By: Jeff Cooper
Hit and Run Morning Stock Report: May 26, 2023
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Courtesy of NVDA, the QQQ exploded out of a Plus One/Minus Two buy setup on Thursday, tagging the 340 square-out region.
To recap, the October low was 254.
A full 360 degree rev up is 322.
Both “point to” our key cycle high of May 17-19 where the SPX struck a high.
The next 90-degree decrement up from 322 is 340 where the Q’s settled essentially.
In my experience, when an item spikes into a “square” be it a spike higher or lower, it increases the odds of a climatic turn.
Of course, given the momentum of the QQQ the last SEVEN days, it must be said that clearing and sustaining this 340 square opens the door for a run to 358,
This is the next 90 degrees up from 340 and represents a full 540 degree ‘cube’ advance (90 X 6).
In other words, 358 is six squares of 90 degrees up from the October 254 low.
Clearly Thursday’s action smarts of “get me in” at any price as to specific semi-conductor stocks and AI names.
Names include AMD, TSM, MRVL, ACLS and The Beast, SMCI --- which may have squared out in the 215 region.
So let’s take a look at a QQQ daily from the November 2022 all-time high.
Notice the Key Reversal Day on the 7th day of the last ditch rally and the preceding momentous rally from early October 2021.
Notice the breakout from a bearish Rising Wedge (green) on May 17th and the ensuing backtest on Wednesday prior to Thursday’s Chip Lollapalooza.
Not all breakouts are created equal. As offered above, we could see a drive to 358 but I don’t know what the chips can do for an immediate encore.
Moreover, the current breakout tested a declining tops line ( blue) from the November 22 all-time high.
Breakage back below the tops line of the Rising Wedge is a red flag. If it should occur over the next day or so with a gap down, it would leave a possible Island Top.
Breakage below the bottoms line of the Rising Wedge is a blaring siren.
Notably, the QQQ has closed below its 50 day moving average once this year---on March 10.
The next day, March 13th was an important low where the Q’s reclaimed the 50 day ma. leaving an LROD, a Large Range Outside Up Day in the process.
In summation, notice that the apex of the Rising Wedge ties to the end of this week.
As well late May is 540 days/degrees from the late November 2021 all-time high…a cube in time coincident with speculative excess in some names while the broad market remains under persistent selling pressure:
TGT, DLTR, PYPL and ABNB to mention a few.
In tandem with the 340 region on the Q’s the SPX has major resistance at the 4200 region.
If you take the all-time high of 480 (SPY) and divide by an 8 octave (do re mi fa so la te do) you get 60.
The first 1/8th octave down from the all-time high is 420 or 4200.
The low weekly close on the SPY is 357.18 (close to the next decrement of 60 down from 420.
The SPY shows an outside up month. Breakage below the May low in June will trigger a Reversal of a Reversal (Keyser Soze).
How important would a reversal in this time and price region be?
The only other times when the tech sector surged over 4% while overall stocks declined were at the onset and in the middle of the Tech Bubble Bust---April 2000 and March 2001.