By: Jeff Cooper
Hit and Run Morning Stock Report: November 2nd, 2022
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Sympathy For the Fed
“If I’m confusing you it’s just the nature of my game.” The Rolling Stones
“I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant.” Former Fed Chair Alan Greenspan
Let’s face it, the Fed is behind a rock and a hard place, but they will get little sympathy from truth-tellers because it is a rock and a place of their own devious devices.
If they raise rates more they will just be crushing the economy into an unequivocal hard landing where capital gain revenue for the government will shrink at the same time higher rates will explode U.S. debt service.
In the last cycle of this degree going into The Great Depression, the U.S. was the largest creditor country in the world.
Not now.
The U.S. dollar was good as gold.
Now now.
What’s my name? Stagflationary debt crisis.
While we’re at it, someone please explain to these youtes that you can’t print oil and other commodities.
What’s thy name Mr. Fed?
The Fed speaks in tongues.
Is it any wonder the market is bedeviling bulls and bears alike?
Net, net…in a bankrupt global system, you reach a point when the value of printed money dies and whatever a politician promises can no longer be bought with fake money which will always have zero intrinsic value.
The SPX is in a clear Rising Wedge and is in a 5th wave up. It is always possible that we could get a quick pump
Above the top red rail of the Rising Wedge for a Pinocchio such as played out on September 12th.
That said we got as large Spike & Reversal for a Turnaround Tuesday following yesterday’s turn up of the SPX 3 Week Chart. In a bear market, a turn up of the important 3 Week Chart should define a pivot high soon in terms of both time and price if the market is going to roll over in short order.
If the red support line does not hold the likelihood is that the rally off the 3492 Oct 13 low is complete.
If so, the structure implies a drop to new lows on the year because:
Wave 3 down started from the August 16 secondary high.
Wave 1 down of 3 culminated on October 13th where a Key Reversal Day marked the start of wave 2 up of 3 down.
Consequently if the corrective wave 2 up of 3 down is indeed over that means the most powerful downside part of this year’s bear is on deck: wave 3 of wave 3 down.
If this count is correct, it would be surprising if it did not lead to new lows.
With today being FOMC Cha Cha Day, the whiplash typically associated with Fed Day may make it hard to know if wave 3 of 3 drama has started.
Monday’s N R 7 Day that telegraphed Tuesday’s expansion of volatility may have only been the precursor to beaucoup drama today.
Despite Tuesday’s downside reversal, the SPX was able to hang on to our key 3854 “square”.
As you know this is a key 540 degrees up from the 3492 low of the year.
As well, it is holding north of its 50 day moving average.
That said, glamours like ZS and BILL that exploded higher on Tuesday’s open fizzled badly leaving bulls singed by the false fireworks.
How will we know if the deal is sealed to the downside?
Drilling down to the hourly SPX shows that although it is clinging to its rising 50 hour moving average we’ve got breakage below a trend line from the October 13 low.
One more quick pump higher could install the right shoulder of an hourly Head & Shoulders top pattern.
Either way an authoritative snap of the 3854 square that is sustained opens the door lower….to the 3790 to 3800.
Below that a smash to the low 3700 region could play out where we see the rising 20 day moving average at 3730.
Why?
When the lower rail of a Rising Bearish Wedge is breached the normal expectation is accelerated momentum to the downside.
In sum, the greatest trick the Bear ever pulled was to make you think he didn’t exist.
The October 13th Key Reversal Day certainly set the hook on sentiment.
The end of October was replete with stories of “October, the Bear Killer” with movers and shakers like Blackrock leaking about a Powell Pivot and JPM touting the Fed was going to hike 50 basis points today instead of 75 igniting a 10% rally.
Anything is possible of course, but would you buy a used car from these fellas?
Could it be they’re just looking for “bag holders”?
If we are correct about wave 3 of 3 on deck then the red tide that is coming is going to be like the elevator doors opening in ‘The Shining.’
90 degrees down from Tuesday’s high for the rally is 3847.
180 degrees down is 3786.
360 degrees down is 3664.