By: Jeff Cooper

Hit and Run Trading Morning Report - January 22, 2024

Zuck Zuck Goose

Real real gone
I got hit by a bow and arrow
Got me down to the very marrow
And I’m real real gone
-Real Real Gone, Van Morrison

The SPX broke out to a new all-time high on Friday finally surpassing the 4818 high from January 2022.

It was not surprising to see a new high for two reasons:

1)      The SPX had been trading just below the prior SPX 4818 all-time high for the last 3 weeks.
Seldom does an item come so close without sealing the deal.

2)      The SPX has been in a Runaway Move off its October 2023 low. How do I know this?

The SPX turned its 3 Week Chart up on the week of Nov 13 directly off the October low and  bullishly  Extended.

The  behavior of the 3 Week Chart is one of the key factors in determining the trend.

Note how the SPX turned its 3 Week Chart down RIGHT OFF THE July 2023 high.

As well, the SPX has turned its Weekly Swing Chart down only ONCE since the Oct 2023 low.

In late November we forecast a basing period from December 20th and then a surge.
The SPX went sideways for 3 weeks and ramped last week.

Now that we’ve struck a new high, the coast is clear, right?

Not so fast.

While I think the SPX can trade somewhat higher in this timeframe  to the upper rail of the trend channel as seen in the above chart, breakouts can be dangerous inflection points…on both sides of the market, at new highs and new lows.

In late December 2022 the SPX broke out of a 7 week consolidation.

Following a 5 day Bull Flag into January 3, 2022, it attempted another breakout.

The index closed below its low on January 4th starting what was to become a 10 month rout.

Following a  3 week long high- level consolidation from December 20th, 2023, the SPX broke out on Friday producing a new all-time high of 4842.

Notice that price has struck the top of a  daily trend channel (blue) here in January 2024 as well as what I call a Ghost Line from the March 2023 low (black).

Consequently, we have a confluence of potential resistance in this general region  on this breakout.

Follow thru will be key. Breakage back below 4800 with downside follow thru is a blaring siren because this new all-time high attends what may be the largest divergence between NYSE McClellan Oscillator and any previous all-time high.

Speaking of breakouts being a Danger Zone, notice the October 2022 low was a false breakout.

I want to look at the DJIA because the US share of global stock market has surged from 40% to 60% pushing market concentration to unprecedented levels.

There’s a reason. When there is geopolitical concern the rest of the world hides in the DJIA…along with a handful of other Mega Caps.

Reports show the premium has gone from -11% in 2009 to +60% today.

Rather than mitigate this extreme portfolio concentration, it appears investors are doubling down and “splitting Jack’s” so to speak.
Pressing the bet, according to a recent Wall Street journal article, the average individual stock portfolio has 40% of its value in just three tech stocks.

I can’t help but wonder when everyone who wants to buy these names has bought, what happens?

There is a remarkable synergy to the JANUARY 2000 top in the DJIA and the current picture.

The DJIA carved out a powerful 17%  advance from October 1999 to its January  2000 top.

The US is the most expensive it has ever been compared to the rest of the world.

It was 4 years until the DJIA eclipsed its January 2000 high.

The DJIA has also rallied powerfully  up 17% since October 2023 into January 2024.

Interestingly, there was a “story” responsible for the euphoria into Q 4, 1999-Q1, 2000. It was the Dot.Com Mania.

Now it is the Tech A.I. Mania powered by NVDA and AMD chips.

They synergy between the Q1 2000 and Q1 2024 doesn’t stop there.

There is a two year comparison of the price pattern from September 1998 to January 2000 with the price action from September 2022 to January 2024.

Why the breakout in the SPX and finally the NDX on Friday?

First it was an Opex…On Wall Street the tail wags the dog.

Then we had a goose from Zuck saying he was going to be buying billions of dollars of NVDA chips for A.I.

Isn’t that a surprise? Isn’t that timing special…after the close on Thursday with on the eve of the first monthly OpEx of the year with the SPX and NDX hovering just below their all-time highs, Zuck throws crack at the market.

Zuck, Zuck Goose. Like the kids game where they chase a goose around a circle.

Would the market have exploded if he’d made the same call (pun intended) last Monday?

As my dad Jack, one of the best tape readers I have ever known, told me often, “Stocks don’t move, they are moved.”

So the chase  was on once we got an Opening Range Breakout on Friday.

The die was cast for a trend day.

And once a trend day starts on a Friday, they usually reel the bears up onto the back of the ship kicking and screaming into the bell.

Be that as it may despite all the hoopla around the vertical action in almost anything chip related,

The DJIA has risen less than 1% since December 19th.

The NDX is up 2.9%

According to Jason Goepfert, there has never been a situation before where the SPX closed at an all-time high and the Russell 2000 is still in a technical bear market---down more than 20% from its high.

It’s concentration in the Confetti Twenty…today’s version of the early 1970’s Nifty Fifty except there’s even more concentration into a few names today.

Importantly, as friend and fellow trader Don Mead, notes  there has never been an ATH for the SPX when the NYSE McClellan Oscillator was as negative as right now.

In sum, the SPX should carry somewhat higher this week.

There is a high to low to high 90 day/degree cycle on the table:

From the July 27 high to the October 27 low to Jan 24 is 90 days/degrees.

Moreover, I have identified an important price/time square-out that ties to a Gann Panic Cycle and my expectations as to how the markets path plays out over the next few months. It is posted  on the Hit and Run Private Twitter Feed this morning.

Caution is warranted on a push higher.