By: Jeff Cooper

Hit and Run Trading Morning Report - January 25, 2024

The 1st Mouse Gets the Squeeze, the 2nd Mouse Gets the Cheese

“…the fact is U.S. stock valuations will not stay stretched forever. Cycles tell me this chicken is coming home to roost. I will get more into the cycles as my roadmap unfolds.

Suffice to say that if I am correct the SPX should top around the 4900 region.”

The above is from yesterday’s Hit and Run Report.

The SPX tagged an all-time high of 4903 yesterday and reversed to close at 4868 leaving a Gilligan Sell Signal in its wake.

A Gilligan is a strategy I developed in my initial Hit and Run books in the late 1990’s to identify exhaustions and Buying Climaxes.

It is a gap up to a new 60 Day high with a close at/near session lows.

We got a small Gilligan sell on Monday but there was no follow thru.

In my experience in markets often the first mouse gets the squeeze and the second mouse gets the cheese.

Again, follow thru will be key, but many generals too arrows in the back yesterday leaving signal reversal bars from vertical runs.

Names include:

TEAM which also shows a Charlies Angels sell pattern (3 Tails, Topping Tails, in close proximity).



To mention a few.

The early strength yesterday gave Hit and Run the opening to sell long positions in ONTO and CDNS and SNOW while at the same time shorting weak names that tried to stand on their tiptoes such as FSLR, ROKU and UPST.

It continues to be an extremely fractured market offering the nimble trader opportunities on both sides.

Despite the new high in the SPX and NDX breadth was -309/-572.

Bulls are convinced that October 2022 was the start of a new bull market.

However, the view from 30,000 feet indicate a bull market from 2009 is culminating.

As you can see 2000 was a major Wave 3 high with a 8 to 9 year bear market into 2008-2009.

While it is theoretically possible that we get a melt-up if 4900 is eclipsed on a sustained basis, my work shows the odds are that would come AFTER an extreme shakeout mirroring something like the 2020 crash or the Christmas Crash in 2018.

Indeed, the big picture suggests that not only is a bull market culminating from the 2009 low, but from the 1982 low and the 1932 low.

Market participants have been conditioned to 2 to 3 year bull markets like 2000-2002 and 2007 to 2009  or sharp shakeout buying opportunities like 1987 and 2020.

In short, Mr. Market has been the Comeback Kid.

When the new bear comes out of hibernation he should growl for at least a decade ala the 1930’s and the 1970’s.

It’s just a Natural Progression of psychology and sentiment.

That being said, there are great cyclical bull runs within the context of secular bear markets.

For example 1932 to 1937 and 2002 to 2007.

You have to be willing to profit from the long side maintaining a bearish complexion and vice versa.

This is the essence of Hit and Run methodology on all time frames.

If the SPX closes at/near the lows of the week caution is warranted as 1932 was 92 years ago.

On my Square of 9 Time/Price Calculator, 92 is 180 degrees straight across and opposite January 27th.

In sum, as always follow thru (to the downside) will be key.

As long as we remain below Wednesday’s high, I am looking for a deeper pullback in the short-term.

90 degrees in price down from Wednesday’s high ties to the 4833 region.

180 degrees down is 4764 which ties to a test of the rising 20 day moving average.

That said as shown in this space recently, a Gann M  A Top may be on the table.

A drop below the top of the M’s at 4805 opens the door to a larger top.