By: Jeff Cooper
Hit and Run Morning Stock Report: December 22nd, 2022
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The Big Kiss Off
The chart below is a daily SPX since last November.
Notice that a “tops line” defines each of the 4 pivot highs in this year-old bear market.
The “tops line” is created by paralleling a line across the tops from a “bottom line” forming a rising trend channel. These define the major contra-trend moves of 2022.
When there is a spike low where the close is nowhere near the low, the “internal” low is chosen.
For example, in the case of the trend channel corresponding to the October 13th low of the year, the “bottoms line” starts a few days before the October 13th low-- it starts at the “internal low” which is often the closing low for the move prior to the Spike & Reversal.
The light blue line running thru the chart is the 20-day moving average.
Notice that when the price has broken below each trend channel, there has been a consistent knee-jerk snapback that backtests the bottom of the broken trend channel.
In each instance, this has occurred where the 20-day moving average is rolling over.
This is The Kiss…where price kisses the intersection of the 20-day ma and the bottom of the trend channel.
As you can see, this same setup presents should the SPX rally to the 3950-60 region over the coming hours/days.
Hopefully, you benefitted from my warning about the 4080 square-out top.
Mr. Market was kind enough to give a second chance to dodge a bullet on December 13th.
That is when the second mouse got the cheese… the “square-out” cheese.
Our presumption was the SPX would find support at the 50% retrace of the October/December range…
It did, on Monday.
Tuesday backed and filled.
Wednesday was a Gap & Go.
The clear target objectives are 3915 and 3950 region.
These are Fibonacci retracement levels (38.2 and 50%). It is important to be aware that there is a gap at about 3960, so if the other two levels are reached, then potential exists to Phil D Gap.
If we do get a three-day or so rally, my expectation is a strong move back down that could break the October low.