By: Jeff Cooper

Hit and Run Trading Morning Report - February 1, 2024

A Big Deal

“That’s to be seen.”
-Jerome Powell, Wednesday, January 31, 2024 Presser

“There are only three sports: bullfighting, motor racing, and mountaineering: all the rest are merely games.”
-Ernest Hemingway

The potential for an explosion of volatility was telegraphed by Tuesday’s SPX N R 7 Day flagged in this space.

In fact it was an N R 7 Day (the narrowest range in 7 sessions) at an historic high.

As well there was the prospect of a Boomerang sell signal on the hourlies on a reversal back below the 4900 region as depicted on this chart from yesterday’s report.

What happened?

The SPX delivered a Breakaway Gap below 4900 dropping decisively…to 4880.

Then came an FOMC Cha Cha Cha for the ages.

This is when Fed Day produces 3 intraday moves in opposite directions:

A down up down or an up down up.

FOMC Day is grist for the mill for those wild and crazy Algomatics.

Following the drop to a new low on the session mid-day, (1), the SPX dropped to session lows (2) followed by a spike up to the opening gap. Phil was MIA.

He never got the memo.

We tweeted this was the spot to buy ODTE puts.

“Today is Fed Day and in league with yesterday’s sell in tech we should get a doozy of an FOMC Cha Cha Cha.”

We wrote the above in Wednesday’s Hit and Run Report.

The 3rd move, down was  a doozy :  After kissing 4900 goodbye, the SPX high tailed it out of town,

Eviscerating the tape with  a 60 point plunge in just over an hour.

We thought that the 4900 was a big deal.

Yesterday’s Breakaway Gap reversal below 4900 underpins that assessment.

To recap  4900 is 70 squared and 7 is WD Gannn’s fatal number. It is the number of Time.

Consider that there are 52 weeks in a year and 52 X 7 the number of days in a week = 364 the number of days in a year and the time it takes the earth to orbit the sun. A Cycle.

7 years is a major cycle.

A week ago we linked to the Great American Eclipse due in April.

We walked through the price action around first Great American Eclipse was on August 21st, 2017.

7 years ago.

490 days from the important October 13, 2022 Interim Low for the Bear is mid-February.

It will be crucial to gauge the action following this time frame.

This morning we’re getting a sharp rebound.

Yesterday’s Crocodile Dundee knife produced a short-term oversold condition.

The SPX should rebound to test the 4860 square which is 90 degrees down.

My expectation is that this should define short-term resistance but optimism is extreme so you never know… especially with META and AMZN on deck.

As well, the percentage of bulls in the most recent Investors Intelligence Advisors’ Survey rose to 57.7% of late, the highest level in 2 ½ years, since July 2021.

In sum we forecast a drop to 4860 (90 degrees down from Monday/Tuesday’s all-time highs.

Mr. Market delivered in spades skidding to 4845 immediately.The knife tru 4860 opens the door to the next decrement of 90 degrees down which is 4790.

So it will be interesting to see what this morning’s rebound to the 4860 region perpetuates.

I think this reversal from 4900 is a big deal.

Whether it leads to a flush-out in the first half of the year that elicits a final run for the roses or not.

All major highs and lows are time/price harmonics of some previous major highs and lows.

Moving the decimal point on the 2009 bear market low of 666 we get 66.

On the Square of 9 the number 66 squares January 29th.

One could ask well why does that make late January 2024 important?

And it’s an excellent question.

We are in the 90 year cycle range from 1929 to 1932.

The 2021 melt-up ties to the 90 year cycle from 1929.

We are 92 years from the 1932 low.

On the Square of 9 the number 92 is opposite late January.

So that makes the square out with “66” in late January interesting.

Two “big deal” low to high cycles.

As well the high in 1929 on the DJIA was 381 (closing high).

381 is 180 degrees straight across and opposite early February.

The structure of the SPX validates the idea the end of January 2024 is a big deal.

From January 2022 Wave 3 peak a 4th wave correction played out.

The trend channel at a new high underpins the idea of a 5th wave.

This is in the context of a 5th wave on a larger degree from the 2009 low.

If we get above this weeks high with sustained momentum, it opens a door to a culminating blow-off.

But it will NOT be a new bull. The Matador is at the end of the rage.