By: Jeff Cooper
Hit and Run Trading Morning Report - January 8, 2024
Sign Of the Bear
Friday’s Hit and Run Report, Is the Truth Teller IWM, A Liar?, highlighted a weekly IWM comparing the false breakout in November 2021 to a potential false breakout in late December 2023.
That was before the Friday’s close was in the books.
Now we know that IWM closed below the breakout pivot on the Friday weekly closing basis.
A daily IWM shows it has closed below the breakout pivot for 3 consecutive days.
Notice the downside follow-thru after it turned its 3 Day Chart down on January 2nd -- immediately off the high for the more. That’s the Sign Of the Bear.
Since reaching 205.49 on December 27th, IWM is down 6% in 6 days.
Friday it filled the open gap from December 14.
That said, IWM has a possible Island Top.
The Square of 9 Wheel shows that the 162 October low squares out with the high day (so far), December 27th. That ties to 270 degrees up from low.
If IWM reclaims/offsets the open gap from last Wednesday and then the Dec 27th 205.49 high
It will rally to 217 which is a full 360 degrees up off the low.
IWM gapped up thru the important July 2023 high and gapped back below it last week.
Prior resistance should act as new support. It did not.
Instead, IWM knifed back below the July high like a hot knife thru butter.
The odds suggest that the December 27 high is the top of Primary Wave 2.
The former breakout level, the July high, is likely resistance.
Primary Wave 1 down started in November 2021 and lasted into October 2022.
Primary Wave 2, a corrective wave, took place as a double A B C.
Let’s look at the SPX.
90 degrees down from the Dec 28 high at 4793 is 4724.
Once the SPX broke 4724 what did we say?
We stated that the 4724 region should act as resistance.
The SPX should be headed to 4655 this week.
Why? Because this is 180 degrees down from the 4793 high.
Checking an hourly SPX from December shows the last impulse up started from 4646 on Dec 13.
So this 4655 region looks pivotal for this week.
Why this week?
Because the SPX turned its Weekly Swing Chart down last week.
In other words it traded below the prior weeks low giving us one weekly lower low.
Trade below last weeks low THIS WEEK puts the SPX in the weekly Plus One/Minus Two Buy position.
The 3 Week Chart is up = Plus One of my Swing Method.
Two consecutive weekly lower lows = Minus Two.
In sum this week is going to be pivotal.
Breakage below last weeks low opens the door to the 4655 region.
It’s a nice long setup for several reasons:
1) The weekly +1/-2 setup
2) 180 degrees down from high at 4655
But additionally, this would be the first weekly +1/-2 buy setup since the October low.
This setup must be taken within the context of the significant momentum in the last two months.
Not all setups are created equal. 4655 may not hold. The agenda may be for THREE consecutive lower weekly lows with the SPX turning its 3 Week Chart down.
If that should play out and it does not define a low, it opens the door to a 50% retrace of the Oct/Dec advance at the 4450 region.
If the SPX drops below 4450 it is further validation of a major top, the top of Primary Wave 2.