Rally From 50% Retrace?

On Monday the SPX satisfied the objective of filling the open gap from November 10^th at 3818 and then some…it skidded further virtually testing the 50% retrace at 3795: yesterday’s low, 3800, before rallying on the runoff to close right on the gap level of lore-- 3818.

Despite being down at least 30 points overnight, the futes are green as I write this morning, three hours before the bell.

Monday’s advance/decline ratio was negative 2.41 to 1, which was actually less negative than last Thursday’s (Dec 15)  massive negative 4.50 to 1 ratio.

Consequently,  Monday’s intraday low of 3800 was probably the 5^th wave down of the impulse that started last Tuesday.

If so bounceage is in order.

Key resistance is going to be 3848 because it is 360 degrees down from the 4100 December 13 peak.

As well the 50-day moving average is currently at 3867.

Additionally, 3840 is the sharply downsloping 20-HOUR moving average. 3840 also ties to my hourly Pocket Pivot Indicator.

So this tight region of resistance is the first upside hurdle for any rally.

There is a strong likelihood that when complete a bounce-- especially one that finds resistance in the aforesaid 3840-3867 region will resolve into another strong market downdraft.

The bulls are going to have a lot to prove if the SPX rallies because the angle of attack to the downside is sharp and their field position is weak as the bear’s have the ball at the bull 3795-3800 goal-like.

It’s going to take a major fumble by the bears and a Hail Mary playback above 3867…that sticks…

To generate a change in the short-term trend.

In sum, until proven otherwise, the market has carved out an impulsive 5-wave decline from Dec 13 which is the signature of the bear.

As well, in the short-term many former growth glamours look like they may snatch defeat from the jaws of victory.

Specifically, names like NVDA, SITM, and BILL are pushing the pullback limits of recent breakouts.

That’s the nature of the bear: give him an inch and he takes a mile.

There’s nothing the bear likes more than a market “breaking out” in a downtrend… like a salmon swimming against the stream. Lunch.

Just as it looked like the second mouse was going to get the cheese on a second breakout above its 200-day moving average on Dec 13^th  paving the runway for a Santa rally, the SPX buckled.

The normal expectation would be for a rally attempt to play out from this 50% retrace.

If so the nature of any rally will say a lot about early 2023.

On the other end of the spectrum, GDXJ, which looked on a trajectory to pull back to the 32 regions is rallying nicely in tandem with the entire metals complex this morning.

Well-defined horizontal resistance is at 35 based on the hourlies.

This is where GDXJ is trading pre-market.

Reclaiming and holding 35 is a bullish indication, but there is an open gap at 35.50.

Offsetting that gap will trigger a Jump the Creek short-term…hourly…buy signal.

On the long radar, is TLT, which is pulling back in league with our forecast.

We’ll send an alert on the Hit and Run Private Twitter Feed as to pulling the trigger.

Tomorrow’s report will take a deep dive into the outlook for 2023.