of October 2. The SPX fell just over 36% from its all-time high on August 25th
Technically, The Truth Teller is set up for downside.
Breakage below its October/March trend line triggers a Rule of 4 Sell signal opening the door to 157 or lower.