By: Jeff Cooper

Hit and Run Morning Stock Report: February 9, 2023

The Seventh Seal

When the McClellan Oscillator (based on the A/D Line) closes with a negative reading, the running total of McClellan Summations, known as the Summation Index, closes lower than it did the day before. That lower reading is then reflected as a downturn in the Summation Index.

Since the first day of this Primary Bear Market, there have been six times when the Summation turned from trending upward to trending downward. The following chart tracks the Summation Index in alignment with the SPX for the last 14 months.

 What happened in the weeks that followed each:

1)      Mid-January 2022---SPX fell over 500 points in seven sessions

2)      Early April 2022---SPX fell over 750 points in six weeks

3)      Early June 2022---SPX fell over 500 points in six sessions.

4)      Mid-August 2022---SPX fell over 800 points in 8 weeks

5)      Early December 2022---SPX fell about 400 points in 3 weeks

6)      Early February 2023---SPX dropped over weeks to be determined.

It must be said that the average from above is about 575 points in 3-4 weeks.

The overriding conclusion is that a downturn in the NY Summation Index (or the NAZ Summation Index) IN A BEAR MARKET is a big deal. It triggers an immediate decline of significance.

You have to decide if this is a Primary Bear Market.

I think it is.

The 90 year cycle and its half cycle, the 45 year cycle argue that this Bear Market should not be over in one year.

The 90 year cycle downturn that started in 1929 took over 2 years and 10 months to strike the low.

But the Bear continued until 1942 or 1949 depending on how you measure.

The Bear Market on the 45 year half cycle lasted throughout the 1970’s…despite a price low in 1974.

Whether or not the SPX double tops or even carves out a new high, does not take away from the message of the above cycles.

Whether there is one more run for the roses is not the point.

The point is while such a rally will be imminently playable, market participants who have no idea of what cycles are exerting their influence will be buying every dip throughout the duration of the bear’s wrath that will occur over the subsequent stretch of years.

My point is this: when the NYSI turns gets overbought and extended in a Bull Market it says one thing; when it occurs in the context of a Bear Market it says something entirely different.

We’ve seen what happens when the Summation turns down in a bear in 2022.

If the bear has gone into hibernation, then the extreme Summation reading we saw in January marks a sea change. It marks Breakaway Momentum (BAM).

The NY Summation (and the NAZ Summation…not shown) both turned down this last week, confirming that downturn on Wednesday.

Above we map the prior 6 instances. We’re about to see what the 7th has in store for us.

As long-time readers know, W D Gann keyed off the number 7 since he believed Time is more important than Price and 7 is the number of Time.

This plays out in many ways in markets, but that is not what this is about.

I mention it because above I point to the fact that we are witnessing the 7th down turn of the Summation in this Bear Market.

Since the nature of the market is diabolical in that job number one to deceive as many traders as he can, I can’t help but think that he would stage a rip-snorting rally just prior to the biggest rug-pull of the bear.

A weekly SPX shows that the rally off the October low is approximately 700 points.

This is a Measured Move of the near 700 point advance from June through mid-August.

The major difference between the two advances is TIME.

The June-August rally was two months.

The SPX has rallied nearly four months since its October low.

So we do have a synergistic relationship in that the current advance is 2 X the June/August rally.

This is another reason why mid-February looks pivotal.

This is the SEVENTH turn down in the Summation Index.

We have had two 700-point advances.

Wave A-Wave C of an A B C correction in the Bear.

If so, then the elusive powerful 3rd of 3rd wave down is on deck.