By: Jeff Cooper

Hit and Run Trading Morning Report - December 27, 2023

Prepare Yourself

The more times a trend line is hit and price is rejected, the more significant the trend line.

The longer a trend line has defined a price range, the more significant that trend line.

A trend line needs at least 3 points to be valid.

WD Gann wrote about the importance of the number 3:

“The majority of moves will generally occur in the time period of three…days, weeks or months.”

When long term Tops Lines and Bottom Lines converge with cycles important turning points may be produced.

Today’s report is going to look at some long term trend lines and trend channels and time cycles.

A monthly Ghost Line from the 1987 crash low shows THREE hits going into the March 2000 Bubble Top.

The first hit (backtest) is July 1998.

The second hit is occurs throughout all of 1999 as the SPX “rides the rail”, creeping up the bottom of the trend line.

That is until a 3 month shakeout into October 1999.

That pullback turned the important 3 Month Chart down.

The turn down in the 3 Month Chart defined a low prior to a Last Ditch Rally to the March 2000 high, five months later.

Here’s another look at the 5 year run from 1995 to 2000

It is possible there is a Fibonacci 13 year cycle that exerted its influence in January 2022.

It is 13 years from 1987 late August pre-crash high to the 2000 bull market Secondary High in late August 2000.

It is 13 years from the March 2009  bear market bottom to the early 2022 bull market top.

The market respected that cycle declining sharply in 2022 overbalancing the uptrend from the 2009 low.


Because 2002 was the largest correction in Time and Price since the 2009 low.

Despite what through the often opaque lens of history is remembered as an uninterrupted blow-off from October 1999 thru March 2000, it was not.

The SPX struck a closing high on December 31st, 1999 tracing out a Key Reversal Day on the first trading day of January 3, 2000…the first trading day of 2000.

Then, like now, there are two overarching factors driving the Tractor Beam.

1)      Performance. Money managers can’t afford not to show they are heavily invested in this ramp into year end.

2)      Tax considerations. Money managers desire to push gains into 2024  locking in profits in the next year thereby forestalling taxes.

So the SPX carved out a low on October 18th, 1999 and ripped into December 21st, 1999.

When the bell rang opening the year 2000, the selling commenced.

The SPX dropped into the end of February, tracing out 3 drives to a low before the Cherry On Top Blow Off where the SPX exploded nearly 2000 points in SEVEN days. The index ran from 1357 on March 15 to 1552 on March 24th.

In sum, we got a 74 calendar day Runaway Move from October 18th, 1999 to December 31, 1999 before a correction.

If this pattern plays out from our recent October 27 low it points to January 9, 2024.

Of course the aforesaid tax-selling may exert downside influence on Tuesday, January 2, the first trading day of 2024.

That said January 9th (+ or -) is an interesting date.

This is because the low for the move off the late Nov 2021/early 2022 top was SPX 3490 or 349 (SPY)

And on the Square of 9 Wheel, 349 aligns with, vectors January 9th.

The SPX is in the monthly Minus One/Plus Two sell position.

This is because the 3 Month Chart turned down in October with  3 consecutive monthly lows as offered above (Minus 1).

Now we have 2 consecutive monthly higher highs (Plus 2).

What I’m watching to see if the benchmark SPX turns down on the first trading day of 2024 like 2000

Or the 3 Month Chart turns back up given the cycle and square-out into January 9, 2024.

Be that as it may, if the 3 Month Chart turns up in January, the ensuing behavior will be critical to gauge.

If indeed the SPX is working on a bearish B wave ( yes bearish, believe it or not), then the turn up in the 3 Month Chart will define a big inflection point.

It warrants pointing out that we got a two month relentless rally going into the October 2007 top.

That was a B Wave top with a nominal new high.

We’re in an 8 week rally and a nominal new high in the SPX is virtually assured given the new highs in the Q’s and the DJIA.

A weekly QQQ shows the nominal new high is backtesting the bottom of a 3 point Ghost Line (black) from the important August 2022 high.

The FOMO producing the magnificent all-time high in the QQQ is in the context of a possible Ending Diagonal.

While it would not be surprising to see a Throw Over, it warrants noting that we have a possible Time/Price square-out as 410 squares this week.

When multiple indices have square-outs it gets my attention.

IWM squares out this week at 204.

Yesterday it struck 204

IWM is the Truth Teller because it often tells bold faced lies at major inflection points.

Allow me to explain.

IWM broke out above a Line Formation in November 2021.

It was a big Bull Trap (red)

IWM lied when it violated a well-defined support level in October 2023 (blue). It was a Bear Trap.

Now IWM has triggered another Rule of 4 Breakout (purple).

Prepare yourself for breakage back below the breakout pivot around 196.

Sustaining below 196 signals a Bull Trap has been sprung.

Calls for breadth to continue to broaden out spearheaded by IWM are the new mantra for 2024 and beyond…confirming a new bull market.

However based upon my cycle work and the structure of IWM, it’s on the cusp of a major top.

When that top is in the vast majority will be buying the narrative hook line and sinker that there is no top in sight.