By: Jeff Cooper
Hit and Run Morning Stock Report: July 7, 2023
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The Fat Lady Is Gargling
I wrote the above in Wednesday’s Hit and Run Report, Turning Point.
The DJIA was down 600 points before trimming losses to close down 366 on Thursday.
The worst single day drop in months---since the May 2, 2023 downdraft and before that March 22,2023 plunge three and a half months ago.
Ditto the SPX.
For two months we have been pointing to a change of trend to occur in early July and for cycles to exert their downside influence this month, perhaps in a dramatic way.
Allow me to explain and recap.
1) July 4th, 2023 is 540 days/degrees from the SPX January 4th all-time high. Why is this important? W. D. Gann wrote that when time and price square out, expect a change in trend. A true square is a cube. A cube consists of 6 sides with 90 degree angles or 540 degrees.
2) January 4th aligns with/vibrates off 350 (3500) on the Square of 9 Wheel. The low off the all-time high was 349 (3491) virtually a direct hit. The intraday high for the rally was June 30th. The closing high was July 3rd.
3) July 4th 1776 was 247 years ago. 247 vibrates off/squares out with July 4th. So this July 4th squares out with the Big Enchilada July 4th, 1776.
There are several synchronicities this July with prior crash years.
4) For example 1929 is 94 years ago. On the Square of 9 Wheel, 94 vectors July 13th.
W.D. Gann wrote about the significance of anniversary dates of important highs and lows.
The market struck a major high on July 13th, 1990, crashing into October.
The primary/ orthodox top in 2007 occurred on July 19th.
23 years ago was a major high in March 2000.
On the Square of 9 the number 23 is 180 degrees straight across and opposite June 30th, our recent high.
Check this out:
The aforesaid July 19 top in 2007 squares October 19…Black Monday in 1987.
October 19 squares 94 and 94 years ago is 1929.
So this year shows some synchronicity with 1987 and 1929.
There is another similarity to 1929 and 1987.
The pre-crash blow-offs in both years were 90-100 days.
The recent rally started in mid-March, following this blow-off pattern.
Markets are not random. They love order.
“Everything in existence is based on exact proportion and perfect relationship. There is no chance in nature, because
Mathematical principles of the highest order lie at the foundation of all things. Faraday said: ‘There is nothing in the Universe but mathematical points of force.’”
As offered on the Hit and Run Private Twitter Feed following Thursday’s gap down, “If the SPX fails to close today’s gap down, (which it will fail to do), it will leave an Island Top from our July 4th Turning Point…the title of Wednesday’s report.”
The SPX rebounded to roughly half its Thursday drop intraday before tailing off on the runoff.
90 degrees down off last Friday’s high is 4391.
The index skidded below 4391 but the rebound held a close above it at 4325.
Today is the Big Enchilada, the Jobs Report. If the number is hot, trade back below 4391 opens the door to 180 degrees down to the 4311 region over the coming hours and days.
Breakage below the SPX 20 day, which hasn’t happened since the stampede from May 25th started is the sound of the Fat Lady Gargling.
The SPX has formed a Bearish Island Reversal pattern from June 30 thru July 6.
These often appear at the end of long advances or declines.
This is occurring in the context of several negative divergences:
While the SPX drove to a new high for the move on June 30th above the June 16th high, the QQQ and the DJIA did not.
Above we flagged 4325 as a potential downside pivot.
Let’s take a look at a Weekly Swing Chart and see how that sets up.
Last week was an outside up week. The SPX ripped higher following the first turn down of the weeklies since the breakout started in late May.
Last week’s low was 4328 which ties to the 4325 level above---180 degrees down from high.
Consequently, breakage below last week's low triggers a Reversal of a Reversal---a WEEKLY Keyser Soze.
If that plays out, the fat lady will be singing.
The tune will be 360 degrees down from high which is 4195…above an important confluence of trend lines.
Notice the intersection of these trend lines at the 4050 region occurs in JULY.
Above we mentioned the significance of cubes, true square-outs.
A 540 degree cube down in price from the 4458 June 30th high is 4066---virtually a direct hit with the intersection of the green and blue trend lines in the above weekly SPX.
In sum, the drive into quarter-end window dressing will look like a Buying Climax if we get downside follow thru from yesterday’s Breakaway Gap over coming hours/days.
Mr. Market did a good job of stampeding under-invested money manager into quarter-end window dressing.
This is in league with Investors Intelligence Advisors’ Survey showing a reading of 75% bulls versus 36.2% last October.
In tandem with Time and Price, this sentiment suggests that the coming weeks and months will look entirely different that the last few months.
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