By: Jeff Cooper
Hit and Run Trading Morning Report - July 28, 2023
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Elvis Has Left The Building
“We’re caught in a trap, I can’t walk out.”
-Suspicious Minds, Elvis Presley
“The SPX broke out of a tops line for 2023 this week but reversed having struck a larger intersection of trend channels.
Breakage below the 2023 top's line around 4525 opens the door to 4400 which is the rising bottom's line from March.
Whether or not indices can push to another new high here first before we get the downside structure to gauge is not my concern at this time.”
The above is from Monday’s Hit and Run Report with the following chart.
The SPX did an encore after the July 19th high…on the anniversary of the July 2007 primary closing high.
On Wednesday I went on to say: “When the SPX declines through 4450 the bear will be growling."
4450 is the Breakaway Gap from the June 16/June 30th little double tops.
This would confirm a Gann M A Top.
The two peaks are the M being June 16 and 30th.
The ‘A’ being July 19/25th.
Thursday we noted that using the number grid as YEARS versus price that the year 2023 squares out with
A price of 4610.
Notice that 2023 also squares out with August 11th.
The year 1929 squares late August…the pre-crash peak region that year.
The year 1987 squares October 29th, the day of the big one in 1929.
You can’t make this stuff up.
The Wheel Of Time and Price is the best anticipatory trading tool on the planet.
And isn’t all trading about anticipating the anticipators?
The bottom line is that as offered above 2023 squares out with 4610 and points to August 11. This ties to the 2 week analogue we’ve been using of the January 26th, 2018 top that marked Volumageddon…. a 10% crash in two weeks.
Following the cascade, the SPX bounced hard to a lower high before testing the low.
I can’t help but wonder if The Pattern from 2018 is a fractal of January 2022 to July/August 2023.
The Pattern is a classic A B C: A down, B up, C down.
In this instance the decline from the January 2022 SPX all-time high down to the October 2022 low would be the A Wave with the subsequent advance carving out a B Wave corrective rally.
What follows would be a vicious C Wave decline…the first leg of which would be marked by an air pocket mirroring
The crash from late January 2018 into February 9th, 2018.
That kicked off a larger C Wave that ultimately culminated with the Christmas Crash in 2018.
Importantly the SPX struck a new high in late August 2018 thru late September 2018.
It was a Trap Door. A false new high that caught bulls in a trap.
Fast moves come from false moves and that was certainly the case in Q4 2018 as the SPX plunged 600 points or 20% in 3 months.
For a reference point, a similar 20% drop from here would take the SPX to the 3700 region….below the 3809 March 2023 low. Basically back to the point of origin as is the case with most blow-offs.
Above I mention the July 2007 primary high.
That was a Trap Door, a false new high above the 2000 top.
It was followed by a waterfall decline into AUGUST 16th.
A new advance played out eking out another nominal new high above the July 2007 high.
On October 11, 2007, the SPX left a large range Key Reversal day.
The second mouse (following the July reversal) got the cheese for the bears.
The Fed’s final rate rise in 2000 was on May 16th. The Bull had already left the building.
The market bottomed initially in October 2002 and then in March 2003 nearly 3 years later.
In late AUGUST 2000, days before the 71st anniversary of the 1929 top, I wrote, “the most speculative area of the market today, the NDX, is as vulnerable as the heart and soul of speculation, the DJIA, was in late August 1929.”
The NDX went on to lose 83%, mirroring the DJIA 3 year wipeout into 1932.
One of the factors in my assessment of the risk at that time was that on my Square of 9 Wheel, the number 71 is opposition late August.
Similarly, we are 94 years from 1929 currently.
94 vibrates/points to July 16th. The NDX struck a high on July 19th, 2023 followed by a Breakaway Gap.
On Thursday the NDX gapped up to meet Phil D Gap from July 20 and reversed with authority.
Breakage just below Thursday’s close breaks key short-term support which also triggers a Grail Fail (Holy Grail failure of the 20 day ma to act as support): the Bull will have left the building.
And it’s been a big arena built over a dozen years with many magical mystery comebacks -- a construct that is longer than prior bull trends and entails a greater multiple price gain than prior bulls including 1929.
The question is then was late 2021 a Super Cycle Peak?
The length and breadth of the rebound since last October has disabused most all market participants of the narrative of a bear market. But that is precisely what one would expect of a rebound of a Super Cycle degree.
The bigger the top, the bigger the drop.
The bigger the rebound within a bear, the larger the cycle.
Like Elvis, the audience was left clamoring for more after he’d left the building.
It must be said, The Matador also wears a cape.
Tomorrow’s report will look at the primary technical thesis of where we are in the big picture and where we’re headed and when we should get there… and the alternate scenario.