By: Jeff Cooper

Hit and Run Trading Morning Report - July 18, 2023

The Heat is On

Just 8 stocks account for around 90% of the gains on the SPX so far in 2023.
The entire rest of the SPX stocks are essentially flat for the year.

Get this: the Price/Earnings ratios for these eight stocks is extraordinary:

AAPL 32.94

AMZN 318

GOOG 26.44

META 38.54

MSFT 37.50

NFLX 49.46

NVDA 243.25

TSLA 84.66

To put this in perspective, as of July 17th, 2023, the overall P/E for the entire SPX is 26.18. The 153 year Average is 16.02 and the 153 year Median P/E is 14.93.

The market is at risk of an abrupt decline.

There is a remarkable correlation between an inverted Yield Curve and stock market crashes and economic recessions.

When the 10 year Treasury is below the 2 year Treasury yield you have an inverted yield curve.

There were five previous periods when the yield curve inverted:

1)      Prior to the 1980 and 1982 Recession

2)      In 1987-1988 prior to the 1991 Recession (interestingly that period was an A B C decline: A down from August 1987 through December 1987, B up into July 13th, 1990, and C down into October 1990).

3)      In 2000 prior to the 2001 to 2003 Recession

4)      2006 through 2008 prior to the Great Recession of 2008

5)      2019 prior to the 2020 Lockdown Recession.

Now in 2023, since 2022, we have another inverted  yield curve.

The rub is that tend to occur within a few months to two years after the yield curve first inverts.

The implication is an Economic Recession will start in full force between now and late 2024.


5 consecutive inverted yield curves led to five stock market crashes, no exceptions.

With 100% accuracy a Recession and stock market crash occurred within 3 months to 2 years after the yield curve inversion started.

That means between now and late 2024.

There is another correlation.

When the Fed Balance Sheet shrinks, the stock market declines significantly---crashes.

Recently the Fed’s balance sheet topped on March 23, 2022 and since dropped to July 5th 2023.

There was a significant increase from March 1st, 2023 to March 29th, 2023 after the major bank failures.

This is what produced the rally from March which perpetuated a stampede since May 24th.

In May I mentioned that if the market did not top before the end of that month that it left the door open to a drive higher mirroring the May lows and Buying Panics in 1929 and 1987.

Most people think the entire year of 1929 was a bull run.

However the chart below shows that the DJIA was flat until May 31st when a Runaway Move started lasting into late summer.

In 1987 the market was strong from January through late March prior to a correction into May 20th when a Runaway move started lasting into late summer.

This year saw was basically sideways until May 24th when a Runaway Move commenced.

They say markets don’t crash off their highs but 1929 and 1987 saw waterfalls shortly after the highs.

Notice in both instances once support was broken, it was Get Out Of Dodge. There was no graceful exit.

The only exit after a Stampede Buying Panic is urgent selling.

Interestingly the August 25th, 1987 top was a Time/Price square-out: the 338 high was 180 degrees opposition August 25th.

In 1929 the DJIA 386 ATH at the time squares the first crash that fall on October 24th (the second crash was October 29th).

In 1929 the market fought the Fed which had warned about excess speculation since the start of the year.

The Fed brought the market to bear.

Here in 2023 the market is fighting the Fed.

The chart below shows what looks like a full count on the SPX.

Interestingly, the last major swing low on March 13th is 3808 (381).

381 is the DJIA closing high in 1929.

I have shown the Time/Price synchronicities between 1987 and 1929 many times where Time becomes Price and vice versa.

For example, those two crashes are 58 years apaart.

58 squares October 29th---the Big One.

We are 94 years from 1929.

94 conjuncts July 14th.

It squares October 13th…the low in 2022.

We are 36 years from 1987.

36 squares late August.

So the question is with the SPY potentially breaking above the 448/449 square-out tying to this time-frame, is the door open higher?

Perhaps but the March 13th   ( the last major low)  is straight across and opposite 453/454.

Monday’s high, 4532.85 or 453.

Maybe something, maybe nothing but we’re having an historic heat wave.

I found the following on the internet regarding a heat wave in 1929:

The DJIA topped on September 3, 1929.

Indeed, the heat is on.

Several leading names saw panic buying yesterday:






To mention a few.

Whether these point to near term Buying Climaxes or there is more heat is the question.