By: Jeff Cooper
Hit and Run Trading Morning Report - December 13, 2023
Bull markets end impressively.
Secondary Tops are an echo of the prior blow-off.
The late 2021/early 2022 time period has an incredibly significant number of cyclical occurrences that suggest it was a meaningful top.
It was 34 Fibonacci years from 1932 to the 1966 top.
It was 21 years from 1966 to the 1987 top.
It was 55 years from the 1932 low to 1987.
Those speak to the power of Fibonacci clusters.
89 years from 1932 is 2021.
55 years from 1966 is 2021.
34 years from 1987 is 2021.
This suggests the late 2021/early 2022 top was an orthodox top that is being tested now with a melt-up move for the Secondary Top.
This Secondary Top can be a lower high, a double top or because of the significance could see a significant overthrow.
In trading terms it means maximum risk in assuming a melt-up to 5000 + SPX
Or shorting prematurely.
To wit, the SPX has only shows two consecutive lower daily pullback lows since the rally started in late October.
The SPX has two large range signal reversal bars, November 29 and Dec 6 that failed to produce any kind of correction.
The SPX has not pulled back to test its 20 day moving average throughout the rally.
The seasonal markup has the market in its grip and will relent…but not yet.
Today we get Mercury retro on FOMC Day.
Mercury retro has a strong tendency to affect the market but it can be when the retro period starts, at the mid-point, or at the end.
Given the vertical move, it would not be surprising to see a reaction here.
That said, the last Opex of 2023 is Friday and that ties to the open of the Gann 49 Panic Zone which is 49-55 days.
This is Gann’s Crash Window.
We have crashed UP.
This Saturday is 49 calendar days from low.
Next Friday is 55 calendar days from low.
If we do get a shake-out, (to 4500 region?), I think it would be buyable for a drive to 4700 into January 11th.
Remember the 3490 low (349) in October 2022 vibrates off January 11 and 4700 (470).
Currently we can that price has reached the upper Bollinger Band. The blue trend line shows the recent price trajectory.
The exact same trajectory angle defined the July top (red arrow). This resulted in a decline of 272 points in 3 weeks.
Now look at my indicator below.
The black lines show the similarity of the indicator at the July top and now---at that time and now.
The lower indicator looked similar until the last 3 days when the red line exploded higher.
Look at where the indicator is now (yellow arrow). Note the yellow arrows to the left which are at roughly the same level as the current reading.
While one might assume such a high level reading would be associated with a major top, that was not the case with either of the two prior readings. Both followed with a correction, but the corrections weren’t large and only lasted for a few days.
The takeaway is that as offered above any reaction should lead to another higher high.
Interestingly if the SPX should rally 1202 points off the 3491 October 2022 low it would hit 4693.
1202 points to January 11th and ties to the 4700 square-out.
This would satisfy a square-out of the range from the 2022 low in early January.