By: Jeff Cooper

Hit and Run Morning Stock Report: January 3rd, 2023

To Beat the Market You Need An Edge

“The soul never thinks without an image.” Aristotle

“Buy the Dip” was the best investment advice since 1982…

If you had the correct timing and pattern recognition to buy the bear low in October 2002 (which we called the week of),  to sell the October 2007 top (which Hit and Run nailed), and to buy the March 6th, 2009 low which was pinpointed by my Square of 9 Wheel as seen in the image below.

(March 6 is square 666/667 the bear market low on March 6th, 2009)

This is my edge.

As well, the Square of 9 Time/Price Calculator identified the exact low day: March 23, 2020, of the Covid Crash.

(purple 393 in the 3rd number grid for 3393 (the pre-crash high) points to March 23rd, blue, the crash low)

At that time, we wrote, “my expectation is for the SPX to run up to 4000 plus.”

It exceeded my expectations.

Where are we now?

The vast majority of market participants are licking their wounds from 2022 and expecting the worst.

Most players are cautiously waiting for the recession shoe to drop and for the Fed to make another policy mistake.

December 22, the Conference Board, “We project a US recession is likely to start around the beginning of 2022 and last through mid-year.”

The stock market “traditionally” launches a powerful advance signaling a new bull market about three months before the end of a recession.

IF the Conference Board is correct (a big IF) the stock market should see upside momentum approximately three months before mid-year or April/May.

Why a big IF? Because for the above to occur we need 1) to have a recession and 2) it needs to end by mid-year. These are big presumptions.

One thing we can expect is that IF the above scenario should play out, any upside momentum will be widely greeted with skepticism.

In other words, IF we see the inklings of a Fed Pivot, instead of jumping up and down, The Street will be declaring that the Fed will be pushing on a string.

That fits with the idea that a burgeoning bull needs to climb a wall of worry.

We should also hear concern about the economy’s ability to recover quickly from the recession.

Strong economic and earnings recoveries aren’t usually taken for granted early in bull markets.

Cyclically, this fits the 18-month (+ or -) cycle from the internal November 2021 high (NAZ).

However, what if this is not a cyclical bear market, but a secular bear?

In that case, there is a strong likelihood that even if a low is hit after 18 to 24 months that the market remains under pressure until 2026-2027 or 5 years from high.

Even a nominal new high at that time could be a fake-out ala the false new high in October 2007 (above the 2000 peak).

The T Rex in the ointment is that this is the most anticipated recession in history.

So either it turns out we’ve been in one already or it will prove to be much deeper or last longer.

Recent polls show most Americans are expecting the worst in 2023.

Few if any were prepared, as Hit and Run members were, for a debacle in 2022.

In October 2021, we said, “The market will get hit hard in January kicking off a vicious bear market.”

The bear took the scenic route lower; It didn’t take the direct road to perdition.

For example, let’s look at my December Low Indicator using the SPX.

This is triggered when the December low is violated in January.

The December 2021 low was 4495.12.

It snapped on January 20th eliciting a 272 point waterfall decline in THREE days.

A great put buying opportunity.

From there, as if so often the case after a signal is flashed, a knee-jerk counter trend rally played out that backtested the key 4495-4500 dual resistance (December Low Indicator sell pivot and 4500 round number psychological level).

After that early February knee-jerk rally, the SPX carved out THREE drives to a closing low…in early March.

From there another countertrend rally played out that tested/Pinocchioed the early February pivot high.

That ‘test failure’ ushered in the sharpest and longest decline of 2022---a 1000 point near 90 day/degree drop, from 4637 on March 29th to 3637 on June 17th.

That sharpest/longest decline of the year (consistent with a Wave 3 decline) perpetuated the largest/longest rally of the year, 688 points,  from the June 3637 low to 4325 on August 16th…kissing the 200-day moving average on the nose before collapsing.

That rally was virtually a Fibonacci 61.8% of the 1000-point decline.
Markets seek symmetry.

Combined with the backtest of the 200-day moving average, it offered a powerful short opportunity.

Another steep drop played out from the August peak with the SPX shedding 834 points into October where a large range Key Reversal Day was installed.

The October low undercut the key June low igniting another rally to the 200 day moving average.

The close of the October Key Reversal Day is 3670. This ties to the low close at the important June low.

This is going to be an important region for Mr. Market in 2023.

Underpinning the significance of this level is that on my Square of 9 Wheel, 371 (3700-3710) is on the Cardinal Cross. It is straight across and opposite March 21st, the Spring Equinox.

The Cardinal Cross is the numbers that are due north/south and east/west (The Cardinal Cross).

They align with the Spring Equinox (Gann’s Zero Point to measure time and price) and the Autumnal Equinox, and the Summer and Winter Solstices.

W D Gann considered the numbers on this axis “natural support and resistance”

Currently, the SPX looks like it is in a weak position, coiled in a Bear Flag below a broken rising channel.

Downside follow-through will likely see the aforesaid 3700 region tested.

In so doing, the SPX could install the right shoulder of an inverse Head & Shoulders.

Alternatively, a failed potential right shoulder will trigger a Blade Runner sell signal (broken right shoulder) likely setting up immediate a new leg down in the bear market. Why immediate?   Fast moves come from failed patterns.

However, if the SPX rallies reclaiming a Bowtie of its 20/50 day moving averages at 3900 and its declining trend channel, that opens the door higher---potentially to the top of the trend channel currently at 4200 and rising.


As flagged in previous reports, the last week of December and early January set up a time/price square out

That aligns with several cycles.

These cycles include the 49-month cycle from the December 2018 crash and the 1-year cycle from the SPX ATH to mention a few.

As well, the October 2022 low vibrates off the 20-year cycle from the October 2002 bear market low.

Structurally, I see the potential that 5 waves down from the SPX January 2021 top culminated in October followed by a corrective A Wave rally.

If that interpretation is correct, it was followed by a B Wave decline into year-end.

I have reserved for Hit and Run members what will validate a C Wave rally phase and how high it could carry.

With elevated tax selling keeping a lid on the market since December 1st, it will be interesting to see if a spark of buying can turn into something meaningful in this vacuum of sentiment.

Don’t want to miss the next turn?

In addition to our Square of 9 Wheel time/price square-outs which point to future POR’s (points of recognition), the 3 Period Chart is a tool that will help determine the trend.

The following monthly SPX shows the below turned down in June 2022 at 3810.

In early December 2022, the SPX traced out two consecutive higher monthly highs.

This put the index in the MONTHLY Minus One/Plus Two sell position.


The 3 Month Chart was pointing down for a Minus One.

Subsequently, the two higher monthly highs satisfied the Plus Two part of my Swing Method.

This is a potentially big-picture sell setup; however, it is possible the SPX may have an agenda to turn its 3 Month Chart back up. This would require a rally above 4100.96 in January…above the December high.

January sets up as a big move in either direction. It’s in the charts. The price action will tell us which way it’s manifesting.

To all who are reading this, I wish you the very best wishes for a wonderful new year and am hoping you will make the most of the many opportunities it brings.