By: Jeff Cooper

Hit and Run Trading Morning Report - May 6, 2024

Point Of Recognition In Equities and Gold

It’s easy to become inured to the whipsaws, but last week was one of the most volatile weeks in some time.

Let’s recap:

Monday opened with a higher gap but a close in the SPX that was basically flat from the opening price.

Tuesday began with a lower gap and a strong decline with a close on the lows.

Wednesday started with a gap lower also, an 80 + point intraday rip higher in tandem with an NYSE Tick of +1973, the third highest of the year, and then a complete giveback of the rally that left the index lower on the day.

Thursday began with a higher opening gap and a higher close.

Friday started with another higher opening gap with the NYSE A/D Ration surging to almost 10 to 1.

However, by the close, the strength of the rally had dissipated to an A/D Ration of 3.6 to 1.

The DJIA and RUT were also up strongly from Thursday’s close but each index ended below their opening price. That pretty remarkable for a +63 point gainer in the SPX.

All three indices closed below their respective 50 day lines after Pinocchio’s.

Which brings us to a compelling comparison between two historic periods that are a striking parallel to today’s SPX from its October 2023 low to the current time period.

Those two prior periods are August through October 1929 and August through h October 1987.

While I present those two comparisons with late 2023 through May 2024, it must be said that while there are definite synergies between each of these three periods, it does not necessarily imply that the outcome must be the same.

However, at the same time it would be foolish to ignore the setup.

That said, this week is a point of recognition as you will see below.

The first chart is the DJIA in the top section versus the McClellan Oscillator in the bottom section from mid-August to October 29, 1929.

Notice how high the McClellan Oscillator rallied at the time of the secondary high, the pivot high prior to the crash.

This is because, the vast majority of market participants thought the “correction” from the September 3rd all-time high was a buying opportunity and plowed into the market.

It was the opposite of a buying opportunity.

When that realization set in, players sold.

The selling turned into a stampede to the exits.

Checking October 1987 with the DJIA in the top section and the McClellan Oscillator in the bottom section shows a similar pattern to 1929.

Ditto the NYMO (NY McClellan).

On August 25, 1987 the DJIA peaked. Following this peak, in mid-September, the DJIA snapped its 50 day ma. in league with the McClellan Oscillator plunging to approximately -102 before a subsequent rebound.

This rebound perpetuated a rally in the DJIA to around its 50 day line.

However when the point of recognition set in and the 50 day line was breached once again one of the most dramatic declines in market history played out over the following three weeks.

The SPX has taken over for the DJIA as the markets benchmark.

I show the comparison with 2024 to 1929 and 1987 because I believe there is a distinct possibility that the SPX in the weeks ahead may resemble what followed the two comparative periods, culminating in October 1929 and October 1987.

Where is the Bull’s Uncle Point?

Breakage below the prior all-time high, the January 2022 high of 4818 opens the door to the July 2023 high of 4600.

That opens the door to the bottom rail of the major channel (black) at 4200 which roughly ties to the October 2023 low.

Let’s turn to gold because I believe the consolidation may be over.

Below is a weekly GLD for 2 years.

GLD exploded from a low in early October 2023.

We are SEVEN months from that low, a time to look for acceleration.

As well GLD carved out a weekly Plus One/Minus Two buy signal last week: Two consecutive lower weekly lows with the 3 Week Chart pointing up.

GLD is 90 days/degrees from the important October 5th low this weekend.

That’s time. Let’s look a pure price.

GLD struck a major low at 150.50 in late October 2022.

203.50 is 360 degrees up. GLD exploded again after pausing at 203 for two weeks.

This two week pullback and the two week consolidation in March is consistent with Runaway Moves.

GLD installed a higher low on October 5th 2023 at 168.

360 degrees up is 225.

GLD left a large range reversal from 225 in early April.

It sets up for continuation.

My expectation is when GLD clears the open gap from April 22 and then the 225 reversal high at 225, Keyser Soze will put on a show.