By: Jeff Cooper
Hit and Run Morning Stock Report: January 31st, 2023
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As Above, So Below?
The pattern for the SPX changed Monday. Rather than opening down and closing up near the high of the day, markets opened lower, tried to rally, then failed and closed at the day's low.
Friday’s failure to close over the 4077 square on the 4th time there was the technical culprit in front of the macro jury on Fed Day, Wednesday.
Then we get the Big Enchilada, the Jobs Report, on Friday.
You don’t see many quadruple tops so the T Rex in the ointment is that the SPX has a hidden agenda to attach this horizontal resistance and run to 4144. This is 540 degrees up from the December low.
As well it ties to a 50% retrace of the entire bear market which is 4155.
I can’t help but wonder that Powell will perpetuate a pop to this level during an FOMC Cha Cha on Wednesday.
If so a failure from there below The Line at 4100 must be respected.
We commented Monday morning that downside follow-through after the obligatory snapback on the heels of Monday’s gap down could see a test of the key 4013 level.
This is 360 degrees up from the December low.
The SPX low on Monday…4015.55.
You can’t make this stuff up.
Math is the mind of the market.
Since the December low (December 22) the SPX has not seen more than 2 consecutive INTRADAY lower lows.
Today we’re set to see another with the futes down as I write.
It will be important to gauge the behavior.
That said as flagged yesterday, there is a rare convergence at the 3945-55 region: a 20/50/200 day moving average Bowtie.
That may act as a magnet this week.
Additionally, the SPX last turned its 3 Week Chart up at 4004, so our eyes should be riveted on this low 4000 pivo, breakage of which opens the door to 3950 ish.
As to the Monthly Swing Chart, on Friday, it seemed nearly a given that the SPX wanted to turn its 3 Month Chart up before the end of January.
To do so it would have had to rally above 4100.96 before the end of January.
With today being the last trading day of January, Monday’s decline pulled the plug on that possibility unless a miracle happens.
So that leaves the SPX in the MONTHLY Minus One/Plus Two Sell position.
Officially it takes a drop below January’s low in February to trigger the signal, but that is 3794.33.
So we have to turn to the dailies and weeklies for guidance and the aforementioned 4000 region and the 3950 cluster.
If 3950 is snapped it opens the door to 3794. Should the SPX violate and extend below 3794, there is a strong likelihood that the promise of a push to 4300 + is off the table and that a move to new lows below 3590 is on.
Finally, the NAZ had its worst day since it’s December.
As above, so below?
It was deceptive looking at the daily NAZ below.
That’s because the actual range is not large but the true range is when you account for the gap down from Friday’s close.
The NAZ will trace out two lower lows this morning putting it in the Plus One/Minus Two buy position.
It may do so from Phil D Gap in the 11,330 region.
That should be pivotal. It should inspire a rally. If the rally is puny and lackluster, the market is talking.
It must also be said that the NAZ has turned its 3 Month Chart up with January seeing 3 consecutive higher monthly highs.
It wasn’t pretty as December was an outside down month so this turn-up of the NAZ 3 Month Chart left market participants with Whiplash.
If the bear market is going to reassert itself, this turn-up of the NAZ 3 Month Chart should define a high soon in terms of time and price….ie, this week.
If the market has more to rally, this turn-up of the 3 Month Chart should see a bullish pullback, a knee-jerk reaction.
Subsequent trade above January’s high sustains opens the door higher.
With early February marking Fed Day and a Jobs Report, Whiplash may return.