By: Jeff Cooper

Hit and Run Trading Morning Report - August 23, 2023

Minus One/Plus Two…A Leather Jacket and A Moose

The SPX popped up producing the first daily Minus One/Plus Two sell setup since the July high.

This is because the 3 Day Chart is pointing down (Minus One) and we have 2 consecutive higher daily highs (not closing but intraday basis) for the Plus Two part of my Swing Method.

The pop up open led to another intraday rollover.

Markets remain weak.

94% of NDX stocks are below their 200 day moving average.

180 degrees down from the July 4607 high is 4471 which would be a Pinocchio of the 50 day ma.

That’s what happened in 1987.

This Friday will market the August 25th anniversary of the 1987 pre-crash peak… 6 squared years ago.

That would be an interesting time to see a backtest of the 50 day line which currently resides at 445-4450.

The SPX reversed yesterday as it failed to reclaim 4405 which we flagged as 90 degrees up from Friday’s low.

Breadth was strongly negative as NYSE breadth has been positive only 4 sessions in the last 15.

I am told the market is the most oversold it’s been this year on Friday and the most oversold it’s been since the March 2020 low.

But a market that doesn’t rally from deeply oversold conditions often crashes.

90 degrees up from Friday’s low is 4405.

The index gapped open at 4415 and quickly reversed closing well below 4405 at 4387.

This morning it looks like another rally attempt to test the 4405 region is playing out.

If the SPX gets traction over 4405 this week it may push to the aforesaid 4471 region.

There are two catalysts on deck that could trigger that potential:

NVDA earnings tonight

Powell in Jackson Hole Friday

Yesterday morning we flagged a potential square-out at 481 on NVDA as it ramped pre-market to open at 481.35,

The high of the day shortly after the open was 481.87.

You can’t make this stuff up.

NVDA closed near session lows. In so doing it left a Gilligan sell signal---a gap to a new 60 day high with a close at/near session lows.

90 degrees down from 481 is 458/459.

Notice the consolidation at that region after the drop.

180 degrees down from 481 is 438…and Phil D Gap.

Is it possible NVDA kisses Phil today…be it before or after earnings?

Notice that 438 also ties to the backtest of a Ghost Line (blue)

This is how we put the pieces together using the squares and the patterns, the trend lines and channels to map the play.

Despite strength in the dollar yesterday, metals rallied.

too early to mean anything; however, follow thru in GDXJ could lead to a breakout.

1)      The major swing high on April 13 is square 33, the recent low.

2)      Notice the rally off the March low was elicited from an Undercut.

Upside follow thru that reclaims 34 could be argued to be an Undercut & Rally pattern of the late June low.

3)      The 35 strike is a key level and of course we get Powell on Friday’s Opex.

35 ties to a declining trend line from the July peak and the declining 20 day moving average.

4)      IF GDXJ can eclipse 35 and get traction the motherlode is 36.50

Why? This would trigger an Angular Rule Of 4 Breakout. Coming off fresh five month lows the Street is not positioned for a upside continuation… which, reflexively, is exactly why it may play out.

Fast moves come from false moves and we clearly got a fast move to the downside from the false breakout in July. But turnaround is fair play and recapturing the horizontal black line could a sharp advance mirroring the pattern from March. Notice the persistency of that rally with no more than 1 to 2 day turndowns in the dailies.

Lastly late August/early September have been historic turning points in gold/silver.

For example a major all-time high at that time occurred in late August 2011.

That’s a Fibonacci 144 months ago.

A turning point is on the table….and it ain’t a high.