By: Jeff Cooper
Hit and Run Trading Morning Report - January 4, 2024
In mid-December Hit and Run said there were only three factors keeping the market up:
1) Performance chasing
2) Tax considerations, ie. pushing profit taking into 2024
3) Bullish seasonality
Our expectation was that due to the first two factors profit taking could hit the market hard from the get-go in 2024. It did, driving the last two days of the Santa Rally phase into the gutter.
We went on to say as 2024 dawned that the selling should be sharp and quick in order to shake out the euphoria and complacency.
In early December we thought a basing phase should begin around December 20-21 and move through January…;possibly into the last week of January.
I never wavered. It was difficult to hold onto this road map given the spike in many stocks past December 21st.
That said many big names did top around December 20-21st followed by Gann’s pattern of two weeks (of distribution) “on the side”.
AMZN, topped on 12/20 leaving a Lizard sell signal. Notice the narrow sideways stint and series of NR 7 Days into the end of the year.
CRWD topped on 12/18 with a similar sideways stint. I’m certain many traders misread these as high level consolidations as leaders “came out” lifting the SPX to a new all-time high.
TEAM topped on 12/22 leaving a Gilligan sell signal (a gap to a new 60 day high with a close at/near session lows). Hit and Run shorted.
DUOL topped on 12/19 leaving a Gilligan sell signal.
UPST topped on 12/20 leaving a Key Reversal Day.
To mention a few.
All topped and went sideways before plunging.
Names that held up until the end of the year made up for lost time, plunging this week.
Names include AMD, ARM, CAT, DKS, OLED, META and TER…to mention a few.
Is this a significant high? For the answer to that question we have to see how low we go and where we are in late January.
Why late January? July 27th was an important high, 90 degrees/days later was October 27th and an important low. Another 90 days/degrees later is late January 2024.
If the market gets momentum from late January (the basing period) we could have one last hurrah for another 90 days into April.
There is a major Panic Cycle that hits in late April/early May.
A Panic Cycle can be a spike high or an air pocket.
I don’t know if it’s a high or waterfall low. It should be easier to tell once we see how the market is acting past January/February.
If it is destined to be a waterfall/crash, then if we count back 49-55 days for the Gann Panic Cycle we arrive at March 9-11.
That’s very fitting for a blow-off top. It harmonizes with the chart I showed earlier this week showing the 1 year cycles that hit in many Marches.
A big high in March is the 24th anniversary of the Bubble Top in March 2000.
This March is the 15th anniversary of the March 2009 low.
15 years is important because it is 90 degrees or ¼ of the Gann Master 60 Year Cycle.
If late April/early May is a high it may be the Mother Of All Sell In May’s And Go Away.
If late January is a low as offered above then we want to consider a 90 day advance ala 1929/1987 into pre-crash tops.
Either way the point I want to convey is that the July 2023/October 2023 decline and subsequent ramp into the end of the year may just be an appetizer to the volatility that will be the rag doll in the pit bull’s mouth in 2024.
The over-arching takeaway is that 2024 should see the top from 2009…IF IT HAS NOT ALREADY BEEN SEEN. That is a possibility we cannot rule out.
If the SPX breaks below a 50% retrace of the advance off the October 2023 low (4450) it’s a danger signal that the top is already in.
If we get another leg up after a correction, the structure projects to 5219-20.
Interestingly, 522 for 5220 on the Square of 9 Wheel squares September 3rd.
Of course that was the high of a major Super Cycle top and we’re looking for a Super Cycle top in this time frame as well.
That synchronicity warrants our attention.
It is worth pointing out that 2024 is 95 years from 1929 and that 95 is 180 degrees straight across and opposite January 2nd.
This possible Time/Price square-out may be exerting its influence from Tuesday, Jan 2, 2024 when heavy selling in stocks hit the tape.
It would be typical for the perverse Mr. Market to pull that gambit with the vast majority of market participants brushing it off as simply tax selling forestalled into 2024 from big gains in 2023.
For now the SPX has a Trifecta Buy Signal on the table:
1) The 3 Day Chart turned down for the first time since the rally started in late Oct 2023.
2) We have a Holy Grail buy signal as the SPX is testing its rising 20 day moving average. Again this is the FIRST Holy Grail buy setup since late October.
3) The SPX is testing its prior swing low from Dec 20 at 4697.82.
In and of itself, the first two factors would be enough to produce a rally but given these are the first occurrence since the vertical rally has been in effect warrants our attention.
If the market does get traction here and carves out two higher daily highs we will have a Minus One/Plus Two sell setup.
Drilling down to the hourlies shows that a rally phase could install a short term right shoulder of a Head and Shoulders top pattern.
That said 90 degrees down from the Dec 28 high of 4793 is 4724.
The SPX closed with authority below that level at 4704.
Consequently if we do not get a bounce, the door is open to the next decrement of 90 degrees down which works out to 4655.
If the Trifecta buy setup fails to produce a rally we should see 4655 in short order.
If we do rally, the first hurdle is the aforesaid 4724 level (90 degrees down).