By: Jeff Cooper
Hit and Run Morning Stock Report: January 24th, 2023
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The Errand Boy
And follow thru showed up on Monday.
The two-day rally in the NDX is the largest since November 10 and 11 of last year.
At that time, the NDX struck a near-term high two days later on November 15 and has never been able to rally much above that high.
It took TIME for that rally phase to burn out but it did so with three drives to a high.
The subsequent decline broke the trend but never followed through to the downside.
It looked like a Bear Flag was playing out prior to another leg lower, but something happened on the way to that new leg lower: 2023 happened.
The bombed-out growth glamours hit a vacuum after elevated tax selling: every one that wanted to sell or had to sell, sold.
What do they say? Nature abhors a vacuum.
The NDX knifed back up through the black trend channel and are still knifing.
Currently, the index has struck the top of a little trend channel (green), but clearing it opens the door to the top of the upper rail of the black trend channel.
That becomes an interesting juncture should the NDX push to the top of the black trend channel because breakage over the top triggers a Rule of 4 buy signal.
Since the NDX led the way down in 2022, peaking in November 2021.
Currently, the NAZ has rallied nearly 6 times as much as the DJIA month to date.
And while the SPX was up 47 points on Monday, it pales in comparison to the intensity of the NDX.
TSLA +11 to our 146 “Wheel” target
Pulling back the lens to see the entire NDX Bear, shows that the NDX has broken above a declining blue trend line from its December 2021 high.
However, now it’s challenging a purple declining trend line from the late March high.
Breakage above the purple declining trend line validates the initial Rule of 4 Breakout; however, a Ghost Line (red) presents significant resistance
Market participants have embraced full frontal FOMO and it may have just started.
If the market wants to blow its top the NAZ targets the top of the black channel with the SPX targeting 4141 (540 degrees up from the December low) breakage higher opening the door to 4325.
The 4141 region ties closely to a 50% retrace of the Bear Market at 4155.
Clearing and sustaining 4155 gives a path to test the 4325 August high.
One can see the euphoria in Monday’s equity put/call ratio which early in the day dropped to .63.
This ties the lowest level since early April of last year-- just after the key March 29th peak.
The 4141 and 4155 region are key for another reason.
If the SPX rallies above the December 4101 December high it will turn its 3 Month Chart up.
So we have a trifecta of technical between 4101 and 4155.
When there is a significant cluster like this, in my experience, it can act as a magnet.
Why are market participants so giddy?
Maybe because of Fed Jawboning and Fed plants, one more rate hike and they’re done-- versus higher for longer.
In other words, a Fed Pivot.
This Jawboning and planted rumors are in direct contrast to the hawkishness exhibited by Fed Govenours in interviews.
It seems Jerome is doing a Jerry.
Jerry Lewis is in The Errand Boy when he drives Mrs. Wellonmellon’s Cadillac with break, gas, break, gas break, gas.
The next FOMC meeting lurches.
Maybe that’s the excuse for the Friday/Monday explosion.
Maybe it’s the idea that the Fed has entered the Blackout Period and the market is celebrating a market unhinged by The Invisible Hand…er foot.
However, history has a different tale to tell.