By: Jeff Cooper

Hit and Run Trading Morning Report - August 1, 2023

NR 7 Day

Yesterday the SPX and NDX left NR 7 Days.

These are the narrowest day in 7 days.

These contractions in volatility are typically followed by expansions in volatility within the next few days.

This is in the context of the DJIA having its best winning streak since 1987.

As well, the SPX hasn’t seen a 1% move in months.

The last 10 minutes may be a precursor to an overdue bout of volatility.

This is blatant manipulation, whether it was ODTE call options that went from 50 cents to $10 into the close or month-end window dressing which is not permitted.

Monday was about to show a reversal day until the last 10 minutes when the SPX spiked 15 points from down 8 points to close up 7 on the day.

Monday’s NR 7 day follows the Key Reversal from Thursday and the Weekly Sell signal on the SPX/VIX pattern shown yesterday shown again below.

Notice the red arrows in every instance since the January 2022 all-time high has coincided with a pullback of some degree.

It has been 3 weeks since the last signal.

Is it a sign of strength or are we overdue?

The more the rubber band is stretched, the more price will snap back in the face of the bull.

Obviously, higher gas prices won’t have any effect on the economy and spending habits of resilient consumers.

Nor will significantly higher interest rates on the same consumers who’ve maxed out their credit cards… just as student loan payments return this fall.

Along with the market, GDXJ is at an important inflection point.

A daily GDXJ shows a potential triple Triangle Pendulum.

GDXJ broke below a triangle on June 20th, then broke above the triangle on 7/18, then broke the bottom of the triangle again with authority on July 27th.

Follow-through from Monday’s strong rally reclaims the triangle.

Notice the Ghost Line from the big September low that GDXJ attacked yesterday.

It would not be surprising for GDXJ to pull back the rubber band from here before exploding thru this important pivot …if that is the agenda.

Importantly, GDXJ has offset the knife down on July 27th.

It should find support on a pullback at the little rising red trend line.

Notice that GDXJ broke above a declining trend line from the  important mid-April high on July 18th.

Reclaiming the triangle is important because it suggests that the second mouse will get the gold cheese for the bulls.

In so doing, GDXY would be in a 3rd wave up.

That implies a drive to the April 44 high putting GDXJ in position to attack a weekly declining trend line from May 2021

Residing at 46.

The metals love August so it looks like there is a setup for GDXJ to rally to the 45 strike in August.