By: Jeff Cooper

Hit and Run Morning Stock Report: October 24th, 2022

The Hulk Or Another Bear Market Rally?

There has been a recurring cyclic pattern between key panics over the last 100 years plus that come into play within the same lunar signature.

This is proven by Chris Carolan in his book the Spiral Calendar.

It centered On October 21st/24th this year.

However, it got so much notoriety in the last month that it may have put the “maloik” on the cycle.

The publicity may have led to the “plant” in the New York Times about a potential Fed Pause on Friday.

Twitter and the internet wasn’t around when the 1929/1987 analogues converged in the last century as they are converging now.

Isn’t that special…on Opex.

I remember well a similar “plant” on a Friday in August 2007 by The Bernanke that started a scorcher of a rally into October…from which the market collapsed.

The Fed be lovin’ themselves Friday Squeeze Plays.

The point is the Fed may “want” the market down…but they don’t want a crash.

The enigma of the market is bringing Time cycles, Price cycles and Pattern together.

What about the fundamentals?

The perspective with which we approach the market is that the market makes the news…that the news breaks with the cycles, not the other way around.

We saw a major price cycle culminate on October 13 when the SPX satisfied a picture perfect 50% retrace of the 2020-2022 range when the Hulk showed up:

The SPX gapped down on another hot number but staged a major league News Reversal leaving a Key Reversal Day.

The high of that October 13 reversal is 3685. The close was 3670.

As we’ve been flagging all last week 3680-85 could be the precipice to a waterfall decline.

While the SPX probed that region, the last three sessions, it bent but it did not break.

Indeed Friday’s open at 3657 saw the index slide to 3647.

It looked like a freaky Friday was on deck if we got FOLLOW THRU to the downside with the index snapping the key 3636 June low.

However, we got an Opening Spike Low (a characteristic of bullish trend days) and a quick 65 point spike just below the upside 3730 pivot.

Why is 3730 the upside pivot? To recap, it is 360 degrees up from the 3492 low of the year.

The first intraday pullback on Friday tagged the aforesaid 3680 level of lore offering a solid Side Door Entry on the long side.

The SPX never looked back: when it cleared 3730 it exploded to 3758  and the October 18th Opening Spike High leaving a undeniable Friday weekly close over 360 degrees up---the 3730 level.

In so doing the index was/is telegraphing higher.
As such the futes were up as much as 50 points Sunday night.

While it seemed a straight line shot to our 3854 “square” was on deck, the futes reversed to being down 20 points overnight.

As I write Monday morning, they have turned slightly green.

Why 3854? This is 540 degrees (a true square…a cube) up from the low of the year.

I have been trading since 1982. One thing I have learned is that the stock market is not linear. Price progresses in a logarithmic spiral based on square roots and the Principle of Squares.

This was the great discovery of W D Gann.

It is the essence of the geometry of my Square of 9 Wheel, a Time and Price Calculator (pictured below)

The chop fest continues. The bear isn’t just a bull killer, he hates everyone and is out to squeeze anything in his path.

So the question is whether the SPX has installed an Intermediate Term Low-- the first one of what is thought to be an extended bear market-- or we are in the throes of another Bear market rally?

Is this The Hulk, Big Green, or another bear market squeeze play?

The major argument for an Intermediate Term low is the Key Reversal off the aforesaid 50% retrace coming in the 9th month or 270 degrees of time from the all-time high.

That said, the pattern could simply be pointing to a large rally phase ala the August rally.

Tomorrow morning’s report will show a chart depicting precisely where and when such a rally could go.

Of course, that will only occur on the SPX clearing and closing above 3854.

Another argument for an Intermediate Term low is a positive divergence in a weekly proprietary oscillator.

A chart which I will also show today on the Hit and Run Private Twitter Feed.

The argument against an Intermediate Term low being satisfied is that we have not seen true capitulation.

October 13th was like a mini-capitulation.

Every Intermediate Term low, within a bear market, typically sees an acceleration and the towel thrown in by die hard longs.

This time could be different…but those are 4 dangerous words.

Another argument against an Intermediate Term low is that Friday may have been Option Expiration Pinball…an Opex Extravaganza based on a large number of YOLO puts outstanding based on the well-advertised crash scenario due right here right now.

The puts were low lying fruit ripe for the squeezing.

And the story about the Fed in the NY Times served as a fuse backstopped by an equally well placed buy program after the Side Door Entry pullback on Friday.

Another factor arguing against an Intermediate Term low is the number of market watchers (65%) looking higher from here.

In sum, the SPX carved out a 1 2 3 Pullback on the dailies into Friday morning, that backtested the high of the low bar day.

That was a nice long-side setup.

The question is was the setup good for a one day wonder or something grander?

The resolution of this overnight Bleedback into Friday’s range to the 3730 region will have a lot to say about the next move.

Conclusion. We are on the knifes edge of a major move…up or down.

My expectation is that we will not meander but see a major move.

While it appears the crash scenario for this time frame has passed, the market is not a fine Swiss watch.

Plus or minus a week in the scheme of a 9 month Bear desperately seeking capitulation is not out of the question.

As well, as noted in this space, 482 (4820), the ATH is 180 degrees straight across and opposite November 16th.

November 16th is also 90 days/degrees from the important August 16 Secondary High.

As they say, it ain’t over ‘til the fat lady sings.