By: Jeff Cooper
Hit and Run Morning Stock Report: May 17, 2023
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The Big Pinch
“That which is not but should be is more real than that which merely is.”
An extraordinarily tight SIX week trading range in the SPX of 3%.
This is the tightest range in the past 5 years.
It will be resolved here, the 7th week, as 7 is the number of time according to WD Gann.
Fittingly, today is our May 17th turning point...always + or -.
Tuesday was the 7th day in a narrow range since the May 5th upthrust and the index rolled over.
The dailies show a Head & Shoulders with the head being the backtest of a broken Ghost Line from the March low.
The downdraft on the runoff saw the SPX come close to the 4099 support flagged in yesterday’s report.
The hourlies show two short-term double bottoms that define support---the aforesaid 4099 region and then the 4040-4050 region.
This morning the SPX is backtesting the broken black rising Ghost Line (black).
Breakage below 4040-4050 opens the door o a trend line connecting the October 2022 low and the March 2023 low which comes in at 3950.
This ties to the monthly trendline shown yesterday.
Is it possible we get a swan dive over coming days toward this 3950 region.
Interestingly, this week aligns with 398 (3980).
The current coil/narrow range of 6 weeks is expressed well by the weekly Bollinger Bands.
Below is a weekly SPX with Bollinger Bands for the past 18 months.
Notice how tight those bands are right now through Tuesday’s close, covering 120 SPX points: The Big Pinch.
The panel at the bottom shows that this width is just 2.96% at the moment.
This is the narrowest it has been since it fell to under 3% at the top of the 2009-2021 bull market/beginning of this 2022 primary bear market.
Markets breathe. They contract and expand. Major contractions like this typically occur shortly before a powerful new leg arrives.
On a clear break, we will be initiating put positons on the QQQ and the SPY.
In the meantime we remain patient, taking longs here and there despite an intellectually bearish bent.
There is a lot of truth on the tape, but little logic: a big emotional pinch.