By: Jeff Cooper
Hit and Run Morning Stock Report: February 17, 2023
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The First Mouse Gets The Squeeze, The Second Mouse Gets The Cheese
“The early dip buyers are the key to the action today. If they fizzle out and we get some lower lows below the 50 hour moving average, then the bears will grab the ball and get aggressive. C wave support potential is near the 4077 “square” (from the Square of 9 Wheel). Follow thru below that and we’ve got a big down day on deck.”
I wrote the above on Thursday after the open on the Hit and Run Private Twitter Feed.
I followed up with: “after 2 weeks of index whipsaw we should be coming to a resolution soon now that the CPI and PPI are out of the way.”
The CPI squeezed stocks higher earlier this week. Thursday’s PPI looks like the second mouse will get the cheese for the bears.
A 10 min SPX for Wednesday/Thursday shows yesterday’s gap down struck an opening low as the Pavlovian Buy the Dippers waded in.
The market bounced in sync with the Return To Normal bullish sentiment; however following 3 little drives higher into Phil D Gap, the index knifed below an intraday trend line and fell out of bed.
With stocks “disrespecting Powell and partying like it’s ’99 after the little 25 basis point hike this month, The Fed was out for blood on the Street on Thursday.
It was a one/two punch.
First Meister hammers the tape with “We’re in it to win it” (inflation) and “I voted for a 50 basis point hike last time around.”
When the market just did a rope a dope, Bullard unleashed a right hook
Saying we may get a 50 basis point hike next month.
Coupled with TSLA’s tailspin on a recall of 340,000 cars, the tape skidded.
TSLA broke Thursday’s intraday Triangle and waterfalled.
A daily TSLA shows the Soup Nazi/Key Reversal Combo sell signal issued yesterday
A Soup Nazi sell signal occurs when a stock makes a new 20 day high and knifes back below the prior swing high of at least 4 days prior within the 20 day lookback.
In other words a Test Failure
As well, TSLA made a new recovery high on Thursday but closed below Wednesday’s low leaving a Key Reversal Sell Day.
90 degrees down from Thursday’s high is 190.
I think there is a strong likelihood TSLA drops to at least 190 today.
Breakage below 190 opens the door to the 180 strike over coming hours/days.
Notice the last pivot low in the 180 region.
A rising trend line (red) from the 101.80 low in early January ties to 185 splitting the difference between the 190 and 180 strikes.
Notice the 20 day moving average at 185.
A shorter term trend line (black) comes in at 195.
Breakage below 195 should see accelerated momentum to 190.
The thesis for the rally from the October 2022 low revolved around a “Fed pivot” and lower inflation.
Since then inflation has been revised higher 3 times adding 3 Fed rate hikes to expectations.
At the same time the SPX is still up approximately 17% from the October 2022 low.
Why? Psychology? The Return To Normal trade?
Cyclically, the reason for the rally is the 20 year cycle from October 2002.
That rally rolled over testing the October low in March 2003, five months later.
The 90 year cycle saw a crash into November 1929.
That low was followed by a 5 month rally into April 1930,
Because of the upthrust off the October 2022 low, I consider that month 1 of this advance.
That means February 2023 is month 5.
Last weeks report, Turning Point, flagged mid-February as an major inflection point.
A daily SPX shows that the index has not broken its rising 20 day moving average in 2023.
The SPX reclaimed its 20 day on January 6th and never looked back.
It closed right on its 20 day on Thursday---its closest test of the 20 in 7 weeks.
Downside follow through below 4077 opens the door to the 4013-4000 region based on my Square of 9 Wheel.
Last ditch support for the uptrend shapes up at 3980.
This is an intersection of a rising trend line from the December 2022 low and a declining trend line from the January 2022 all-time high.
Often times these price intersections are synchronistic with Time.
Notice how we are in the heart of the intersection time-wise.
It would not be surprising to see the SPX magnetized to a test of the 400 SPY strike.
Conclusion. The rally from the 1929 crash low into April 1930 saw a 50% retrace.
Similarly, at 4155 the SPX retraced 50% of the decline in 2022..
While the crash in the indexes in 2022 were nowhere near as deep as the DJIA crash in 1929… nor was it as abrupt. The crash in 1929 was 2 ½ months while 2022 was a slow-motion crash taking 10 months.
Nevertheless, many glamours crashed anywhere from 60% to 90% in 2022, mirroring the debacle in growth in 2022.
I suspect the return to normal psychology that is prevalent here in February 2023 was widespread in April 1930.