By: Jeff Cooper

Hit and Run Trading Morning Report - April 10, 2024

Weekend At Bernie’s

“Hot time get it while it's easy.”
-Aerosmith, Rag Doll

Hit and Run showed the following daily SPX on March 22nd:

We noted that from the initial high off the October 2023 low, a Tops Line ties to Thursday’s high of 5261,

The “initial high” was the  high struck on December 20th when the index left a Key Reversal Day (it made a new 52 week high and closed below the prior days low).

It is interesting that the December 20 high ties to the Winter Solstice.

The blue Tops Line is connected to another Key Reversal Day on March 8th.

This ties to the NAZ all-time high 24 years ago in 2000.

We produced this chart for the March 22nd report, 19 days ago,  showing the reversal from the 3rd kiss of the blue Tops Line.

We thought this line would be important.

What has happened since the 5261  March 21st high?

The SPX has done a good imitation of Bernie in Weekend At Bernie’s.

It’s been staggering around as if it’s moving on its own volition but in truth the index is going nowhere fast, running in place under the cover of rotation and distribution.

Since the March 21st high the SPX turned its 3 Day Chart down immediately making 3 consecutive lower daily lows. That turn down perpetuated a low and a fresh new high as would be expected in a roaring bull market.

However something funny happened after that fresh new high:  last Thursday, the index traded below the “circled” prior 3 Day Chart low at 5303 from March 26th.

And it did so with authority last Thursday with a knife below the 20 day moving average.

Another funny thing happened after last Thursday’s drop, whereas the normal expectation would have been for the SPX to test its 50 day moving average, joining the other usual suspects, the DJIA and the QQQ in their drops to their respective 50 day lines; instead, the SPX stopped dead in its tracks and has traded inside the last 3 sessions.

Is the SPX tracing out a bullish coil the last 3 days or what I call a Crouching Tiger…a double down inside pattern?

Or is the SPX carving out a few “Paws Days” pausing before heading lower?

That is the question.

And it seems as if Mr. Market isn’t telling.

Ever since last Thursday’s waterfall day…the worst bar in a year, Mr. Market has been tossing the tape around like a rag doll in a pit bulls jaws.

Is it do or die with today’s CPI?

Maybe, maybe not.

The SPX may be carving out a B corrective (bearish) B Wave on the heels of an A Wave down from the March highs.

Caution is warranted because the C Wave of the pattern implies a test of the 50 day line…finally.

In fact a push above Tuesday’s high today puts the index in the daily Minus One/Plus Two sell position.

Consequently, if we make a high over yesterday’s high today, heads up for another rug pull like we got on Tuesday’s Up Opening Spike.

Speaking of a rag doll caught in a pit bulls jaws…yesterday’s first hour 20 point SPX gainer fizzled to a 40 point loser before a complete rebound to close up 7.

It was pure Miss Direction. How do I know?

Because without a catalyst,  it is the first hour and the last hour when it is easiest to drive players to distraction.

The Algomatics are Driving Miss Direction.

Daisy is a figment of Fitzgerald’s Roaring Twenties.

Spearheading the spin was a conspicuous ramp in “dead” names like TEAM, PANW, ZS and ETSY and ROKU while strongly trending names like APP, SIMO, MOD and CROX got hit.

As well the air came out of the oils like MPC, VLO and CEG on Tuesday…at least for the day.

In sum, Turnaround Tuesday was a concerted squeeze the shorts higher, squeeze the longs lower.

Whether this playbook  was a one day deal and we revert back to the strong names remain strong and the weak remain weak or this rotation continues will depend on the structure of the SPX.

Does it drop to its 50 day line potentially completing a C  Wave opening the door to a marginal new high into the April OpEx or do we plunge below the 50 day moving average sealing in the highs behind us.

Either way, time is running short.