By: Jeff Cooper
Hit and Run Trading Morning Report - December 20, 2023
Lock Out Rally Due For Pullback
Since the explosion off the October 27th low, the SPX has only seen two consecutive lower daily lows ONCE…on November 28th.
Otherwise every other pullback has been defined by a one day pullback below a prior days low.
November 28th was one month after the low.
It will be interesting if we get multiple consecutive daily lows one month from November 28th
Going into the end of 2023.
Yesterday’s Hit and Run Report flagged a potential time price square-out at 475 (4750) and December 19th.
475 is straight across and opposite December 19th.
The SPX closed above that and on its high on Tuesday at 4768.
That may indicate the SPX is on the A train to a destination north of the old high at 4818.
That said, the market is not a Rolex.
We must give momentum some leeway especially as the SPX kissed a Ghost Line from the March 2023 low thru the Breakaway Gap on September 20.
Clearly the market is so far out over its skis that the largest pullback since the October low could come at any time.
The short-term downside pivot is the July high, 4607 which ties to the20 day moving average.
The 20 day ma hasn’t been tested since the Lockout Rally started.
The Lockout Rally revealed its true colors after the SPX gapped up on November 2 following a turn up of its 3 Day Chart on November 1st.
In other words the bullish behavior following the turn up of the 3 Day Chart on the heels of the plumb-line drop into October was telegraphing a conspicuous change in character.
Yet no one I know of was expecting the kind of relentless momentum the market has delivered in the last 7 weeks.
We got an initial projection of 4497 which is 540 degrees up off the 4104 low.
Clearing that opened the door to a complete retracement to the July 4607 peak.
When that was taken out the market stood on its heels and is less than 30 points from its all-time closing high in early January 2022.
The deal with Runaway Moves like this is that they “lockout” most players because it doesn’t accommodate players with continuation setups.
Runaway Moves like this by definition are part and parcel of the Pain Trade: buying extended moves without the benefit of a pullback.
The Lockout nature of the rally is a cocktail produced by cooing from Powell mixed with end of year performance considerations over FOMO rocks.
It’s a slippery slope but Runaway Moves have a strong tendency to streak for around 90 calendar days.
That was the pattern in both 1929 and 1987.
The Runaway Blow-Off Move in 2000 started on October 18 and ran up 90 days prior to another section which took the NDX into its March 24th top.
It subsequently crashed for two years.
If the 90 day pattern plays out it points to a turning point in late January. 2024.
Interestingly, this is also 180 degrees straight across and opposite the late July 2023 top.
If we mirror the 5 month pattern the market will extend into late March/early April.
Notably we have a solar eclipse on April 8th mirroring the lunar eclipse at the October 28 low.
There was a solar eclipse on November 1, 1929, just days from the big crash.
In 1987 there was a luar eclipse on October 7th. The market started to see selling pressure a week later.
The eclipse this April is another Great American eclipse after the one in August 2017 which was SEVEN years from April 2024.
The 2017 eclipse ties to the beginning of a persistent Runaway Move that lasted into late January 2018. A crash ensued. Volatility came out of hibernation.
Notice that it was 5 months from the August 2017 eclipse to the late January 2018 top.
This mirrors the 5 month Runaway from October 1999 to March 2000.
History shows that parabolic moves last 3 months or 5 months (in two sections of 2 and 3 months)
2, 3 and 5, are the building blocks of the Fibonacci Spiral that that produces the Principle of Squares as revealed by my Square of 9 Time/Price Calculator.
In sum January and late March/early April are on the map in 2024.