By: Jeff Cooper
Hit and Run Trading Morning Report - December 11, 2023
Nothing Is Random
Throughout this year we’ve mentioned the “94” vibration with 1929 which was 94 years ago.
1929 saw a waterfall decline into the end of October.
This year marked a 500 point SPX drop into the end of October---10% in 3 months.
A major move but obviously not comparable to the crash in ’29.
Mr. Market is a poet not an essayist.
Remember 94 “points to” July and squares October.
Look at what these months July and October represent and tell me it’s happenstance.
We got a 500 point decline from late July to late October and a 500 point rally back in half that time.
Early this week marks half the duration of the drop.
Some good symmetry.
From the March 2020 crash low to the January 4, 2022 all-time high was 94 weeks.
Another 94 weeks gives the late October 2023 low.
No wonder the market exploded in November, respecting this cycle. Wow.
Let me give you another example of the non-randomness of the market that was a major factor in our call for an important top of some sort in July 2023.
Late July 2023 is equal distance from the October 13, 2022 low to the January 2022 all-time high:
It is 41 weeks from the January 4, 2022 all-time high to the October 13, 2022 low and it is 41 weeks from the October 2022 low to the July 27th, 2023 high.
Another 41 weeks is early May 2024.
In sum, July 2023 was 540 degrees or 18 months from the January 2022 all-time high.
540 degrees = a cube, a true square.
An important turning point was due in July. It took to the end of the month to sew up the setup.
The market has the memory of an elephant. It remembers anniversaries, golden rations, time-price square-outs and equal distances and durations.
These milestone dates/prices remarkably often mark major shifts in market participants collective attitude.
Last October 2023 was one such shift, also marked by it being precisely 90 days/degrees down from high.
Remember that following the crash in October 1929 the market rebounded into April 1930.
It was an echo of the bull market. An adorable illusion. I suspect the vast majority of market participants at the time thought it was a return to normal. It was not. The bear returned with a vengeance before the end of April 1930.
The current rally is set to deceive as many investors and traders as possible for the bear market resumes…be that from an all-time new high or a lower high than 4818.
It must do so---it is a culmination of a 13 year bull.
Markets like to test. The upcoming top is that Secondary High.
My expectation is that mid-January to February will be a major high.
If it is not, then the market may extend to early May.
January looks like a turning point for many reasons:
1) Mid-January is 55 Fibonacci trading days from the Oct 27, 2022 low.
2) Late January is 180 calendar days from the July high and 90 calendar days from the October 2023 low.
Check out the 90 day/degree cycles running backward from July 2023.
I had originally thought a basing phase would play out from November 22 into January.
That basing phase may be over.
It’s going to depend on the price action into this weeks OpEx and early the following week.
The cycles at the end of October perpetuated extreme momentum. It played into the bullish narrative of an October trough within the context of a new bull market and elicited performance chasing as the SPX got past mid-November with bullish price action subsequent to a turn up of the 3 Week Chart.
The SPX has broken out following the uptrust since late October 2023 low.
It has cleared a trend line connecting the January 4th, 2022 all time high and the July 2023 peak.
The market is in a Runaway Move which will end in a parabolic move.
The move was telegraphed by the Breakaway Gap marking a 3rd of a 3rd wave in progress.
The Breakaway Gaps with Follow Thru pointed to a 3rd of a 3rd wave.
How else do we know when we’re in a 3rd wave to the upside?
None of the stuff you’ve been using that calls for a top at least for a reaction works…
Not overbought, not divergences, not short setups on individual names.
These are all grist for the bull mill.
It’s just the express train to Parabola City.
We’ve all seen it rush by and steam roll perfectly good short setups on occasion.
We’ve also capitalized on many moves that were simply continuation plays with no real pullback.
You know it when you’re on that train.
It’s hard to hold on---it’s the pain trade, the Pain Train.
The Train wants every one that’s missed it to chase it to the next station.
The trick is to step off before the train comes off the tracks.
However, and it’s a big “however”, the only way I can count this structure from the October 2022 low is as A B C.
Allow me to explain.
Checking the daily SPX from January 2022 shows an A B C formation off the October 2022 low.
An A B C formation is a corrective versus impulsive structure.
The weekly SPX shows a double A B C versus an impulsive 5 wave structure.
In other words when I say that November saw a Point Of Recognition with a 3rd of a 3rd wave it is in the context of a C wave which will have 5 waves.
This is a 3rd of a 3rd wave rally but in my opinion in the context of a C wave.
I will change my opinion if we get past January clearing and sustaining above 4800.
That opens the door to May.
Notice that the SPX came out of a Cup & Handle pattern in May 2023 which started the other A Wave into July. The drop into October by that reckoning is a B wave and we are in a C Wave advance. Which is testing the important July cyclical top.
Notice the “breakouts” in the bear market right off the all-time high.
There was one in March that failed with a Ghost Line defining the low.
There was a fake-out breakout in July 2022 . That Ghost Line defined the October low.
Not all breakouts are created equal.
The current Ghost Line ties to the open gap at 4400.
A failure back below that Ghost Line warrants extreme caution in 2024.
Be that as it may the market has a date with destiny in January or the May time frame.
And it’s a parabolic date.
The next top shows up in my work as the top from the 2009 low.
To say it’s a big deal is an understatement.
In the short term, there is a possible pivot due Wednesday December 13th coincidentally when Powell is at bat.
If the market has a shake-out, I would be a buyer.
December 15th is 49 Gann days from the low.
Often blow off moves cool their heels or exhaust themselves 49-55 days from where they started.
It would not be surprising to see the tree shaken when Powell speaks and then a further squeeze into Friday’s Opex.
475 (SPY) is straight across and opposite December 15th.
Is it possible the SPX rips to 4750 this week?