By: Jeff Cooper

Hit and Run Trading Morning Report - July 25, 2023

All In

“We were wrong on pessimistic outlook.” Mike Wilson, Morgan Stanley

Yesterday one of the biggest bears on Wall Street threw in the towel. Is this capitulation the sentiment straw that breaks the bull’s back?

Is there anyone who wants in who isn’t?

In markets, man is a sentimentalist, not a scientist.

Succinctly, markets operate on emotion.

Today I want to take another look at a weekly SPX that I showed last week.

There are two trend channels---a blue declining channel from the all-time high and the June/October lows, and a green rising channel from the October low.

The green trend channel is produced paralleling the bottoms line from the first rally peak off the October low.

Notice that they intersect in the mid-July time region.

A shorter green tops line is taken from the 2nd rally peak.

It shows the index broke out above that line.

This inflection point/intersection is quite relevant in the context of the many Time/Price square outs, synchronicities and anniversary dates littered throughout July 2023.

Notice this confluence of declining and rising channels also dovetails with a horizontal trend line (black) that defines the left and right shoulders of the topping pattern at record highs from late 2021.

Not the least of these ‘vibrations/synchronicities is that, as you recall, 94 years ago is 1929 and 94 points to July 13th.

As well, the July 8th, the 1932 Great Depression low was 91 years ago.

91 points to/aligns with August 8th.

As you will see later, this may prove to be a significant vibration this August.

Recently we compared the current advance from March where Mr. Volatility went AWOL to that of the 4 month rally from September 2017 into late January 2018 where Volmageddon erupted.

An air-pocket sent the SPX reeling from 2872 to 2532 in 2 weeks.

The lack of volatility throughout 2017 saw a cataclysmic reversion to the mean from the January 26th, 2018 peak that produced 3 crashes over the next 26 months.

Those crashes were the waterfall off the Jan 26, 2018 top, the Christmas Crash in late 2018 and the Covid Crash in Feb/March 2020.

The January 26th, 2018 inflection point was momentous.

We are 66 months from that turning point.

Last week we mentioned that 666 WEEKS from the March 2009 Bear Market low of 666 is December 2021.

This is a bulls eye for the bull market top: the NAZ peaked in late November 2021 while the SPX all-time high was January 4, 2022.
Split the difference and we get December 2021.

This 666 week periodicity is synchronous with the 666 SPX price low in March 2009!.

Likewise this 66 month period from January 2018 to July 2023 may be significant.

It ain’t a low.

This brings me to a different kind of statistical confluence shown by John Hussman:

“On Friday, November 19th, we hit the motherlode. Across four decades of financial markets and over a century of historical data, I’ve never observed as many historical indications of a market peak occurring simultaneously. Noise reduction is always a process of drawing a common signal from multiple, partially correlated sensors, even if each individual sensor might be imperfect. The reason that we follow boatloads of these syndromes is the same reason we base our gauge of market internals on thousands of securities---uniformity conveys information. Emphatically---and this is important---my intent here is not to “call the top” of this bubble. Wyes this is a bubble in my view. Yes, I believe it will end in tears. Yes, the price investors pay for a given stream of future cash flows is inseparable from the long-term returns they can expect. Yes, if this bubble is ever to actually have a top, this would be a perfectly reasonable moment to expect one. Still, my present intent is simply to share what we’re observing.”

So far, a truly great call. But here is where he gets really interesting.

He does a lot of statistical analogies. Here is one he did just a few days ago on July 18:

He sets up 5 criteria, 4 of them easy to replicate, the 5th, one of his proprietary calculations.

The important thing is the criteria were met on July 18th and have only been met on six previous occasions in the past 31 years.
Looking at the results and taking the average max closing decline over the next 15 trading sessions from July 18, if this situation follows the past, the average decline would take us to the 4100 region over the next 11 trading days…on average.

Now the market isn’t a fine Swiss watch and history does not repeat exactly, but even if anything remotely similar played out it would be Airpocketism.

What’s remarkable is that, as the above SPX chart shows, this 4100 region ties to a trend line connecting the two biggest lows since the all-time highs.
These are the June 2022 low and the October 2022 low.

Is a sharp downdraft that tests the March low possible in August?

Maybe something, maybe nothing, but the 381 (3809) March low points to August 8th.

Let’s see if there is any synergy with the leading QQQ.

A weekly QQQ shows the ineffable precision of trend channels.

Note the current uptrend was triggered on a breakout of the declining trend channel.

The first pullback saw a turndown in the 3 Week Chart followed by a large range outside up week.


The Q’s have been in a persistent uptrend since that signal reversal bar.

However, last week, in the heart of our Turning Point, QQQ hit the top of a rising trend channel and left a signal reversal sell bar.

As below, so above?

The presumption is even in a continuing bubble, the Q’s should inhale and test the bottom rail of the channel. That ties to around 355.

Breakage of the channel opens the door to the 330-325 region.

Below 325 ISH validates the idea of a vicious C Wave to new lows.

90 degrees down from the Q’s 388 high is 368.

180 degrees down is 349.

270 degrees down is 331.

360 degrees down is 313.

Interestingly, 313 is the February 2nd, 2023 high, the first point on the rising trend channel.

Interestingly, August is 180 degrees opposition the SPX early February 2023 peak.

A roughly 10% decline played out from February 2 to February 13th, 2023.