By: Jeff Cooper

Hit and Run Trading Morning Report - January 23, 2024

Gilligan and A Lizard Walk Into the N R 7 Bar

While the SPX rallied to new highs on Friday, the daily total new highs minus new lows was negative 40.

On a 5 day basis total new highs minus new lows topped on December 20, made a lower high relative to a higher SPX high on December 28 and has contracted significantly since then..

Said another way, the 2 day rally last Thursday and Friday was not enough for total new highs minus new lows to get back above zero.

This just highlights  how narrow the markets advance has been.

That’s not new information. But it only matters til it matters.

It hasn’t stopped the indices from rallying.

What the narrowness of the advance does is magnify the thinness as long as it persists.

In other words, the fewer the momentum names, the more money plows into them further exemplifying and exacerbating their outperformance.

Reports show that as of Friday, just two stocks, MSFT and NVDA, accounted for almost 75% of the SPX rally so far in 2024. Wow.

On Monday the SPX left Combo sell signals…a Gilligan’s Island and a Lizard.

A Gilligan is a gap up to a new 60 day high with a close at/near session lows.

A Lizard is a new 10 day high with an open and low near session lows.

In other words the market opens and runs up but tails back off to close near the open.

Monday was also an NR 7 Day…the narrowest range in 7 days.

These contractions in volatility typically see an expansion in volatility within a few days.

As well the SPX also may be working on a Gann M  A  Top pattern.

Back below the peaks of the “M”…get defensive.

While Monday left a signal reversal bar the wave count looks incomplete to the topside.

If a 5th wave unfolds toward our 489 SPY square-out shown the other day (489 is opposite the July 27th high and square the October 27th low and conjunct January 23rd , today.

A drive toward 4900 (an octave of Gann’s 7 squared panic number 49) today/tomorrow burnishes a potential picture-perfect sell setup. A Rembrandt so to speak.

Two generals, AMD and NVDA underpin the idea of at least a near term exhaustion.

Today vibrates/vectors 605 as to NVDA.

AMD overthrew our idealized 171 square but closed below it on Monday leaving bearish looking Train Tracks.

Today vibrates off 171. Consequently a rally attempt to the 171 region in AMD that falters may offer a good short scalp opportunity.

The Q’s also left a Gilligan sell signal on Monday.

Monday’s high was 424.72. The Q’s reversed to close at 41.73.

On the Sq of 9 Wheel Monday points to 424.75.

So we have a signal reversal bar at a Time/Price square-out  in the leader.

Checking the Truth Teller, IWM, shows it turned its 3 Week Chart back down last week.

Notice that the it left a weekly Bottoming Tail after turning down last week from the precise level where IWM turned its 3 Week Chart UP in December. This was the first turn up in the 3 Week Chart since it bottomed in late October 2023.

This ties to the same level where IWM turned its 3 Week Chart down in August 2023 coming off the July peak.

We have a change in complexion then versus now.

When it turned its 3 Week Chart down in August, IWM continued lower.

After last weeks turn down, IWM reversed up and is extending---for the moment.

A higher weekly high next week; however, puts IWM in the WEEKLY Minus One/Plus Two sell POSITION.

Think the 3 Week Chart is important?

This week is 180 degrees from the July high and 90 degrees from the October low.

The action in early to mid-February will be pivotal.