By: Jeff Cooper

Hit and Run Trading Morning Report - October 17, 2023


“Terrorism, war and bankruptcy are caused by the privatization of money issued as a debt and compounded by interest.” Napoleon Bonaparte

The job of the bear market is to make as many people as possible buy into a rally before another leg down.

However this market plays out be ready to deal with significant turbulence along the way as the market is buffeted by a extreme news cycle.

I think the strong likelihood  is that an Intermediate 3rd Wave down is in progress.

Intermediate Wave 1 down bottomed in October 2022.

We got our seasonality advance from there.

The Principle Of Alternation suggests that the notion of another October trough is the short straw.

Albeit that’s exactly what the market wants the vast majority of market participants to think.

From the July 2023 high was leg 1 down of Intermediate Wave 3.

Importantly, the July high was 540 degrees in time from the SPX January 2022 all-time high.

From the first leg down into August 18th,  we got a countertrend minor wave 2 into September 1st.

From September 1st was wave 1 of 3 of 3.

The mapping suggests wave 2 of wave 3 of 3 is in progress.

When it culminates a powerful decline should take out the 200 day ma currently at 4208.

That’s remarkable because it is precisely 540 degrees down from the July 4607 top.

Consequently, breakage below 4208 is a double whammy:

The 200 day support is lost as well as the important 540 degree “cube” down.

The important takeaway is that the indication is the strong slide from September 1st is only wave 1 of 3 of 3.

Where can the current rebound culminate?

A declining trend channel shows there is room to above 4400 theoretically.

270 degrees up from the 4216 low is 4413.

270 degrees is important as it is THREE cycles of 90 degrees.

It is HALF of the 540 degree cube.

A push over 4400 fully satisfies Phil D Gap (black).

360 degrees up gives 4479.

As well trade above last weeks high puts the SPX in the WEEKLY Minus 1/Plus Two sell position.

This is because the 3 Week Chart is pointing down (Minus One) and 2 consecutive higher weekly highs is the Plus Two part of my Swing Method.

If this plays out it will be the first time the index has been in the weekly -1/+2 sell position since the July high.

Should this setup unfold it will be critical to gauge the markets behavior.

I think it unlikely that the SPX drives to as high as 4479 in the midst of this first weekly Minus One/Plus two since Intermediate Wave Two high.

While the Seasonality Crowd assumes another October low is playing out, the 60 month cycle suggests a drop into late December mirroring the crash in Q4, 2018.

Interestingly that whoosh lower started on October 4th, the recent low.

In 2018, after two attempts to reclaim its 200 day ma, on November 7th and December 3rd, the SPX collapsed.

The 60 month or 5 year cycle exerts a powerful influence.

For example, the 1987 crash followed 5 years up from the August 1982 low major low.

The debacle after the 1937 top followed 5 years up from the major 1932 low.

As W.D. Gann wrote, “Time is more important than price.”

In sum, I think Monday saw a squeeze play after weekend positioning/hedging/put buying for a land incursion after it was put on hold.