By: Jeff Cooper

Hit and Run Trading Morning Report - May 14, 2024

Back To The Mania Future

“This is heavy.”
-Marty McFly, Back To The Future

The DJIA finally had a declining day on Monday to kick off what we think is a very big week.

This is important because the DJIA was the leader in putting in a high before the SPX.

It topped on March 21st …along with the lead dog, the QQQ.

On the SEVENTH day from the big gap up on May 3rd,  the DJIA gaped open on Monday but closed near session lows.

Monday’s reversal occurred from Phil D Gap---the gap down on April 2nd which got the downdraft from all-time highs started.

Whether this is a warranted breather in the sharp rally in May or puts in a Right Shoulder I think we will know by the end of the week.

As well the DJIA 3 Week Chart turned back up last week so the action this week should be an indication of whether this is a Pause in an uptrend or whether this turn up in the 3 Week Chart defines a high. That would be the expectation if the trend indeed turned down from the March high and this is a Return Rally.

In that case, I would expect a turn up in the 3 Week Chart to define a high soon in terms of time and price.

The SPX 3 Week Chart has NOT turned back up yet.
It remains in the Minus One/Plus Two sell “position”.

The NYMO (NY McClellan Oscillator) peaked a week ago on Monday May 6th and has been declining since despite a continuation of the rally in the NYA, the DJIA and the SPX.

This leaves a mini Jaws divergence which I believe may be an indication that the short-term trend is turning back down in alignment with the Intermediate-Term Downtrend that has been underway since March 28th, 2024.

SPY volume on Monday was 35.8M shares, the lowest non holiday trading day since November, 11, 2021…near the top.

If this is what volume looks like in a rally, when  volume expands,  it won’t be to the upside.

Option volume on Friday was 2 to 1 calls.

Retailers are getting whacked.

LULU, DKS, DG, TGT, to mention a few.

The recession that was thought to be a figment of  economists imagination is coming out of hibernation.

Wednesday’s CPI could be an outsized reaction. If it’s hot in could simply reinforce the idea of stagflation.

If it’s cool, it could underpin the Stag in Flation…despite what Powell says about both being no-shows.

It feels like today will be range-bound before Wednesday’s CPI and the biggest OpEx on record on Friday duke it out.

QQQ remains above the triangle showed yesterday and we want to continue to watch for a possible reversal below the triangle---especially a reversal that takes out the bottom triggering a Triangle Pendulum sell signal.

IWM shows a Charlie’s Angels sell signal---3 “Tails” in close proximity.

In other words IWM left Topping Tails on Monday, on Friday and last Tuesday.

It’s having trouble at this 206 square.

Breakage below the 50 day line at 202.50 with follow thru below the open gap at the 200 strike should be a blaring siren that the downside door is open.

History rhymes. Before what I am counting as Wave A down from late 2021/January 2022, GameStop became the poster child for the absurdity to which meme stock traders blindly jumped into mania.

Roaring Kitty is back to the future growling at the top of a B Wave.

When it comes to delivering hard lessons, the market never changes.

You be the judge.