By: Jeff Cooper
Hit and Run Morning Stock Report: July 5, 2023
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“When the duration of a move squares with the extent of a move, price trends tend to change.”
W.D. Gann famously wrote about markets that, “Time is more important than price.”
Anyone who’s been trading through more than a few cycles and tries to time a top knows how true this statement is.
This is for two reasons:
1) There is always an underlying bullish bias to markets. They go up more than when they come down.
That said when they come down, they make up for it. The Bull is an escalator, a psychological stairway to heaven. The Bear is an elevator, a psychological descent to hell.
2) It is easier for market participants to visualize the effect of gravity than it is the nature of propulsion and persistence.
As the famous Great Depression economist John Maynard Keynes said, “Markets can remain irrational longer than you can remain solvent.”
In sum, bottoms are often “V” affairs while the distribution at tops can stretch out over time.
For example, recently we had a V Bottom that defined the Christmas Crash in 2018 and the Covid Crash in late March 2020.
This is in contrast to:
1) the 8-month topping formation from late January to late September 2018
2) the 4-month topping formation from June 2007 to October 2007
3) the 5-month topping formation from March 2000 to September 2000
These are just examples from this century of course.
There are times when topping patterns are short-lived without a chance for sufficient distribution.
In these instances, panic selling sets in.
Examples are the waterfall decline starting just 7 weeks after the top in early September 1929.
Ditto the top in late August 1987.
Likewise, the topping formation into the SPX January 4, 2022 top was relatively short-lived---only 8 weeks prior to a slow-motion crash that took just shy of 6 months into mid-June, 2022.
With the help of my Square of 9 Time/Price Calculator, we were able to identify many of the major turning points:
We called SPX March 24, 2000 top to the day.
The Square of 9 below shows that the low October 5th, 1998 low of 923/924 is straight across and opposite the March 24th high of 1552.
In fact, from 923 to 1552 is a Fibonacci 1620 degrees.
We identified the week of the low in October 2002.
The low was 768 SPX which is square October 5th.
The low was October 10, 2002.
We also identified the October 11, 2007 top at 1576 SPX.
A square of 9 shows that 1576 is square October 5th as well.
Notice that 1576 is precisely 6 full revs or squares up from 768.
More recently, after forecasting a crash was on deck in January 2020, we called the exact low on March 23, 2020 (2191) saying that the SPX was on the cusp of an advance to 4000 over the near term.
This was a little different technique.
Allow me to explain.
The pre-crash SPX high in 2020 occurred on February 19th at 3393.
A Square of 9 shows that 3393 (393 in the 3000 grid) POINTS to the exact day of the low, March 23, 2020.
Time points to price, price points to time.
This is the power of integrating Time and Price.
Let’s look at one more historic Time/Price synchronicity before we drill down to the current market.
The bear market low in 2009 was on March 6th at 666/667.
A sq of 9 shows 667 is square March 6th.
Happenstance? I don’t think so.
Suffice to say there are a myriad of examples of time and price lining up at major turning points.
Which brings us to the current important time frame which we’ve been pointing to for two months.
First, the market bottomed off the January 4th , 2022 all-time high on October 13, 2022 at 3491.
A Square of 9 shows that 349 is square October 13 for a perfected Time/Price square-out.
349 is 180 degrees straight across and opposite July 11.
As well July 4th is 540 days/degrees from the January 4th, 2022 all-time high.
My expectation is that July will prove to be a turning point, a momentous turning point.
The SPX polished off the 2nd quarter with a Gap and Go to a new high for the move.
Monday was a half-day but nevertheless carved out an N R 7 Day---the narrowest range in 7 days.
These contractions in volatility are often followed by expansions in volatility within a few days.
Breakage back below the mid-June high will trigger a Soup Nazi sell signal.
Downside follow-through below Thursday’s open gap will trigger a Jump The Creek sell.
In sum, offsetting Thursday’s gap suggests a double top of some degree.
There is also a Time/Price square-out in July that squares out with the October 2022 low that is very compelling that I have shared with subscribers this morning on the Hit and Run Private Twitter Feed.