By: Jeff Cooper
Hit and Run Morning Stock Report: February 1st, 2023
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FOMC CHA CHA
Below is a fascinating table of the number of new highs the market made each year since 1929.
1929 had 45 new all-time highs during the year.
The next new high didn’t occur until 1954…25 years later.
WD Gann was one of the first to see the uniqueness of the Decennial Pattern for the stock market.
If you use a 10-year moving average on the above data, you get the chart below.
You can see that the line ‘flat lined’ for the 24 consecutive years of “0” and then moved up for a peak in 1968 when the OTC (now called the NAZ) peaked leading into the low in 1974.
1974 does not show up as a low on the chart, but the major low in 1982 does.
So the chart would have suggested selling in 1968-9, the peak of speculation at that time, and getting back into the market after 1982.
Not too shabby.
Then the line advanced to its 1999-2000 peak and then reversed down until 2009 through 2012.
The stock market bottomed in 2009, but the real estate market continued down until 2012.
Then the line went up from 2021 to 2022.
Simply put, the trend line from the 1960s would have had you out of the market at the 2000 top and out now.
The bottoms in between couldn’t have been much more perfect.
This is obviously not a short-term timing mechanism, but it appears to have a pretty good record for the Big Picture.
If the chart follows suit, this market has a lot of wood to chop for reversion to the mean to play out.
I’m seeing a lot of bullishness even euphoria pop up here and there.
TSLA for example has rallied 74.7 off its 102 low.
January is going to be a big “vibration” for TSLA.
TSLA bottomed on January 4th and January 4th conjuncts/aligns with 162.
TSLA struck 162.78 just after Tuesday’s open and ripped 12 points higher.
January 4th aligns with 174 and TSLA was rejected from the 174 region yesterday.
In other words, this 174 region may be significant as it squares the date of the low.
There is a long to talk about a Fed pivot with expectations for a less hawkishness tone and smaller rate increases.
Powell has been talking tough and implying that he is the second coming of Paul Volcker.
The last Fed pivot occurred at the beginning of 2022 because inflation had reached its highest level in 40 years.
We have seen a strong rally in many stocks from the October low partly based on the expectation of less hawkishness from Powell.
Not even a pivot…but less hawkishness gets the market high with a little help from its friends.
Be that as it may, the market and the economy have given Powell every excuse to be hawkish today.
No matter what he “does”, he must act as “monotone” as possible, unless the market construes an inflection in his voice to take on some hidden dovish meaning.
A daily SPX below shows a series of Ghost Lines (extended trend lines) forming a Rising Wedge or Leading Diagonal.
The majority of the lines cluster around the 4140 to 4150 region.
4144 is 540 degrees up from low. 4155 is a 50% Retrace of the entire range of the bear market.
There is one Ghost Line that points to a possible run to a test of the August high…4325.
There is a smaller blue Rising Wedge that may magnetize a move higher today.
If that occurs and we get a breakout over the quadruple top at 410 SPY (4100 SPX), the pattern suggests a reversal back to the downside.
Consequently, we want to be mindful of a doozy of an FOMC Cha Cha that sees a Spike & Reversal.