By: Jeff Cooper
Hit and Run Morning Stock Report: September 7th, 2022
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The Big One
Stocks tried to rally again on Tuesday, but, despite several fits and starts, failed.
That failure saw the market reverse sharply lower into the run-off.
Volume rose above its 10 day average.
Breadth was 2 to 1 to the downside.
It is unclear whether the powerful wave 3 of 3 down has started, but the intensity of the cycle we are on the precipice of its underscored by the number of down closes since the mid-August secondary high.
If wave 3 of 3 to the downside has not started, the alternative scenario is that a little wave 2 countertrend rally is on deck.
If so a dramatic wave 3 of 3 down will start between September 10 and 15th.
The SPX has complete a Head & Shoulders Top pattern from July through now giving a downside projection of 3500 region.
The NDX shows a Head & Shoulders Top pattern from July with a minimum downside projection of 10,400.
This is 1600 points below Tuesday’s close.
Tomorrow’s report will show these charts.
But today, I wanted to show the big picture cycle I have been looking at which has kept me on the bear side, the right side, since we wrote last October that the “market will get hit hard in January, kicking off a serious bear market.”
What are the two most historic lows in US stock market history?
You all know the first one, July 1932.
The second is March 1842.
You will notice that these are 90 years apart or what WD Gann called the Great Cycle.
This should get your attention. It got mine as 90 years from 1932 is 2022.
Below is a chart showing the decline from 1929 into July 1932.
Below is a monthly chart of US Securities showing the 1842 and 1932 lows.
Drilling down the further gives an exact time span of 1084 months.
What is important is that 1084 months from July 1932 = November 2022.
In mid-August, one could have argued that a Low-to-Low to High cycle would play out.
However the likelihood is we get a Low-to- low to Low cycle.
A technician by the name of George Lindsay promulgated a bottom- to -bottom to top count -- when you measure the time from a bottom in the market to another bottom and then you extend that time out in the future to predict a top.
However, I have seen that often it becomes a bottom-to-bottom to bottom.
Of course, this is not a “bet the farm deal”: it could be a bottom-to-bottom to nothing.
But I doubt it. Especially as the 1 year cycle from the NAZ high was November 2021.
As well, checking my Square of 9 Wheel shows that 1084 aligns with/points to November 18th.
Long time readers will remember that I often write that “every 40 years, or some, something BAD happens (in the economy and markets), and every 80 years or so, something REALLY BAD happens.
The basis for that statement is that after a depression, there are two periods of debt buildup that follow.
From the depths of the Great Depression in 1933, you had debt build up into 1973 and then you had the worst recession since the Great Depression. The DJIA reached the 1000 barrier for the first time in 1955 and it provided a 17 year barrier for the DJIA.
In reality, these two periods are separated by a ‘digestion period’ that is called the 'Plateau Period' in long wave cycle analysis.
That period lasts for about 10 years.
This digestion period referred to is between the two 40 year periods of debt buildup.
Again the first period ran from the 1933 depression low (when the banks were closed) to the 1973 peak…and just happened to be 40 years.
During the Plateau Perid, the ‘digested’ I refer to is the fallout from the 40 years of debt buildup. It is the “exhale.”
In 1982 we were already in another nasty recession. This one had the news media suggesting that another depression was on the way.
If we start the next 40 years of debt buildup at the 1982 low for the stock market, you can see where we are now-- 40 years later.
You can clearly see why these two 40 year periods of debt build up are so important.
“Every 40 years or so, something BAD happens; then there is a digestion period of about 10 years; and then there is a second 40 year period of debt buildup that leads to something REALLY BAD.
If we add 40 +10 + 40 we get Gann’s Great 90 year cycle.
In sum, over the summer I’ve presented various targets on the SPX from 3500 to 3100 region down to 2500 and ultimately even 1550 region.
If I am correct about a plunge this fall, anyone of these could play out.
I know they sound extreme, but, then, most thought I was crazy when we wrote on March 23, 2020 (the day of the low with the SPX having struck a low of 2192) that “the structure of the SPX and cycles suggest a rip to 4000 plus.”