The Power Of the Soup Nazi Signal

The SPX made its Wave 2 retracement closing high on November 30 at our 4080 square-out level.

This is because  407/408 is 180 degrees opposite October 13, the low of the year.

A nominal new intraday high was struck on December 1^st..

On Tuesday’s CPI the SPX Pinocchioed the Nov 30/Dec SPX highs and caved in.

The reversal triggered a Soup Nazi sell signal.

This is a new 20-day high followed by a stab back below a prior high within the 20-day lookback with at least a 4-bar interval (this is to guard against a continuation move).

The Soup Naxi sell is a TEST FAILURE pattern…as in “no soup for you” for the chasers of the new 20-day high.

Wednesday the SPX retraced 50% of Tuesday’s range and caved in again on the Fed’s rate hike and Powell’s comments.

Powell seemed more nervous than usual. I suspect the bulls thought it was transitory.

But Mr. Market didn‘t like the body language or the comments.

Be that as it may, the SPX held the key 3890 flat line support carved out over the last week.

As we noted on the Hit and Run Private Twitter Feed yesterday, “If 3890 is broken, forgedaboudid.”

This morning pre-market, the SPX is dropping through 3890 and in so doing is triggering a follow-on sell signal to the Soup Nazi---a Jump the Creek sell signal on offsetting Tuesday’s gap.

The SPX, flirting with 3980 doing so yesterday, but the second mouse (below the gap) is getting the cheese this morning.

In sum, 50% of the 2020-2022 range was the 3492 October 13, 2022 low.

That low perpetuated a 600-point rally over SEVEN Gann weeks.

50% of that rally off the October low ties to 3800.

Breakage below 3800 opens the door to a new low.

The vast majority of market participants seem positioned for a year-end rally.

If 3800 holds that may yet play out, but the urban legend of the Santa Rally is being high-jacked by

The Mother of All Turnaround Tuesday’s (December 13).

Santa Claus Rallies are a bull market phenomenon.

It looks like Tuesday’s spike ran in the shorts leaving the market more vulnerable than otherwise to elevated tax-loss selling.