By: Jeff Cooper
Hit and Run Trading Morning Report - August 14, 2023
Need help? Check out the Hit and Run Success Guide.
“Signals curling on an open plain, rolling down the track again
See the sky about to rain.”
-Neil Young, See The Sky About To Rain
“So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession.”
“We have no indication that the major, more diversified institutions are facing any funding pressure. In fact, some of them report what we classically see in a context like this, which is that money is flowing to them.”
Grab an umbrella.
We just had the fastest rate cycle in history.
Interest rates impact the economy with a 9 to 12 month lag.
The Street has shelved their recession calls just as the lag effects hit, ie NOW.
"Through my study of the Bible, I have determined the major and minor time factors which repeat in the history of nations, men and markets.”
-W.D. Gann, The Tunnel Thru The Air
In late May, in the Hit and Run Report, we outlined the strong potential for a significant market top in mid-July.
NDX has been the leader and it topped on July 19th.
Below we will recap some of the factors relating to that forecast but let me start by saying that, importantly, July 19th is the 16th anniversary (4 squared years) of the 2007 primary/orthodox high prior to the Great Financial Crisis. See the quotes above.
WD Gann said markets will often reach extreme high or low (or make other significant tops and bottoms) on or about the same day of the month in different years.
The Panic Of October 1907 started on October 14th (lasting thru November 6th)
The October 1917 crash
The October 24th and October 28th, 1929 Great Crashes
On October 8, 1974 the bear died making the first low of a W bottom (the 2nd low of the W Bottom occurred on December 9th).
The October 1987 Black Monday Crash
The October 1997 Asian currency crisis
October 9th, 2007 market (secondary) peak
October 10th, 2002 bear market low.
July 13, 1990, top, prior to plunge into Oct
To mention a few.
And of course the July 19, 2007 top. The primary high of that cycle.
On July 19th, 2023, the NDX left a signal reversal bar, making a new high for the move and closing at/near session lows.
The next day we got a Breakaway Gap to the downside.
Notably, the NDX turned its 3 Day Chart down directly off the high--- a possible SOB (Sign of the Bear).
The index bounced which is the normal expectation after turning the 3 Day Chart down, but the best it could muster is one day turn ups of the dailies…not even 2 consecutive higher daily intraday highs.
Then on August 2nd we had a validation of the Sign Of the Bear---we had a Breakaway Gap on the NDX with a close below the 20 day moving average for a Holy Grail Failure AND importantly trade below the prior circled 3 Day Chart low from July 24th (magenta arrow).
All these signals are dog whistles for the Hit and Run tape reading methods opening the door to lower prices.
And lower prices we got : On August 4th, the NDX rolled over after a rally attempt from a backtest of the 20 day moving average (Holy Grail sell signal)…leaving an outside down day in its wake.
Moreover, last week the NDX offset the open gap and the little double tops from the July 12 upthrust (black ellipses and black square).
In so doing the NDX left 3 closes below its 50 day moving average as well as a Friday weekly close below the 50 day line.
In sum, the back of the runaway move from March 13th has been broken.
That does not mean the NDX cannot rally…even to a somewhat higher high prior to an unequivocal downtrend.
In sum, the back of the runaway move has been broken and that any rally to a double top or even higher high will be as false rally just as was the case in 2007 after the Flush Of the Fifty (the 50 day moving average) into the top of tops in October 2007---the secondary peak prior to the Great Financial Crisis
Apart from the July 13, 1990 and July 19, 2007 anniversary dates, let’s recap some of the Time/Price synchronicities that have been on our radar and benefitted Hit and Run members since May:
1) The 1929 melt-up and crash was 94 years ago.
On the Square of 9 Wheel, 94 “points to July 13th…just 6 days from the July 19th NDX peak.
2) Since we are looking at 1929, it is interesting that the DJIA pre-crash high that year was 386.
On the Square of 9 Wheel, 386 aligns with July 19th.
You can’t make this stuff up
Interestingly the recent QQQ high was 388 which ties to the 386 DJIA high from 1929.
The QQQ July 388 peak is 90 degrees down from the QQQ all time high of 409 on November 22, 2021.
The above weekly QQQ shows a close below the 90 degree zone down from the recent 388 high on the important Friday weekly closing basis.
This opens the door to the next decrement of 90 degrees down at 350 which ties to the bottom rail of trend channel red from the March low as well as the 20 week moving average.
As such 350 QQQ is a critical pivot for the bull case. Breakage below 350 implies a drop to 331 and a trend line (black) governing the trend for 2023.
Notice that a full round trip of the momentum move since May at 313 ties to the 50 week moving average.
Interestingly 313 squares-out with October 9th.
Can the Q’s drop to 313 into October?
October is important as it is the one year cycle from the October 13th, 2022 low.
As well, speaking of anniversary dates, October 9-11 ties to the bear market low in 2002 and the secondary high in October 2007.
On August 2nd I penned “Fibonacci Air Pocket” pointing to the August air pocket in 2011.
We have another anniversary in August this week…that of the LTCM crisis.
Chinese real estate is in trouble as is CRE in the U.S. and Moody’s and Fitch have cut the outlook for U.S. banks, credit conditions and fiscal management.
A credit storm is coming.
WD Gann employed a concept called “overbalancing in time and price.”
A monthly SPX from 2009 shows the decline in 2022 overbalance in time any prior correction.
As well it also overbalanced any prior price correction.
The largest prior price decline was the 1200 points from February to March 2020---the Covid Crash.
The decline off the January 4th, 2022 SPX high was 1300 points.
This fact alone suggests the SPX has carved out an Intermediate Wave 2 countertrend rally into July 2023.
It has never been a new bull market.
Last week the SPX struck our 4450 projection made in July.
In so doing it tested its 50 day line for the first time since May and satisfied Phil D Gap from July 12…testing the little June double tops in the process.
If it were that simple everyone would be rich.
It would not be surprising to see a rally attempt following an undercut of the 50 day moving average as early as today.
Following which my expectation is for a Flush Of The Fifty.
Then there are two scenarios going into October which we’ll be mapping in this space and on the Hit and Run Private Twitter Feed.
Let’s imagine the above chart was not a monthly but a daily.
In that case one could visualize how the vertical move into the January 2022 ATH mirrors that of the blow-off into the September 1929 top.
In this fractal analogue then the 2022 plunge on the monthlies mirrors the 1929 crash on the dailies.
After the crash in 1929 bottomed, there was a countertrend rally into April 1930.
In this fractal analogue that would be the advance from October 2022 to July 2023.
What followed after the 1930 secondary high was a slow-motion train wreck into JULY 1932.
More synchronicity with July.
The Bull/Bear Maginot Line is the 4200 region, the rising purple trend line.
It will be pouring if 4200 breaks.
Tomorrow’s report will analyze where the market is headed and when it will get there.
Clouds are curling. It’s starting to rain.