By: Jeff Cooper
Hit and Run Morning Stock Report: February 10, 2023
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The Beauty and Significance of Technical Analysis
The daily SPX below shows a CLOSE ONLY trend line connecting the June and October lows.
It hits 4 separate points making it a very valid trend line.
I then extended a parallel line from the August closing high, the cycle high between the low.
On Thursday, February 2nd, the SPX closed on the upper rail of the channel.
I have been looking for a major turning point to occur in early to mid-February as flagged in the Hit and Run Report from last week, Turning Point.
Subsequent to that report, the SPX turned its 3 Day Chart down on Tuesday, February 7th.
The 3 Day Chart turns down with 3 consecutive lower daily lows (intraday, not closes necessarily).
It was the first turn down in the 3 Day Chart since the December low.
The first time the market does something within a trend, such as turn the 3 Day Chart down, it is usually a good buy point for a continuation of the trend.
In keeping with that notion, the SPX exploded to the top side on February 7th, the same day the turn down hit.
In so doing, the index carved out a Large Range Outside Up Day (LROD or Lighting Rod).
I call these Lightning Rods because large range outside days get traders attention.
In a bull market, the February 7 upside reversal should have seen upside continuation and a breakout above the trend channel.
Wednesday was a throw-away day, an inside day. Follow that “Pause Day” the SPX should have been loaded for bull.
Sure enough it came out of the chute like gangbusters on Thursday—gapping up to the 4155 level of lore---the mid-point of the entire Bear Market.
On the Hit and Run Private Twitter Feed we flagged that breakage below Tuesday’s 3 Day Chart low should see accelerated momentum to the downside.
There is a technical trifecta that sent blaring alarm bells on Tuesday:
1) First the SPX triggered a down ORB (a break of the 1st half-hour low). This occurred at 4141.62. The SPX knifed lower.
2) Then the index triggered a Jump the Creek sell when it offset the open up gap from Thursday morning.
3) The third nail occurred when the SPX violated Tuesday’s outside up bar. This is what I call a Reversal of a Reversal or a Keyser Soze after the villainous character in the movie The Usual Suspects that strikes fear into the hearts of all who cross his path.
The bulls crossed his path and closed below that path late Thursday and this morning as I write pre-market we’re seeing follow thru. The key 4000 “square-out” region is exerting its downside gravitational pull. Why? 4013 is 360 degrees up from the December low. Notice how a breakout above 4014 in late January perpetuated a new leg up.
Conclusion. Thursday’s violation of the SPX 3 Day Chart low coupled with today’s gap down looks like a one-two punch to the bulls.
The index looks to be on a trajectory to 4000-4013.
Today is an options expiration. Is it possible the SPX tags the 4000 strike today?
The large Topping Tail reversals (Lizard sell signals) in MSFT, NVDA, TSLA, CYBR, to mention a few, are indicative of urgent selling.
Corroborating all the above technical is the message of my unique Square of 9 Time & Price Calculator.
1) I anchor the zero line to 482, green, (for the 4820 all-time high of 4118, rounding)
2) It squares February 10th, blue. This is synergistic with our early to mid-February Turning Point. You always want to allow for + or – a few days.
3) Notice that the mid-August top is 180 degrees straight across and opposite our current time frame, forming a T-Square between the August high, the price of the ATH and the current time.
Said another way, the mid-August peak was called by The Square of 9 Wheel because mid-August squares out with the PRICE of the 4818 all-time high on January 4th, 2022.
This square-out in February should be significant as well. Breakage below 4000 will tell us just how significant.
Defense is on the field.
