By: Jeff Cooper
Hit and Run Trading Morning Report - August 31, 2023
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As Easy As A B C?
An hourly SPX from the July 27th peak shows a rally off the August 18th low was rejected the first time up to a declining tops line on August 24th.
The index gapped open on August 24th and reversed with authority, leaving a large range outside down day (LROD).
The reversal mirrored the LROD from the July 27th peak.
However, the 2nd mouse got the bull cheese on the second attempt to convert the declining tops line on August 29th.
Notice the SEVEN hour consolidation below the declining black tops line prior to the rocket thru it on Aug 29th.
The breakout saw the SPX reclaim its 50 day line and eclipse the high of the August 24th downside reversal. In so doing, a Keyser Soze or a Reversal of a Reversal was triggered.
The dual positive technicals---the recapture of the 50 dma and the Keyser Soze---swamped the bears.
Be that as it may, not all breakouts are created equal.
The price action since the August 18th low may be an A B C retrace of the decline since the July 27th Key Reversal Day.
If the next] pullback holds the low 4400 region and turns back up, then arguably a bullish complexion prevails and the potential would be for a POSSIBLE echo of the pattern in 2007 when a July peak saw a sharp break into August followed by a new high in early October.
As you can see a pullback to the low 4400 region ties to a possible backtest of the aforesaid black tops line and the 50 hour moving average.
Breakage through both is a blaring bearish siren which opens the door to the 4000 region this fall.
The 2007 is one analogue we have shown, but as you know there are three others that warrant close attention.
These are 1987, 1929 and 2000.
In each instance, late August/early September was a critical reversal.
In 1987 and 1929, those turning points perpetuated October crashes.
The year 2000 was a secondary high to that year's March high and marked the start of a 2 year bear market.
What bears attention is if the market is carving out a secondary high here to the July high, it is also within the context of a secondary to the January 2022 all-tine high.
In other words this could be a major test of a test failure going into the seasonally nasty months of September and October.
In sum, if the SPX is tracing out an A B C upward correction it is a Wave 2 following a Wave 1 down from July 27th.
That puts a potential 3rd of a 3rd wave dramatic decline on the table right into September’s crosshairs.
Indeed counting from the July 27th SPX peak, the Gann Panic Cycle indicates no more strength after September 4th.
I am not an astrologer, I just play one on the internet, but….
Jupiter goes retrograde September 4, 2023.
Jupiter went retrograde August 19th, 1987.
Jupiter went retrograde October 5th, 1929
Jupiter went retro September 29th, 2000
Of course September 3 is the anniversary of the 1929 peak and August 25th is the anniversary of the 1987 peak.
The Gann Panic Cycle hits 1 month earlier this year than in 1929 and 1987 (if it is going to hit) because we peaked in July.
Mid-September is in the cross-hairs of the Gann Panic Cycle.
As it happens, mid-September is also 180 degrees straight across and opposite the important March 13, 2023 low.
90 degrees later was mid-June which marked a short-term high for a 120 point 6 day sell-off.
This underscores the idea of a mid-September turning point.
It must be said that the NDX peaked ahead of the SPX. It topped on July 19 this year, mirroring the high day in 2007.
So any reversal from this point back below the 50 day moving average and especially the August 24th low warrants caution.