By: Jeff Cooper
Hit and Run Trading Morning Report - January 5, 2024
Editor's Note: there are two reports posted below. Scroll down to see the second report.
Is the Truth Teller, IWM, A Liar?
“IWM, The Truth Teller, did turn its 3 Day Chart down Tuesday with 3 consecutive lower daily lows.
90 degrees down from last Wednesday’s 05.49 high is 191. Downside continuation on Wednesday after this 3 Day Chart turndown opens the door to the 190 strike.
That said, in order for IWM to knife to the 190 strike they must offset the 20 day ma at the 195 strike and Phil D Gap at 193.90.”
We wrote the above in Wednesday morning’s report
On Thursday, IWM attempted a little rally and faltered closing at 193.82 essentially precisely kissing Phil D Gap for the second consecutive day.
Wednesday IWM struck a low of 193.78. Right at Phil D Gap.
Thursday IWM hit a low of 193.69 closing at 193.82.
The jury is still out as to whether Phil D Gap is guilty.
It looks like the judge is going to be this morning’s jobs numbers.
Overriding the importance of Phil are 3 other factors:
1) IWM has closed below a Bottoms Line from late October…for two consecutive days.
2) IWM has closed below its 20 day ma for two consecutive days.
3) Importantly IWM has closed below its July high.
Downside follow thru from here is a big deal because prior resistance (the July high) should act as new support.
This may be a “probe” of that prior high becoming new support, but the burden of proof is on the bulls to reclaim the July 198.75 high sooner than later.
IWM has a penchant for false breakouts.
The July high itself saw a little breakout above a flat formation.
When it reversed back below the flat formation it telegraphed a persistent decline.
False moves lead to fast moves.
Notice the 1 day false breakout on September 1.
Ditto November 3rd.
However, also notice that when the Tops Line (black) was reclaimed with authority on November 14th it was game on for FOMO.
Theoretically it may be said that the entire breakout above the July high is a false breakout.
With Wednesday’s Breakaway Gap we see an Island Top.
In trading one of the basic but hardest to learn lessons is to believe what you see until proven otherwise.
A weekly close below the open gap from December 14th implies lower prices ahead.
So today is a key day.
A Friday close below the aforesaid technical trifecta opens the door for a drop to a 50% retrace at the 183.50 region.
This ties roughly to a 50/200 day moving average Bowtie in the low 180’s.
This is the Maginot Line for the bulls.
As offered above IWM has a penchant for false breakouts.
One might say, The Truth Teller likes to lie.
Let’s pull the lens back to see.
A weekly IWM shows a false breakout at the November 2021 all-time high.
A big Bull Trap.
In October 2023 IWM broke a Bottoms Line (purple) that had acted as support since October 2022.
When IWM reclaimed this Bottoms Line, it triggered a Trap Door buy signal.
The Trap Door buy perpetuated a Rule of 4 Breakout on the push thru the Tops line (black) in synch with a Triangle Pendulum buy signal.
Why a Triangle Pendulum Buy signal?
This pattern occurs when a market breaks thru one side of a triangle and shortly thereafter reverses and breaks out in the opposite direction.
IF IWM drops below the lower end of the triangle (the purple Bottoms line) a powerful double Triangle Pendulum will be triggered.
Above we stated that today would be a critical day.
A bounce is due in these oversold markets, but when an oversold market doesn’t bounce caution is warranted.
Today is also critical because IWM’s October low was 16t1/162.
On the Square of 9 Wheel, 161/162 aligns with January 5th for a picture-perfect Time/Price square-out.
Be that as it may, we know what happens when oversold markets and time/price square-outs fail.
From the 205 high for the move in late December, 90 degrees down is 192/193.
Breakage lower opens door to the next decrement of 90 degrees lower at 177/178,
GLD, On the Brink of the Heart of A 3rd Wave Explosion
GLD struck an important low of 168.30 on October 5, 2023
1) We are 90 days/degrees from that low today.
Legendary market operator wrote that markets play out in these natural 90 degree divisions of the year.
2) GLD is working on a bullish 3rd higher low if it holds above its December low.
W D Gann wrote that strong rallies often times occur from 3rd higher lows.
3) GLD is tracing out a potentially bullish Cup and Handle.
4) The Handle is testing a Bottoms Line (blue) from the October low.
From the October 168.30 low 180 degrees up is 196.
GLD struck a high of 192.39 on Dec 1. Close enough to satisfy the criteria for a pause/pullback.
Notice that the recent December peak was 193.18. Wow.
GLD has been carving out an A B C Pullback since that 180 degree harmonic was satisfied.
In sum, GLD is working on the C Wave of its correction/consolidation.
When this correction ends and we get upside momentum, GLD will enter the heart of a powerful 3rd wave advance which will also trigger a Rule of 4 Breakout clearing the 3 point Tops Line from early May 2023, December 1 2023 and 12/27/2023.
Accelerated momentum will be produced as GLD comes out of its Cup and Handle in tandem with triggering a Rule Of 4 Breakout over 193.
Clearing 196 will trigger a fast move to 360 degrees up from 168.