By: Jeff Cooper
Hit and Run Morning Stock Report: November 8th, 2022
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The Bear Market is either 10 months or 12 months old depending on whether you measure from the NAZ high last November or the SPX all-time high on January 4th.
The low so far was October 13th.
The Bear Markets from 1973-1974, 2000-2002/2003, and 2007-2009 all ran longer than the current Bear.
1973-1973 was 23 months.
2000-2002/3 was three years.
2007-2009 was 17 months.
This week I will do a write-up showing the record extremes hit in the bull market in the years running up to the top in late 2021.
Based on those record extremes, the normal expectation is that the reversion to the mean/the unwinding in this Bear phase should be at least as long as the aforesaid Bear Markets.
In fact, there is reason to believe that this is a Bear of a higher degree than that of the 1929 to 1932 period.
It must be said that while that Bear found a price low in July 1932… 2 years and 10 months after the September 1929 top, a new bull market did not begin until 1942 or by some measures, 1949.
The Bear that started in early January 1973 saw a price low in early December 1974…23 months later.
That was its PRICE LOW; however, the market continued to mark time and did a good accordion look-alike contest until August of 1982.
That low was virtually a double bottom from 1980: As W D Gann wrote: “Two periods of time on the side.”
One of the factors causing me to say in September 2021 that “the market will get hit hard in January to kick off a vicious Bear” was that January 2022 is 49 years from the January 1973 top.
In other words 7 squared years.
7 is the number of Time. It is the fatal number.
How many panics have we seen in years ending in 7?
Indeed the 7-year cycle has exerted its influence strongly this century.
2000 peak + 7 years= 2007 peak.
2007 + 7 years = 2014.
2014 was not the top of a Bull Market; however, from September that year the market plunged 10% in 4 weeks. A salute to the cycle perhaps.
7 years + 2014 = 2021. Most stocks topped in 2021.
Starting a count from the top in January 1973 and adding 7 years gives 1980 which saw a peak in February followed by a SEVEN-week crash into March.
1980 was both an important peak and an important low. As offered above, the March 1980 low was tested in August 1982 when the mother of all Bull Markets started…30 months after the February 1980 peak.
The 1973-1974 analog may prove an interesting road map.
As well, this Primary Bear Market is very similar to 2000 and that “general” pattern will continue to track the period that followed December 10th
To be clear, I do not expect the pattern to track on a day-by-day basis. Rather, the overall pattern may show some similarity.
Analogs are not fine Swiss watches.
In the meantime, this week is mana from heaven for the Algo YOLO’s with 3 excuses to create a lot of sound and fury signifying little.
We’ve got the election results which will be known for the most part on Wednesday.
But next Wednesday at 8:30 am, we’ll also get the PPI.
Then at 8:30 on Thursday, we get the CPI.
The presumption is that all the data coming from these news events will influence the short-term patterns over the balance of this week-- in much the same way they have before this week.
That said, we are at an interesting intersection.
The SPX 3 Week Chart turned up last week and found a high…SO FAR.
The high coincided with a test of the overhead 20-week moving average.
A weekly Holy Grail.
To recap, the 3 Week Chart turns up on 3 consecutive higher weekly highs.
This is not CLOSES…just higher weekly highs.
This is the 3rd time the 3 Week Chart has turned up in this Bear Market.
It did so in March into the late March top.
It did so in the beginning of August.
The SPX pushed higher for just over a week and then collapsed to new lows SEVEN weeks later.
IF the SPX follows suit and this turn-up in the 3 Week Chart defines a high…be it this week or out into mid-November it could mark an important THIRD lower high based on the price swings of the 3 Week Chart.
That certainly is consistent with the POTENTIAL for a powerful third of a third-wave decline to mark a Capitulation give-up phase.
That said, many individual names look like they’ve seen such wash-outs of late on the back of earnings.
Names include TWLO, ZS, and SNOW to mention a few.
In sum, many of the growth glamour go-o stocks look like the 1929-1932 bleeding out…compressed into one year.
It feels like they have been slow-motion car crashes that have kept players like the proverbial frog in the pot of water.
Up until the last few weeks, these stocks haven’t really crashed, so players have been like deer in headlights holding onto the hope that they always come back.
That’s the lesson that Mr. Bear was counting on their learning so well through the last two bear markets this century…that they always come back.
This third Bear this century may have something else in mind.
Even once a low is found on the road to perdition in these former high-flyers, they may carve out wide and loose trading ranges…versus new uptrends.
Conclusion. Above, I mentioned, the possibility of a push higher into mid-November.
This is 90 days/degrees from the key mid-August top.
As well remember that this ties to a convergence of a declining trend line connecting the March peak and the August peak and a Ghost Line off the June low.
The price intersection ties to the 4100 regions in mid-November.
We showed this two weeks ago…now we’re only a week away and the market is still holding up.
Each day it does so and backstops this setup.
Additionally underpinning the potential for higher is that last week the SPX backstopped a trend line
Connecting the August peak and the September peak.
This coincided with a test of the rising 20-day moving average for a Holy Grail buy setup.
At the same time, however, the SPX is in the daily Minus One/Plus Two sell “position” as it challenges its 50-day moving average.
There are plenty of catalysts this week to light the fuse or flip the switch in either direction.