By: Jeff Cooper
Hit and Run Morning Stock Report: November 29th, 2022
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Pay Dirt Monday
Stocks dropped sharply on Monday.
Despite the reasons that the media sported about unrest in China, Hit and Run subscribers know the two “reasons” the market fell sharply Monday.
Interestingly, about the only names up on Monday were Chinese; but that didn’t stop the media who are always trying to pin the price action on one narrative or another.
The real reasons for the downdraft:
Monday morning’s Hit and Run report noted an uncanny synergistic cycle starting from the March 2020 low that hit on Saturday, November 26. It also called the June low to the T.
We also stated that Monday, November 28th is 180 degrees straight across and opposite 395.50 (3955) on the Square of 9 Time & Price Wheel and that our expectation was the SPX could be magnetized to 3955 yesterday.
The SPX dove to precisely 3955.
Blue is 395.55
Red is Nov 28
The DJIA has led the rally off the Sept 30/October 13th lows leaving a major negative divergence with the other major indices as money plowed into the “safety” of the blue chips.
Notably on Monday the DJIA flashed a WEEKLY Soup Nazi sell signal.
A daily Soup Nazi sell signal occurs when a new high is made over the previous swing high in a 20-day look-back with at least a 4-day interval from the prior swing high that then reverses lower that day or the next day.
So a weekly Soup Nazi is a reversal within a 20-week look-back with at least a 4-week interval from the prior swing high.
Let’s take a look. Below is a weekly DJIA.
As you can see, the DJIA makes a new 20-week swing high…eclipsing the August high last week.
On Monday the DJIA knifed back below the August high…flashing the Soup Nazi pattern.
However, since this is a weekly signal we’re looking at, we don’t really know where the DJIA will close this week.
So we have the threat of a weekly Soup Nazi, but since by the end of the week the DJIA could be much lower before the sell signal is confirmed, we must drill down to the dailies to get in alignment with a short position.
The aforesaid, cycle from March 2020 along with yesterday’s sharp sell-off in league with Monday’s Time/Price square-out back-stopped our short-side efforts:
Shorts from Monday include MSFT, MRNA, and CLFD to mention a few.
Throughout, 2022, the occasions when we had cycle turning points accompanied by Time/Price square-outs in accordance with W D Gann’s Law of Vibration, the results have been significant.
As well, history shows that despite the well-advertised bullish seasonality in December, it turns out this is not the case in Bear Markets such as we are dealing with currently.
In short, surprises are going to show up on the Bear side when the vast majority are loaded for seasonal bull as they have been going into last weekend.
On the tail-end of a year of ugly performance, few money managers are likely to press their long bets if the market starts to unravel in earnest going into the last month of the year.
Where does “Earnest” reside?
I think at 3900 SPX.
Breakage below 3900 opens the potential for a new down leg.
I can’t help but wonder if FTX is the fuse that launched 1000 derivative ships.
Tomorrow’s report will walk through why the big smart money may believe that Santa is riding a Contagion Sleigh and that risk has become a counter-party risk.