By: Jeff Cooper
Hit and Run Trading Morning Report - August 28, 2023
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When Cycles Point To Panic
Bear markets don’t usually end with a whimper like last October. They usually end with a bang…. a crescendo of capitulation and fear.
Credit and liquidity concerns usually go hand in hand with such selling crescendo’s.
These concerns are ripe to become full-blown going into this seasonally bearish period in the fall and a period of time in 2024 which we will walk through.
Under the surface, danger has been lurking within the U.S banking system.
On August 22, the S&P Global Rating Agency downgraded several regional banks and lower its outlook for many others citing loan issues and liquidity constraints.
Rating agency Fitch warned that multiple banks will soon be downgraded for loan and credit issues.
Non-interest bearing deposits have plunged 23% over the past year and are being replaced by higher interest paying Certificates Of Deposits.
Non-performing assets and delinquencies are rising and are about to expand.
Banks willingness to make consumer loans is falling off a cliff.
The Leading Economic Indicators (LEI) have declined for 16 consecutive months.
A squall is about to develop into a hurricane.
A lamb has been sleeping next to a lion: investors have been lured into thinking a new bull market started because the SPX rallied an arbitrary 20% off last October’s lows.
Going back on the 90 year Super Cycle shows the facts are that in the bear market following the 1929 top there were five rallies of more than 20%.
They came AFTER a 48% rebound on the heels of the 1929 crash before the bear market resumed.
The market resolved with a DJIA plunge of over 80% from the rebound high into the JULY 1932 low.
The current rebound has been weaker than the near 50% rebound into April 1930.
If July marked the top of the rebound it was apx 33% on the SPY.
Typically geometric relationships.
So the Bear Market started with a massive crash 1n 1929 and then in keeping with the Principle of Alternation was a slow-motion train crash from April 1930 to July 1932.
When each new plunge from 1930 to 1932 failed to bring about the drama of the October 1929 debacle, hope was instilled at each instance.
If a Super Cycle Wave Top occurred in late 2021/early 2022 then it started with a slow-motion train crash---2022.
That means according to the Principle of Alternation, we may get a horrendous crash before the end of 2023 or in the second half of 2024. Or two.
As a friend and fellow trader pointed out recently, every 84 years give or take a few on either side, the US has a paradigm shift that is more than the 4th turning.
This is the Uranus cycle… explosive and unexpected is the signature.
The year 2025 minus 84 years is the US entry into WW2.
Another 84 years back give or take is kindling for the American Civil War.
Another 84 years back is the American Revolutionary War.
Another 84 years back in 1692 was the Salem Witch Trials.
Another 84 years back was Jamestown.
I am not an astrologer but cycles are cycles.
Interestingly, Uranus goes retrograde today.
As long time readers know, one of the factors allowing me to make the forecast in September 2021 that, “the market will get hit hard in January 2022 leading to a nasty bear market” was that 2022 is 49 years from the January 1973 spike high that preceded a vicious bear market into October 1974.
That puts ground zero at 2024.
Why 49 years? Because WD Gann realized that 7 is the number of time and that 7 squared days is his Panic Zone.
Using a Biblical day for a year that makes 7 squared years important.
The Panic Cycle Year precedes the 50 year cycle.
What does the Bible say about the 50 year cycle?
Every 50 years is an economic, cultural, environmental and communal reset, when the land and the people rest.”
2024 is 50 years from the major 1974 low, the biggest low since 1932.
The market based for 8 years and exploded in 1982---50 years from the 1932 Great Depression low.
There is a likelihood that 2024 could be as significant as 1932 and 1982.
That’s a big deal. Something that the vast majority of market participants do not have on their radar.
What’s interesting is that 2024 is an election year.
Given the aforesaid 84 year war cycles, the election is likely to be a doozy.
It’s already filled with friction. This may be the tip of the iceberg.
May 2024 will be a major cycle as it is 24 natural years (24 hours/24 years) from the major Spring 2000 peak.
It is significant that on my Square of 9 Wheel, using the number grid as years, the year 2024 is 180 degrees straight across and opposite May 7th/8th. The year 2024 vibrates off May 7th/8th.
This is precisely 180 degrees opposition the 2024 election.
2024 also brings elections in the EU and Russia.
At this point the danger is that no one will believe the 2024 elections.
Will the election even happen given the cycles?
111 years prior to 2024 was 1913.
This is the year the Fed was created and the year the new President Wilson brought in the Income Tax.
Hence it was a major turning point economically in shaping the future of the US.
This 6 months produces a lot of time for absolute chaos in the global economy.
On the sq of 9 wheel 111 is square November 7th.
The 2024 election is November 5th.
As well 111 is square May 7th.
Given these cycles there is a strong likelihood the high for 2023 has been seen.
The SPX dropped out of a Rising Wedge immediately following a Key Reversal Day on July 27th.
On Thursday the index gapped up and reversed with authority after testing a Bowtie of its 20/50 day moving averages leaving the largest range of the year.
It is possible that Thursday’s reversal was a wave 2 high of Intermediate wave 3 down.
If so, a dramatic wave 3 of 3 decline is on deck.
On a near term basis counting from our forecast July 19th NDX top (anniversary of 2007 primary high)
And the July 27th SPX high, there is a potential Gann Panic Window in September.