By: Jeff Cooper
Hit and Run Trading Morning Report - November 13, 2023
The Biggest Setup Since January 2022 and July 2023
In my 40 years of trading, I have found a lot of truisms.
One of the most conceptually correct that stands head and shoulders above most is:
Short weak stocks when they try to stand on their tiptoes and buy strong stocks as they crouch.
Let’s take a look at the big wheel of time, the monthlies, from the 2000-2002 bear,
The 2007-2009 bear and the current bear market.
The Monthly Swing Chart is a key chart because 12 months times the 30 days in a month is the 360 degree circle or cycle.
Below is a monthly SPX from 2000-2003.
The 3 Month Chart turned down in November 2000 (3 consecutive monthly lower lows).
Notice that following the March/April 2000 bearish Train Tracks, the monthlies turned down,
Then back up in June, down in July and up in August.
In sum rapid turning of the monthlies put in a Primary Top at the end of August/early September 2000.
The red ellipse in April/May produced a Monthly Minus Two/Plus One sell signal.
The market rolled over.
The 3 Month Chart turned back up in January 2002.
It turned back down in June 2002 and the market crashed the next month in July.
Notice another Monthly Minus One/Plus Two sell signal in December 2002 that led to the March 2003 low, a higher low and test of the October 2002 bear market low.
Notice the market crash from a third lower high into the July-October time frame.
Below is a daily SPX showing the 2007-2009 bear market.
The magenta ellipse shows downside acceleration from a 3rd lower high.
That ellipse is a combined 1st lower high with the SPX crashing from a 3rd lower high from September 2008.
The low is November 21st.
This is important for this year as November 21, 2008 is 15 years ago.
This is 90 degrees of Gann’s 60 Year Master Cycle.
monthly from 2007 thru 2009 shows that
The 3 Month Chart did not turn down off the October 2007 top until the March 2009 low.
Be that as it may, every turn up of the monthlies after the October 2007 peak defined a high soon in terms of time and price be it 2 consecutive higher monthly highs or just one.
In 2017 the market was in a persistent runaway move up until January 2018 which ushered in a breakout of reversion to the mean volatility.
However, notice that the 3 Month Chart remained pointing up until February 2022…right off the all-time high.
That said the XMAS Crash in 2018 followed 3 lower highs.
Importantly, in a change of character of the prior bull market, the 3 Month Chart has turned down twice since February 2022.
The monthlies turned up on Friday, reversing Thursday’s outside down day.
Theoretically this is a bullish Reversal of a Reversal IF we get sustained follow thru.
Contrarily, a sell-off now back below Friday’s low will produce a Reversal of Reversal to the downside.
With the 50 day line just below and an open gap, downside follow thru from Friday’s “breakout” is a conspicuous Trap Door.
Let’s take a look.
A 10 min SPX shows a “breakout” above a Ghost Line connecting triple top peaks in October.
Again notice the mini crash from the triple highs.
The question is whether Friday’s breakout is the real deal of a Trap Door.
The answer to that billion dollar is threefold:
1) there is a massive negative divergence based on breadth at this new relative high: The Advance/Decline Line was falling while the SPX rallied sharply.
2) The SPX shows a Megaphone or Broadening Top at key resistance.
3) That key resistance a Time/Price square-out at 440 SPY.
440 aligns with/vibrates off November 10th
The bottom line is my expectation is that Thursday’s reversal would satisfy a test of 4325 which is 90 degrees down from Thursday’s high.
However, there was an agenda: the SPX had a date with a t turn up of the monthlies.
A Trend Day on a Friday weekly Opex drove the tape.
Pulling the lens back shows the SPX’s Triangle Pendulum setup at this key pivot.
A Triangle Pendulum is a pattern I created to anticipate a fast move.
It occurs when an item breaks out of a triangle and then quickly reverses to breakout of the other side of the triangle.
That usually sees a directional move in the direction of the second breakout which in this case would be up.
However, all trading is contextual, and we’re in a bear market.
As well we have the mini Megaphone Top in tandem with a massive divergence.
What I’m saying is that we may get a Double Triangle Pendulum on breakage below the bottom blue trend line around 4300.
A sustained failure below the top blue line of the triangle is a red flag.
A move below the bottom blue trend line is a blaring sell siren.
My expectation is that a break of 4300 opens the door to 4100…probably in short order as false moves lead to fast moves.
There is reason to believe a Trap Door will be sprung…either directly from here or a possible push into November 21st region.
Above I mentioned the 5 year/60 month cycle, a componet of the 60 year cycle.
60 months ago the market peaked on November 8th prior to a December crash.
60 years ago on the Gann Master 60 Year Cycle was JFK’s assassination which changed the fabric of the country.
As mentioned above November 21st was the crash low in 2008.
This is 15 years ago or 90 degrees of the Gann Master 60 Year Cycle.
There are no fundamentals, only cycles.
The structure of the market supports the idea of cycles exerting their downside influence over the next few months.
A daily SPX from the 2022 all-time high shows a third lower high since the late July high and a
1, 2/ 1,2 downside setup.
A dramatic 3rd of a 3rd wave down opens the door to the 3300 region.