By: Jeff Cooper
Hit and Run Trading Morning Report - March 25, 2024
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The Next Big Short
Stock valuations are at extremes comparable to 1929 and 2000.
Of course overvalued and overbought are not good timing indicators.
Markets are famous for sporting overbought and overvalued extremes for many moons.
As legendary market seer W.D. Gann wrote, Time is more important than Price.
Gann looked at Time many different ways…time counts from highs and lows, time and price square-outs (where time and price ‘meet’ or balance out), natural cycles (seasonal and astrological) and market cycles.
He also placed great emphasis on anniversary dates which many think is voodoo.
Later in this piece I am going to disabuse you of that notion.
Gann wrote:
“The time factor and time periods are the most important in determining a change in trend because time can over balance price and when time is up the volume of sales will increase and force prices higher or lower. Time is the most important factor of all and not until sufficient time has expired does any big move start up or down. The time factor will overbalance both space and volume. When time is up, space movement will start and large volume will being, either up or down.”
In other words, Time Turns Trend.
So Gann speaks about the time FACTOR and time PERIODS being distinct.
Gann stated the time factor is so fundamental that it precedes (and therefore causes) changes in prices and changes in volume in the stock and commodity markets.
He went on to say that the time factor is a valuable secret, details of which he is unwilling to reveal. He is however prepared to teach his rules which, when properly applied, produce profits.
Gann also left valuable clues to his secret in his coded novel The Tunnel Thru The Air.
In typical Gann fashion, the subtitle to the book is more telling than the title.
I can tell you that after 40 years studying Gann’s work, I am convinced that the Square of 9 Wheel is the key to unlocking Gann’s use of Time.
On the front cover of Gann’s book The Tunnel Thru The Air there is a series of interlocking squares.
This series of interlocking squares symbolizes, as Gann observed, that the price action of stocks and commodities progresses according to a series of interlocking squares in time and price and the INTEGRATION of time and price.
These squares represent the true nature of time and price which progress not in a linear fashion but in a spiral progression.
These squares also represent the aspects between planets.
So, as above, so below.
This is the reason, according to Gann, that “Every stock makes tops or bottoms on some exact mathematical point in proportion to some previous move. Each top or bottom comes out in accordance with an exact mathematical proportion to some other top or bottom.”
In other words there are mathematical synergistic relationships in stock movement with all prior important tops and bottoms being harmonically related to each other like notes in a symphonic progression.
As Gann put it, “God geometrizes.”
Starting out I offered that stock the current market mirrors the extremes from 1929 and 2000.
The market crashed off the September 3rd high in 1929 without offering players the graceful exit of a secondary high.
In early September 2000 the market did carve out a secondary high from that years March high before collapsing.
The DJIA lost 89% from 1929 to 1932.
The NAZ lost 77% from 2000 to 2002.
This is a remarkable example of anniversary dates exerting their influence.
The market topped in early October 2007 mirroring the bear market low in early October 2002.
The market also struck a crash low in early October 1990.
The March 6/9 bear market bottom in 2009 mirrors the March 10th NAZ top in 2000.
Likewise the market exploded from the week of March 10, 2003 running up 360 degrees in time.
Anniversaries.
The U.S. became a sovereign country when it was recognized as such by Great Britain on September 3, 1783.
The top in 1929 was on the same date.
Ditto the start of WW2.
The U .S. declared war on Germany on April 4, 1917.
This may prove relevant to the first week of April 2024 and the Solar Eclipse on April 8th.
The U .S. entry into WW1 was 107 years ago.
On the Square of 9 Wheel 107 is opposition September 11…9/11.
9/11/2001 was 23 years ago.
23 squares 9/11 indicating this year has potential for terrorism on U.S. soil.
The U.S. declared war on Austria-Hungary on December 7th, 1917, the same date the U.S. was brought into WW2 in 1941.
The April 8th solar eclipse is thought to have a lot of Biblical synergies, not least of which is that it
Is following the first Great American Eclipse on August 21st, 2017 it is only the second eclipse to have crossed the body of the U.S. forming an X in the middle of the country.
Maybe something, maybe noting but the April 8 Great American Eclipse is 6 years, 6 months, 6 weeks and 6 days from the August 2017 Great American Eclipse.
Last year we identified April as an important potential time period for the market to run up into because we thought it possible a mirror image foldback with 1929 may be on the table.
Allow me to explain.
From the crash in 1929 the DJIA craved out a secondary high in mid-April 1930.
I reckoned this April could be a blow-off high with last October being a low.
One factor underpinning the synchronicity between 1929 and 2024 is that April 2024 is 94 ½ years from the October 1929 crash.
On the Square of 9 Wheel, 94 ½ squares April 8th, the eclipse.
Several reports have walked through the war cycles that loom large.
22 ½ squares the April 8 solar eclipse.
Remarkably notice how 94 ½ and 22 ½ are 180 degrees straight across and opposite each other.
The symbolism of a solar eclipse is that the moon is emotion and represents the past with the sun representing the future getting “blocked.”
Both ‘years’ point to mid-April 16th which ties to the days of destiny, the 3rd week of April.
What does all this have to do with the market?
Signs point to the prospect of the market getting blindsided by a black swan just as it did when it crashed in March 2020.
April is 7 squared or 49 months from March 2020.
W.D. Gann noted that 7 is the fatal number, the number of time.
It was what he referred to as his Panic Zone or Death Zone.
The crashes of 1929 and 1987 begain to accelerate 49 days from high.
Those are just two examples.
On Thursday the SPX gapped up to new record highs pulling back on Friday leaving an NR 7 Day, the narrowest range in 7 days. These contractions in volatility are usually followed by an expansion in volatility in a day or so.
Trade that offsets the open gap at 5224 and sees downside acceleration is a warning flag.
That said, the benefit of the doubt must be given to a Buying Climax unless support is violated around 5150.
Momentum above Thursday’s 5261 SPX high opens the door to that Buying Climax.