By: Jeff Cooper

Hit and Run Morning Stock Report: February 6th, 2023

The T Rex’s  Jaw Bone Is Connected To the Tail Bone

We’ve been targeting early to mid-February as a turning point.

There’s another reason that makes this time zone pivotal…it’s called a Fibonacci Cluster:

Feb 7th is 610 trading days from the Sept 2, 2020 major top.

February 15th is 377 trading days from the August 16th, 2021 top

February 10th is 144 trading days from the July 14th, 2022 bottom.

February 9th is 89 trading days from the September 30th, 2022 bottom.

February 14th is 34 trading days from the December 22nd, 2022 bottom.

February 14th, is 21 trading days from the January 13th, top.

The question is IF we should drop hard into this time frame will it mark a low?

Stocks over the last several weeks have rallied hard, leaving many, perhaps most, to believe that not only is the worst behind us but that the coast is clear and after one bad year things are “back to normal”.

This is the time to take another look at the “return to normal” chart in yesterday’s report.

The psychological condition of the return to normal meme is reminiscent of the famous fable of the scorpion (bear market) and the frog (trading crowd), where the scorpion talks the frog into carrying him across the river on his back. The frog finally agrees, and when the scorpion stings the frog in the middle of the river, the frog yells, “Why did you trick me? You said you wouldn’t sting me!”

And the scorpion answers simply, “That’s my nature. You KNEW all along that I’m a scorpion.”

In the current environment, many have forgotten that we are in a bear market and are surprised when it stings them.

But that is the nature of the bear….just as things are going swimmingly, he strikes.

Indications are the bear is ready to strike.

For the 4th time since May, the McClellan Summation Index turned down on Monday.

It is turning down from an overbought extreme in the NYMO and a negative divergence.

Either January’s momentum will return after the current pullback walks off the overbought condition or in the midst of a major Bull Trap.

AI is emblematic of this “return to mania”.

In the former,  the SPX objective looks like 4270 to 4325 +.

Above that anything is possible.

In the case of a Bull Trap, the door to new lows below the October low is open.

It must be said that following the 2007 Bubble, the “Return to Normal” stage preceded a near 50% drop in the SPX.

Interestingly, that would take us to the region of the 2020 lows.

Coincidentally, interest rates had just gone to 4.75% prior to the plunge in 2008 -- that is the same level hit recently.

The T Rex in the ointment is that we just came out of a much larger everything bubble.

Powell speaks today and we get more Fed Speak all week.

You have to ask yourself…why?

Why do they “jawbone”?

You have to ask yourself: who owns the Fed? Wall Street investment banks.

So moving the market with the jawbone makes their constituents money, does it not?