By: Jeff Cooper
Hit and Run Trading Morning Report - November 21, 2023
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Editor's Note: There are two reports today. Scroll down to read the second one.
“The laughs come hard in
Auld Lang Syne
The glass was raised, the
The fullness of the wine,
The dim last toasting
While at port adieu or die”
-Surf’s Up, The Beach Boys
On March 23rd, 2020 we wrote the SPX was at a Time/Price low that most likely would see a rally to 4000.
We exceeded that level as the SPX fulfilled a 5 wave advance to 4818.
While that 4818 price high occurred on January 4, 2022, you can see that essentially the SPX topped with the NAZ on November 22st.
It broke down from November 22st carving out a little triple top into mid-December.
A false breakout played out from Dec 27h to January 4th.
Wednesday, the market will have traveled 720 degrees in time from the internal high on Nov 21, 2021.
Are we about to see another false breakout---this one above the magenta Tops Line connecting the 1/4/22 high with the 7/27/23 high?
Or…does the SPX pull back from this region putting in a 3 point Tops Line begging for a Rule Of 4 Breakout over coming weeks (January?)
Theoretically a bullish pullback could be deep…to the 4200 region without destroying the path to a new all-time high.
4200 ties to the black Bottoms Line from the March 2020 low.
Breakage below The Triangle in the 4200 region triggers a Rule of 4 sell signal.
The question is do we breakout above The Triangle first?
Of course a breakout above the magenta line, the top of The Triangle could be part of a continuing rally to 4910.
Why 4910? This is the projection given by what may be an inverse Head and Shoulders (green).
Notice the Neckline is around 4100, just below the key 4200 region.
Essentially, the Neckline ties to the October 27, 2023 low.
This is critical support for all the reasons mentioned above:
The major Bottoms Line from 2020 (black).
The Neckline (green).
The October 27th, 2023 low.
492 squares January 10th and April 10th so let’s keep that on our radar if the SPX should breakout to new highs.
Interestingly the apex of the magenta and black trend lines ties to April/May.
These intersections are often big turning points.
Notice the apex of the black Bottoms Line with the declining blue Tops Line that defined the March 2023 low.
That intersection/apex perpetuated a strong rally into late July.
There is another way to look at this chart bullishly.
Counting from the March 2020 low October 27th, 2023 can be seen as a THIRD HIGHER LOW.
This is my Power Surge pattern.
And a surge is clearly what we’ve seen in November.
It’s been nothing short of a buying stampede.
In sum, while the test of the magenta line may produce a pullback, it will leave a 3 point trend line which if broken to the topside will most likely generate a new all-time high by April 2024.
It could come much sooner….if it’s coming.
In sum, whether we make a new higher or not, it’s all part of a Super Cycle Bear toping process that will lead to a catastrophic decline staring in 2024.
That assuming the black Bottoms Line holds thru the end of the year which is the working presumption.
Gold To Surge Like 2009
“Let’s Do It Again”
-The Beach Boys
Investors remain complacent and almost oblivious to one of the oldest, biggest risks: war.
The market has rallied in November backstopped by the idea that the Middle East conflict is contained.
Things were said to be “contained” before the Great Financial Crisis in 2007-2009.
Financial market participants paid no heed to the looming catastrophe of the first world war.
During the first eight months of 1914 (before trading was halted for the year) the UK bond maket rose by 4%.
When trading resumed in early 1915, they gapped down and proceeded to lose 41% over the subsequent 6 years.
This is what happened to the blue-chip financial assets of the winner. German bond investors were effectively wiped out.
These geopolitical risks overlay the brewing radical, systemic, socioeconomic shifts that are emerging as the seemingly comfortable, history-blind societies wrestle with challenging demographics (baby boomers retiring), the need to rebuild their underlying energy systems and allocating the losses that are festering beneath the surface during a 40 year debt bonanza.
Preserving your savings over the coming decades will be paramount.
The return of capital versus the return on capital will be key.
Gold will be in favor as the dollar loses purchasing power.
Gold completed a powerful initial surge in October, with GLD running from 168 to 186.
In so doing, GLD left a large range outside up monthly bar in October.
The last time GLD left a large range outside up month from near its 50 month moving average was off the November 2022 impulse.
GLD continued higher for another 5 months.
In sum, the advance went from 150 to 191.
If the current move mirrors that momentum, it points to 208 and breaks GLD out with authority over triple tops.
This recent pullback is pulling back the rubber band in a wave 2 consolidation.
With a wave 3 on deck with GLD so close to a breakout, fireworks are expected as the point of recognition becomes undeniable.
Note the parallels from OCTOBER 2008 when gold shook out before exploding.
GLD corrected 7 months in 2008 (versus the recent 6 month correction from May 2023) prior to tripling.
GLD struck a low of 66 in October 2008 rallying to 185 in August/September 2011.
A move of 990 degrees.
A similar move over the coming 3 years mirroring the 2008-2011 stampede equates to 315 GLD in 2025 (3 years from the 2022 major low).
Interestingly 2025 is 45 years from the major top in 1980.
This is a big Gann cycle, half the Great 90 Year Cycle.
A month ago surveys showed disdain for gold.
I received sarcastic tweets about “another breakout buyer, can’t wait for this easy short.”
I suspect the breakout will initially be met by more skepticism with most players grateful for the opportunity to get even with their purchases from 3 years ago.