By: Jeff Cooper
Hit and Run Morning Stock Report: February 13, 2023
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TIME For The Market To Prove Itself
“Charting is a little like surfing. You don’t have to know a lot about the physics of tides, resonance, and fluid dynamics in order to catch a good wave. You just have to be able to sense when it’s happening and then have the drive to act at the right time.”
The SPX 3 Week Chart turned up the week of January 9th and bullishly the index continued higher, breaking out above the Line of Most Resistance---the declining Bear Market trend line from January 2022.
An SPX daily shows the 3 Day Chart turned down on February 7th and bullishly, the SPX reversed to the topside with authority the same day.
However, last week the SPX knifed back below the 3 Day Chart low at 4088.39, showing that the trend is bending.
While the trend is bending it has not broken. The SPX continued lower after violating 4088 but the rising 20 day acted as support on Friday.
The SPX tested the 20 day ma and rebounded to the 3 Day Chart low at 4088---with the SPX closing Friday at 4090.
The SPX Weekly Swing Chart has been pointing up for 6 weeks.
This week is the 7th week which as W D Gann stated often marks a turn.
So the normal expectation with the Daily Swing Chart bending is for the weeklies to turn down on trade below last week’s 4060.79 low.
If the market continues lower once the Weekly Swing Chart turns down, my expectation is that we’ll drop to 4000-4013.
Remember 4013 is 360 degrees up from the December low.
Breakage below 4000 opens the door to a backtest of the aforesaid Line of Most Resistance---which now sits at 3970.
So really there are two factors pointing to key support between 3970-and 4013.
Tuesday’s CPI is going to light the fuse one more push up if 4155 is eclipsed with momentum ---potentially to 4270 or, alternatively, a drop to the 4000 region.
If the Bear Market Trend Line of Most Resistance at 3970 breaks that indicates we had a false breakout and my expectation is a dramatic leg down would unfold.
For several weeks I’ve been outlining mid-February as a big turning point.
This week should be the river card as to whether we saw a top at 4195 on February 2nd followed by backing and filling (distribution) and we’re going down for the count or whether this week represents a backtest of the breakout point of the LOMR (Line of Most Resistance) and a turn back to the topside after walking off an overbought condition and some extreme vertical action in individual names.
Most notably those names that are walking off extreme overbought conditions include TSLA, NVDA, SYK and META to mention a few.
Given how this week shapes up to be a point of recognition, let’s pull the lens back to look at the big picture since the bull market started in 2009…14 years ago.
I connected the first high off the 2009 low to the January 2022 all-time high (black). I then paralled a line from the March 2020 low.
I then drew a horizontal line across the 3390 pre-covid crash highs in February 2020.
I then “boxed” the region of the February 2020 highs and the consolidation in the fall of 2020.
When the SPX broke out above the box it went vertical. It had a blow-off move.
I then drew a similar box kissing the October 2022 lows and the aforesaid black horizontal line.
While the SPX dropped down to test the top of this pivot box in October it did not prove the bottom of the box.
Notably, the bottom of the box intersects the bottom rail of the black trend channel in the current time frame at the 3390 region.
The big picture structure shows a 1-2, 1-2 count off the March 2009 low with a Wave 3 high in September 2018 (followed by an A B C correction into the March 2020 crash low).
March 2020 marked a Wave 4 low with the blow-off satisfying a Wave 5 high.
If the prior resistance---the February 2020 peak is lost, the projection for big picture bear market lows ties to the 1000 region.
While the SPX has cleared the LOML, on February 2, the NAZ was rejected from a trend line from its November 2021 all-time high and its early January 2022 high (red).
That said the NAZ exploded when it broke out above a trend line connecting its March and August peaks (green).
The high tight flag displayed by the NAZ broke down last Thursday and it looks headed for a backtest of the breakout pivot--the green trend line.
This would tie to a test of a 20/50 Moving Average Bowtie (black ellipse) at around 11,400.
The markets are in their first pullback since the strong 2023 advance started in early January.
This week and the CPI is set to show whether this is a bullish pullback to support or a failure at resistance.
The cycles and the Square of 9 agree with this.
My Square of 9 shown last week in Hit and Run reveals that 480 (for the 4818 ATH rounded) squares today, February 13th.
482 = blue
Feb 13 = red
Mid-August = purple
At the same time 482 is 90 degrees square the mid-August high which is opposite today.
This is day 7 of the pullback. This is week 7 of the advance.
A turn is on the table—either a resumption of the uptrend or acceleration of the decline off the early February highs.
Conclusion. While the first pullback in this advance SHOULD BE bullish, we must be mindful that the pullback is in the context of a Primary Bear Market that has some signs of exhaustion going into the 7th week of a rally.
Underscoring the significance of the turning point the Square of 9 is pointing to is the synergy of a 4 month cycle from the June low to the October low and 4 months from the October low to mid-February.
So a possible low to low to high cycle is on the table.
As well, the rally from mid-June to mid-August was roughly 700 SPX points with the rally from the October low to the recent high being a synergistic 700 points.