By: Jeff Cooper
Hit and Run Trading Morning Report - April 17, 2024
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Turnaround Turnaround Turnaround Tuesday
“What happens today has happened before and will happen again.”
-Jesse Livermore
It’s only “human” to look at what is happening in the market as unique to this time.
However, the more you study market history, the more one realizes how markets constantly repeat what they did in the past under similar circumstances.
All trading is contextual. For perspective let’s examine how markets have behaved in the past parts of the cycle and structure that matches the current period.
The first chart shows the January 2018 top.
Below is the January/February 2020 top.
The next chart shows the powerful run from the March 2020 low to the January 20222 high.
Notice after the break below the 200 day moving average (black ellipse), the SPX tries to recapture the 200 dma twice. The third break is a charm for the bears and elicits a drop to the bottom of the red trend channel.
The next chart shows the powerful rally into the July 2023 high and the subsequent decline that flushes the 200 day moving average in October 2023.
The next chart shows the high into late March 2024.
Notice the trend line break in tandem with the Expansion Pivot sell signal below the 50 day line.
Below is a chart we showed in mid-March as the recent top was being formed.
Notice the projected “elevator shaft” based on an historic pattern.
As the late March top was playing out we posted the chart below underpinning our view
Why it looked to us like a B Wave high. B Waves are followed by climatic crash waves.
C Waves.
Recently we wrote about the crash that started in May 1893 when Grover Cleveland took his second term. He was the only president to ever serve 2 non-consecutive terms.
The crash of May to November 1893 started a 4 year depression.
It was a Great Depression until THE Great Depression that started in 1929 eclipsed it.
it wasn’t apparent the Great Depression had started until a “return to normal” market ended and we rolled over from a secondary high on April 16, 1930.
From 1893 to 1929 is 36 years.
6 squared years.
A cube in time. (a true square has 6 sides of 360 degrees each).
Many times we’ve outlined the parallels between the 1929 crash and the 1987 crash.
Only their outcomes diverged.
1929 led to The Great Depression while the 1987 remained a financial “contained” event.
This October 2024 we will be 37 years from the October 1987 crash.
Currently we are in in the 36th year from that crash…mirroring the 36 year period from 1893 to 1929.
On the Square of 9 Wheel, 36/37 points to May 7th to May 17th, the anniversary of the NYSE.
Below is 1987.
A simple trend line break( blue)was a chirping canary.
A Rule of 4 Sell (black) in October was a screaming canary.
As we examine the analogs above we see these general similarities:
A) Each decline starts with a sharp fall over the first 13 or so trading sessions
B) Each decline drives through the 50 day moving average within 5 sessions
C) Each decline turns the 50 day ma from up-trending to down-trending
D) Each decline accelerates into a near-climatic slide ….before---
E) A one to three day Snapback relief rally plays out shortly after that climactic decline
F) The market then continues sharply lower after the relief rally.
The chart below shows where we are in this initial part of what we see as a potential significant downtrend.
In sum, I don’t think we have seen that initial “climatic decline” yet.
I suspect we are close.
It should then be followed by a 1 to 3 day Snap Back rally before a truly dramatic slide, if one is to occur.
Yesterday we flagged the 5045 SPX region as it is 270 degrees (3 squares down from the all-time high).
A 10 min chart for Tuesday shows the Whiplash following what we said looked like a Pinocchio of the 5045 pivot.
Tuesday Powell turned the market into an electrocardiogram.
The runoff looked like the market may be headed for a heart attack,
But this morning his “higher for longer” is being shrugged off as Jerry wanting to team up with Cheech and Chong.
This morning the SPX is gaping up with the futes up 20 points as I write at 3 A.M.
Should the SPX extend, it is interesting that the overhead 50 day moving average (which is just beginning curl over) is at 5120…which as you’ll recall is 180 degrees down from the 5265 all time high.
That is the upside pivot.