By: Jeff Cooper
Hit and Run Trading Morning Report - September 28, 2023
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Trap Door Rebound
Wednesday’s reversal was an ambush, orchestrated, a Trap Door.
Why do I say that?
An hourly SPX from the Sept 21 Breakaway Gap shows the index knifed through the bottom of a Descending Wedge and immediately reversed back through it.
This is a Trap Door setup.
The trap was sprung just shy of satisfying a test of the 200 day moving average and our 4208 level of interest.
To recap, 4208 is a key 540 degrees down from the July 4607 high.
That’s how you spring a trap… just when it looked like 4200 and the 200 day moving average was the next stop on the Bear Express a few hours before the bell, you stage a reversal.
That kind of pattern doesn’t just happen. It’s planned.
The plan is obvious when you drill down to a 10 min revealing the Jackknife to the morning high.
The test of the opening high tied to a test of the declining 20 hour ma….something the morning pop failed to accomplish.
The test of the 20 day ma perpetuated a picture perfect 50% retrace of the day’s range.
In sum, while the market had become “oversold” in the short-term, declining 246 points in 9 sessions, and was entitled to a “bounce”, it doesn’t feel like the rebound was “natural”.
The net advances were negative in those 8 sessions before Wednesday.
Of course Friday is quarter-end and a weekly option expiration so there are a lot of cross-currents.
I suspect The Hand flipped the switch ABOVE the 200 day to rescue the baby--- not wanting to wait until it was breached.
After all you get more mileage, if a reversal occurs where it is not “expected”.
On Monday, the SPX struggled to put in an oversold bounce but on breadth of -281.
Wednesday the SPX finally closed up by a mere +.98, however with the first positive breadth in two weeks at +208.
The market kept us guessing until the final trade of the day whether we would close up or down.
That’s the way, The Hand likes it…to keep things equivocal.
However, I suspect we’ll see some upside continuation from here for one or two days.
At the very least we should clearly get trade above Wednesday’s high today---for the first time since September 21st,
A second higher daily high will produce my daily Minus One/Plus Two sell setup.
The last time the Daily Swing Chart turned up was September 20th on the open.
The SPX struck a high shortly after the open after scoring a Holy Grail sell signal (test of 20 day ma) and reversed leaving an outside down day.
The SPX left a Lizard buy signal yesterday. This is a new 10 day low with an open and close near session highs.
In other words, after the market opens it drops but recovers to close near session highs leaving a Bottoming Tail.
Upside follow-through targets the declining 50 hour moving average at 4323 which ties to 360 degrees down from the 4607 high at 4338,
The bulls have their work cut out for them if the SPX pushes to that 4320-40 region.
If markets rally into Thursday’s close we’ll be looking to increase our short exposure and further increase it if we get to 4330 ish before the weekend.