By: Jeff Cooper
Hit and Run Morning Stock Report: December 7th, 2022
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Near-Term Trend Turns Down With Authority
In Tuesday morning’s Hit and Run Report, An Angle Of Attack To The Downside, we stated:
“As we know there was a Time/Price square-out (balancing-out) at 407.5 (4075 SPX).
This is because 407/408 is 180 degrees straight across and opposite October 13, the low of the year.
This is proof that the stock market moves remarkably in an orderly fashion according to the Principle of Squares.
The angle of attack off last week’s highs to the downside speaks to the significance of this Time/Price square-out.
Mr. Market talks if you have the tools to listen.
….the SPY/SPX is approaching a rising 3-point trend line coincident with its rising 20-day moving average.
It should be easy to determine what the market’s direction here is going to be over the coming hours by virtue of the price action of this perfected support (hitting all lows since October 13) and the 20-day ma.
A failure here below the 20-day (Holy Grail Fail) in conjunction with an Angular Rule of 4 Sell signal (break of a 3-point trend line) is in complete antithesis with December seasonality---especially with so many anecdotally loaded for a Santa Claus Rally.”
Below is an updated chart of the daily SPX shown in Tuesday morning’s Hit and Run Report.
On Tuesday, the SPX turned its 3 Day Chart down and accelerated through the aforesaid well-defined rising trend line.
It wiped out the Powell Ramp last Wednesday.
It’s beginning to look a lot like that Powell zero to 120-point surge in 60 seconds was an Algo Ambush…orchestrated to allow some big money a graceful exit.
Tuesday’s breakage below the Powell “Pivot” from last Wednesday (3938) suggests as much.
The SPX undercut that region yesterday dropping to 3918 before settling virtually right on last Wednesday’s low before the Powell pop.
It would not be surprising to see a knee-jerk snapback to backtest the break of the trend line from October which currently resides at 3977 regions.
Be that as it may, the near-term trend has turned back down, and importantly the illusive Wave 3 of 3 to the downside may be in progress when least expected---in December.
Pundits prognosticate ad nauseam about the “Santa Rally” but surprises happen to the downside in a Bear market…and bullish seasonality can be dwarfed by elevated tax loss selling.
There’s plenty of that to go around.
In sum, the SPX looks like it has a date with a 50% retrace of the October 13 low to the December 1 recovery high. That’s 3795.
Breakage below 3795 validates the idea that we’re in the midst of a powerful 3rd wave decline of several degrees…ie, a possible 3rd of a 3rd of a 3rd.
The news breaks with the cycles, so whether this is tangential to the FTX debacle or the BIS warning of trillions of “off-balance sheet” dollar debt remains to be seen.
But there is no lack of suspects to lay the blame on should we tumble.