By: Jeff Cooper
Hit and Run Trading Morning Report - December 19, 2023
Below is a the big picture from the 2009 SPX low.
I have drawn the lines not as trend lines but to delineate the waves.
No one really knows what the top in early January signifies.
What we can say is it is the top of 5 waves of some degree.
In my opinion it is clearly the top of the bull run from 2009.
We don’t know unequivocally if the January 2022 top was a Super Cycle Wave Top (from 1932)
Or whether after a large correction in time and price a continuation within the context of a super bull will continue.
We don‘t have to know the answer to that question to know how to play 2024.
Whatever the case, the advance from March 2020 to January 2022 looks like a 5th wave blow off.
If you want to be a big bull, then the presumption should be that January 2022 to October 2022 was an A Wave decline.
That means the rise from October 2022 has been a B wave CORRECTIVE rally which will be followed by a vicious C Wave decline in 2024 that will likely undercut the 3492 low from October 2022.
Then theoretically, you could get aggressive.
Of course Mr. Market’s job is to deceive the most people.
It does this by being pretty clear about its intent most of the time, but then when it counts the most, being as misleading as possible.
Such was the case in early 2020 when a B Wave struck all time new highs prior to a crash.
We are of one magnitude greater than that.
Consequently the prospect for a runaway move to the 5200 region is viable within the context of a Spike & Reversal pattern echoing 2020.
There is a caveat to the idea of a meltup to the 5220 region.
That caveat has to do with TIME.
If the market continues to run into late January it will have satisfied a 90 day blow-off.
This could be mirroring the runaway, last ditch moves of 90 or so days into the September 3, 1929 top and the August 25, 1987 top.
They say markets don’t crash off highs, but that’s exactly what happened with the two biggest crashes in history.
In sum, if the market is going to buy more time past late January, then the presumption is it will correct from here versus exploding higher immediately.
There is a good argument to be made for a pullback from here.
1) SPX hit 4750 on Monday. 475 is 180 degrees straight across and opposite December 18 (+ -).
2) The massive Breakaway and Breakout Gap on Nov 14th roughly represents the mid-point of the entire rally to date.
3) A Ghost Line from the March 2023 low nails Monday’s high.