By: Jeff Cooper
Hit and Run Trading Morning Report - September 1, 2023
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The Magic Of the Market’s Hidden Pivots
“I work the seaways, the gale-swept seaways
Past shipwrecked daughters of wicked waters.”
-Sail On, Sailor, The Beach Boys
The leader is the QQQ (NDX).
Below is a weekly QQQ, but it is not a chart you see every day…or even any day.
It is a QQQ 3 Week Chart that depicts my swing methodology based on the 3 Week Chart.
The 3 Week Chart turns up with 3 consecutive higher weekly highs (NOT CLOSING HIGHS).
The 3 Week Chart turns down with 3 consecutive lower weekly lows (again, NOT CLOSING LOWS).
The Q’s left a Key Reversal Week at their all-time high on the week of 11/22/21.
The 3 Week Chart turned down on the week of 1/17.
This is the first horizontal red line coming down from the all-time high.
The first horizontal green line is the first turn back up of the 3 Week Chart (the week of 3/28/22).
Notice how that turn up ties to the level where the 3 Day Chart first turned down off the ATH.
The market has a memory.
My 3 Week Chart Method defines these “hidden pivots” that stretch out in time.
The 3 Day, 3 Month and 3 Hour Chart are also pivotal, but the Weekly Swing Chart determines the intermediate trend.
Following the week of 3/28/22, the 3 Week Chart immediately turned back down with 3 consecutive weekly lower lows on the week of 4/18/22.
This is the second horizontal red line.
Notice how that same region defined a high in late August 2022.
This followed a turn back of the 3 Week Chart on the week of 7/4/22.
The market held subsequent to that turn up telegraphing a push higher.
On the week of 9/2/22, the 3 Week Chart turned back down and following a knee jerk rally the market collapsed into the October low for the move, a low which holds to this day.
Interestingly the door to the plunge into the Oct 2022 low was opened by a large range outside bar ---the first outside down week since the all-time high in November 2021.
As above, so below.
Kicking off the 2023 rally phase was the turn up of the 3 Week Chart on the week of 1/16/23.
The important thing to notice is that the SPX rallied hard from that pivot, clearing with authority the prior turn down of the 3 Week Chart in September.
The market was telegraphing higher.
The purple horizontal line defines this Bull/Bear Maginot Line.
After broadcasting his intentions of going higher, Mr. Market was in position to install a key pivot on the first pullback.
In other words the first pullback after my Swing Method signals higher should be an unequivocal buy.
Allow me to explain.
That first pullback is/was defined by the first turndown of the 3 Week Chart following the January signal.
That first turndown in the context of a turn up of the trend occurred on the week of 3/6/23.
The next week, the week of 3/13/23, proved to be a significant low in the fullness of time.
But, that eventuality was announced with a large range outside up week (the week of 3/13/23).
The 3 Week Chart turned back up on the week of 3/27/23.
Importantly the SPX continued higher…and instead of pulling back, consolidated throughout April, tracing out a WEEKLY Bull Flag.
The Q’s erupted from that Bull Flag and never looked back…that is until the week of 8/14/23 when the QQQ 3 Week Chart turned down for the first time since the week of 3/6/23.
Importantly, the Q’s have rallied back above the “hidden pivot”---where the 3 Week Chart turned down.
This may be signaling a move to new highs (ala our 2007 analogue); however, the Q’s have backetested the low of the high week bar from July. This is often an inflection point.
As well, the Q’s are in my weekly Minus One/Plus Two sell position.
Simply put what this means is that the 3 Week Chart is pointing down (MINUS ONE).
When you get 2 consecutive weekly higher highs PLUS TWO) when the 3 Week Chart is pointing down it produces a Minus One/Plus Two Sell SETUP.
It must be said, setups are only setups. Their outcome is not irrevocable…carved in stone.
Follow-through is key.
That is why I always like to say: speculation is observation, pure and experiential; thinking isn’t necessary and often just gets us into trouble.
In sum, this next week is pivotal.
We are 180 days degrees from the key bullish turndown of the 3 Week Chart on the week of March 6th, 2023.
This whole time frame of late August/early September is an historic turning point as it is as walked through in recent reports.
It marks the pre-crash highs from 1929 and 1987 and the secondary high at the end of August 2000.
It was that week that I wrote: “the most speculative area of the market, the NAZ, is as vulnerable as the DJIA at the end of August in 1929.
The NAZ went on to lose over 80% into 2002, mirroring the loss in the DJIA from 1929 into 1932.
How did I make that forecast?
One of the factors allowing me to see the cycles at that time is that it is 71 years from the end of August 1929 to the end of August 2000.
On my Square of 9 Wheel, 71 vibrates off August 30th.
In this same way we forecast a major turning point in July 2023.
The Square of 9 Wheel and the my 3 Period Swing Method combined do a remarkable job of hearing the Music Of the Market and measuring its message.
If you can’t measure risk, how do you manage risk?