By: Jeff Cooper
Hit and Run Trading Morning Report - October 31, 2023
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Rebound To Key 4208 Region?
I interpret the downtrend from the July 27th intraday high in its mid-phase, through rapidly approaching its late, highly emotional stage.
The last part of a downturn is almost always the fastest and most volatile.
As W.D. Gann wrote, “The most money is made when fast moves and extreme fluctuations occur at the end of major cycles.”
To be clear I am talking about the end of an interim cycle. The strong likelihood is that a fast move to downside into 2024 does not mark the end of the bear market.
It must be noted that while the July 27th large range Key Reversal day was an Intermediate High, the closing high was on July 31st.
As such, today is 90 days/degrees from the mid-summer high.
As offered in yesterday’s report, there is potential for an imminent countertrend rebound.
We got one on Monday, albeit breadth vastly underperformed powerful point counts on the DJIA and SPX.
While we could see a continued counter-trend rally, it would be an intermission, postponing a severe market slide.
Regardless, whether imminently of following a brief recovery, my expectation is that the decline to follow will be steep and severe----likely representing the most profound downturn in this Primary Bear Market thus far.
We cannot know whether yesterday’s rebound was a one-day wonder or the rally can last a week.
Let’s zoom in on the structure of the decline since the Right Shoulder on September 1st, 2023, which synchronizes with the September 3, 1929 peak.
After all, this decline has unfolded in “94 vibration” (as we are 94 years from 1929).
The SPX 3 Day Chart turned up once subsequent to the September 1, 2023 high.
The 3 Day Chart turned up Oct 10, following a large range outside up day (LROD) on October 6th.
While the index held up for 5 more sessions, essentially the turn up of the 3 Day Chart defined the high of that rebound.
The 3 Day Chart turned back down on October 19th, diving back below its 20 day moving average.
The SPX has been in an accelerated downdraft since it turned its 3 Day Chart back down on October 19.
Monday saw the SPX trade above Friday’s high.
That means trade above Monday’s high today puts the SPX in the Minus One (the 3 Day Chart is pointing down)/ Plus Two (two consecutive higher daily highs once the 3 Day Chart is pointing down) sell POSITION.
I say position because once something assumes this position we must observe the behavior to determine the resolution.
By that I mean once we are “in the position: a rollover and a turndown of the dailies validates the underlying downtrend is reasserting itself.
This is a very sensitive juncture in price and time.
The SPX showed two consecutive closes below its declining trend channel going into the weekend.
Then on Monday, the index regained the lower rail of the trend channel.
As long as price holds above the lower rail of the channel (currently around 4147) theoretically it can push higher---to the key 4208 region. Above that opens the door to the 4240 region.
This ties to a picture perfect backtest of the 200 day moving average.
Time wise we passed thru Red October but face the Mars/Uranus Crash Cycle starting on November 9-11.
When a market rallies into the Mars/Uranus Crash Cycle, it typically falls abruptly as the cycle hits.
Reminder: the Mars/Uranus Crash Cycle will remain open for a year.
However. This November 22 will be the anniversary of the 11/22/63 JFK assassination and the Gann Master 60 Year Cycle is due to exert its influence.
This late November time period looks pivotal because the all-time 480/481 SPY high opposes November 22.
Again this morning we cannot know whether Monday was a one-day wonder but we can align ourselves with the downtrend and the potency of an Intermediate Wave 3 decline that should carry below the 3490 October 2022 Intermediate Wave 1 low.
An hourly SPX shows a recovery above the black trend channel after testing the lower rail of the blue trend channel.
As well the SPX has Pinocchioed the prior waterfall on the hourlies (magenta.
In so doing it has carved out a micro inverse Head & Shoulders.
The indication is the door is open for an ATTEMPT at 4208.
This should act as staunch resistance.
Given that structure and the persistency of the prevailing downtrend, historical precedent suggests that several indicators or warnings will occur before the markets reach their nadir and begin to set up the subsequent rebound.
1) The McClellan Oscillator (NYMO) will get to the -90 to -135 range. Currently it reached -45 at Friday’s low
2) The Fear & Greed Index will fall below at least 10 into extreme fear
3) VIX will rise into at least the 30’s or 40’s.
4) The 10 week average of the National Association of American Investment Managers Commitments will fall at least into the 30’s and probably much lower.
5) Put buying will accelerate. We will report on these numbers
In sum, other vital measures of investor sentiment are nowhere near bottom levels.
When they move into range, we will discuss in this space and on the Hit and Run Private Twitter Feed.