By: Jeff Cooper

Hit and Run Trading Morning Report - August 21, 2023

Market Validating Forecast of July Top and Drop

“Keep your eyes on the road
Your hand upon the Wheel.”
-The Doors

I’ve been in the markets ever since a stint with the storied Drexel Burnham office in Beverly Hills in 1982.

From there I went on work with my father’s private hedge fund.

After Black Monday in 1987 when I realized the same crash pattern had played out from the 1929 crash I knew there was something that wasn’t random that ordered markets.

This led me to studying legendary market operator W.D. Gann.

“I soon began to note the periodical recurrence of the rise and fall in stocks and commodities. This led me to conclude that natural law was the basis of market movements. I then decided to devote ten years of my life to the study of natural law as applicable to the speculative markets and to devote my best energies toward making speculation a profitable profession.”
-W.D. Gann

The greatest breakthrough came for me with the Square of 9 Wheel which showed me how to make forecasts integrating Time and Price.

There are hundreds of indicators that attempt to decipher the markets.

There is only one that tells you when and where it’s going…

The Square of 9 Wheel Of Time and Price.

Gann’s theory can be described as the study of time, price and pattern relationships and how these relationships affect the market.

The important thing to understand is that while each factor---time, price and pattern have their own characteristics, it is their overlapping and synchronous quality that occurs at major turning points.

Succinctly, Time points to Price, Price points to Time.

Gann alluded to the idea that Time and Price were one in the same when they converged or squared-out which is why a change in trend occurs when time and price meet or balance out.

As Gann wrote, “All important highs and lows are harmonically related.”

This is sometimes simple, sometimes more complex.

Allow me to explain by showing you some examples.

Above I mentioned 1982 which happens to have marked a major bull market low at 102 SPX on August 9. The low close was August 13th…a Friday the 13h.

That was a Time/Price square-out as 101 is 180 degrees straight across and opposite August 9th.

40 years later is 2022.
when the SPX topped on January 4th.

On the Square of 9 the number 40 is square late December 24th within a week of the January 4th all-time high.

As Gann stated, “Key off the weekly charts when determining the trend.”

We have a 20 year cycle from low to low to high…1982 to 2002 to 2022.

A 40 year cycle of debt build up that will be unwound.

But where are we NOW.

Since May 2023 I have been flagging mid to late July as a major pivot.

If the market ran up into this timeframe there was a strong likelihood of a top.

Why did I make this prediction?

The DJIA high in 1929 was 386.

On the Square of 9 the number 386 aligns with/vibrates off July 19th.
The NDX topped on July 19th, 2023 at 388.

There was reason to believe in some synchronicity with July and the 1929 high because 1929 was 94 years ago and 94 vibrates off July 13th.

July 19th was also the primary high in 2007.

It is 78 years from 1929 to 2007.

78 squares the first week of September, the all-time high in 1929.

So we have several examples of significant tops and downdrafts vibrating off the Shock Wave from 1929.

July 13th was a pre-crash high in 1990. That was 33 years ago.

33 vibrates/vectors July 8th.

I realize this must sound like voodoo to many of you, but Hit and Run members have blown the doors off in August.

How about the following example.

I’ve already mentioned the uncanny analogue of the 1929 and 1987 crashes.

It is 58 years from 1929 to 1987.

On the Square of 9 the number 58 squares-out with October 29th, the historic crash day in 1929.

You can’t make this stuff up.

The synergies between the two years are remarkable.

But wait, there’s more:

If I use the number grid on the square of 9 as years and anchor ‘zero’ to the year 1987, it squares October 29th, the crash day in 1929.

If I anchor zero to the 386 peak in 1929 it squares out with October 19th, the crash day in 1987.

So the price high in 1929 points to the crash day in 1987 and the year 1987 squares out with the crash day in 1929.

Drilling down to 1987 shows that the high of the year 338 SPX is 180 degrees straight across the September 3 high in 1929.

If I anchor the Wheel to the year 1929, it squares today, August 21st.

1987 was 36 years ago (6 squared years, a true square, a cube). 36 squares August 21st, today.

Now I don’t think today the markets going to crash necessarily.

The structure suggests a rally ATTEMPT.

The SPX has satisfied a 360 degree point decline from the July 4607 high.

As well breadth was nicely positive on Friday.

360 degrees down is 4339. Friday the SPX struck a low of 4336. A bulls eye.

But if we break below Friday’s low with momentum, get out of Dodge.

As well, importantly, Friday the SPX tested the Bear Bottoms Line.

I connected the October 2022 low with the May pre-liftoff low and the index struck it on Friday.

A bounce is the expectation.

Additionally, the SPX pulled back to test the prior Rule Of 4 Breakout region (black).

If we rally, Hit and Run has identified in a special update for subscribers today precisely the region and the time frame where a counter-trend rally will rollover leading to a waterfall decline

So today is an important pivot for several reasons:

1)      August 21 squares the 480/481 SPY all-time high.

2)      480/481 is opposite November 22nd,  the NDX all-time high in 2021

3)      August 21/22 is square November 22nd.

In sum, the SPX  satisfied a 360 degree decline on Friday.

Today squares out with the all-time high (481 =4818).

The normal expectation is for a rally attempt, but when the normal expectation doesn’t play out the result is often a fast move.

What this means however is that when the SPX closes below this August 21sth square-out,

The market will see accelerated momentum.

Surprises happen in the direction of the trend.

The angle of attack to the downside is persistent: since the July high, the SPX has closed only once above a prior day’s high.

The SPX 3 Week Chart turned down the week before last and last week saw accelerated downside momentum.

This is the Sign Of The Bear.

If we rally from this inflection point it will set up a fall into the Gann Panic Window.