By: Jeff Cooper
Hit and Run Trading Morning Report - October 19, 2023
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SPX Threatening A Weekly Rule Of 4 Sell Signal
The SPX closed back below 4346 on Wednesday.
4346 is 180 degrees up from the 4216 October low.
This opens the door to 4280 which is 90 degrees up from 4216.
I think there is Air Pocketism below 4280 to the low 4200 region.
Today would be an appropriate day for a waterfall as it is the anniversary of the 1987 crash.
The 36th anniversary or 6 squared years.
So this is a square anniversary which underscores the potential significance.
As well as we know the 1929 crash was 94 years ago this month and 94 squares yesterday/today.
Was yesterday’s urgent selling the start of a selling stampede?
It certainly had some signs of indiscriminate selling.
Stocks that were already in free fall fell further:
To mention a few.
Wednesday’s weakness arrived on cue following our weekly Minus One/Plus Two sell setup from Tuesday.
This weekly sell came in tandem with our hourly Triangle Pendulum.
Taken together they delivered a one-two punch to the market.
The decline tested and held---so far--- the 20 day moving average for the 3rd time in 5 sessions.
So essentially we have what could be called a Rule Of 4/Holy Grail sell signal on deck.
It could show up today.
The 4280 downside pivot also ties to my daily Pocket Pivot Indicator which is at 4284.
In addition remember that 4270 squares out with yesterday/today.
Consequently we have a trifecta of factors pointing to 4270-80 as pivotal to opening the cellar door.
In sum, Tuesday was an outside up day, Wednesday snapped Tuesday’s low triggering a Keyser Soze sell signal: a Reversal of a Reversal.
If the wheels come off and the SPX descends to the October 6th 4220 low we could see a genuine waterfall.
1) October 6th was a large range outside up reversal day (LROD). So taking out the 4220 October 6th low is a serious signal.
It means the Keyser (Keyser Soze) is in the house.
2) 4208 is a key region because it is 540 degrees (a true square, a cube) down from the July high.
3) Today the 200 day moving average resides at 4229. It has not been broken on this decline as was the case on Intermediate Wave 1 down in 2022.
If indeed we are in Intermediate Wave 3 down, the 200 day moving average should be broken with a bang, not a whimper.
4) A trend line connecting the October 2022 low and the Mach 2023 low currently resides at 4240.
As you can see a failure below this trend line triggers a Rule of 4 Sell.
It’s as if Mr. Market knew his agenda when it bounced from the early October test of this trend line because in so doing it installed this 3 point trend line.
As we know, the 3rd time thru seals the deal for follow thru.
So we have a cascade setup:
1) Taking out the Oct 2022/March 2023 trend line at 4240 opens the door to the
2) 200 day moving average at 4229
3) As offered above the Keyser shows up on breakage below 4220
4) Last ditch support is 4208 which is 540 degrees down from the July 2023 high.