By: Jeff Cooper

Hit and Run Trading Morning Report - May 21, 2024

Will NVDA Checkmate the Market?

“Tryin’ to stop the waves behind your eyeballs”
-The Rolling Stones, Sweet Virginia

“At the end of the game, the King and the Pawn end up in the same box.”
-Italian Proverb

“Who looks outside, dreams: who looks inside, awakes.”
-Carl Jung

Just over 18 months ago in October 2022, we published why we thought a low was playing out, showing the SPX Time/Price square-out at 3490 (349) and October 13th, 2022.

Red is 349

Green is Oct 13

As you can see they literally square-out at 90 degrees.

As legendary market operator, W.D. Gann wrote “When time and price square-out expect a change in trend.

At the time, there was no way to know how significant the Oct 13th bottom was.

Despite there being a square-out, it is important to let the market speak as it progresses from a potential turning point.

We do this using my 3 Week Swing Chart Method…along with the “pattern” being presented at the potential turning point.

In the case of the October 2022 low, it shaped us as an Undercut low of the mid-June low as the SPX quickly knifed back above the June low.

As well the SPX turned its 3 Week Chart back up immediately with 3 consecutive higher weekly highs.

While the 3 Week Chart turned back down in on the week of December 19th, 2022, that turned down defined a low and it was a HIGHER low.

Importantly, the 3 Week Chart turned back up immediately on the week of January 16, 2003.

Yet again the 3 Week Chart turned down on the week of Feb 27th.

Once again the that defined a higher low almost within a week.

So we had a Up Down Up  Down  Sequence.

The 3 Week Chart turned up from the October 2022 low, turned back down, turned back up, turned back down and then when it turned back up on the week of April 3, 2023 it trended smartly for THREE months.

This is often how an important low (or high) is struck with an Up Down Up Down Sequence where we get rapid flipping of the 3 Week Chart.

Markets play out in threes.

For example once the SPX turned its 3 Week Chart back up in April 2023 it trended for THREE months into July.

From the July 2023 top the SPX declined turning its 3 Week Chart down immediately.

Notice that it bounced from that turndown which coincided with a test of the rising 20 week moving average.

The bounce produced a turn up of the Weekly Swing Chart. That’s all the rally could produce.

When the 3 Week Chart circled low from the week of August 14 was violated in mid-September the market was in a well-defined down trend.

It bottomed on October 27th, 2023 at 4103 (410).

Just as the rally from April 2023 to July 2023 was 3 months or 90 degrees in time, so too  the decline from late July 2023 to late October 2023 encompassed 3 months or 90 degrees in time.

The October 27, 2023 low was 4103 (410)

That would turn out to be important going forward as 410 is direct/conjunct March 28th.

What I believe to be the orthodox high. That is yet to be determined.

Be that as it may, notice that a similar pattern played out on the weeklies from the late March high.

The SPX turned its 3 Week Chart down immediately off the late March 2024 crest dropping to test its rising 20 week moving average mirroring the pattern from the summer of 2023.

However, as you can see this time we have a twist. This time the 3 Week Chart has turned back up.

It did so last week as it eclipsed the March high.

Many times we have shown in this space how new highs are not created equal and how in fact many times they can be corrective B Waves leading to powerful C Wave crashes.

Not all breakouts are created equal.

We have been looking for cycles to top out around May 16/17th.

One reason being a Time/Price square-out.

Specifically, the 5264 high from late March, 2024 “points to” 526 (5264).

This is one reason why I think March was the orthodox top: time caught  up with price when on May 16th, time squared out with the prior 5264 high.

As Gann stated, “Time Turns Trend”. He did not say PRICE turns trend. He said “Time is more important than price.”

Time is more important than price in markets.

But the vast majority operate from price action.

Thousands of systems and Algomatics operate off Price.

Price is a lot easier to understand than TIME.

Underpinning the idea that March 28th was the orthodox top is that the decline over-balanced in time and price any pullback since the October 2023.

Indeed there were no pullbacks to speak of in the advance off the October low as it was a vertical run.

Regular readers are familiar with my Soup Nazi buy and sell strategy.

A Soup Nazi Sell is a Throw-Over to a new 20 week high that quickly knifes back below the prior high with in the same week or the next week.

This is the next week.

The October 2022 low was in the spirit of a Weekly Soup Nazi buy pattern, an Undercut and Rally potentially opposite to the current pattern which may be a Throw-Over and Drop pattern.

The pattern is derived from the Seinfeld character, The Soup Nazi.

“No Soup” for the breakout buyers or sellers of new 20 week lows or highs (or new 20 day lows or highs that DO NOT FOLLOW THRU for that matter).

Over a 40 year trading career the two most important trading maxims I have developed are:

Follow Thru is key


Believe what you see until proven otherwise.

There is another reason why the March high looks like the orthodox top.

Below is a daily SPX from November 2021.

That was an orthodox top followed by a drop and  a false breakout new high to January 4th.

I am labeling that the top of a major Wave 3, culminating the advance from March 2020.

The drop from the November 2021 high was an A wave decline followed by a B wave into January 4, 2022. The subsequent C wave decline was pernicious undercutting the 200 day moving average.

A similar C wave decline now could project to the 4600 to 4700 region, an undercut of the 200 day moving average currently residing at 4740.

On the above chart I have I created a trend channel with a Tops Line connecting the highs from 2023. Notably the March high overthrew the Tops Line as would be expected in a vertical run. As well the sharp decline into April 19th is strong respect to that 5264 Throw-Over high.

What it means is that the current rally may be a bearish backtest of the black Tops Line.

Importantly, the 526/May 17th square-out region is intact as the SPX tailed off from a new ATH on May 16th. The more time goes by without a new high being struck the larger the likelihood is that put in a top.

An initial decline below Friday’s low of 5203 especially if its an impulsive little 5 waves is the 1st indication a top is in.

Important confirmation of a top will be generated if the SPX drops below the open gap from May 15th that started the push above 5264.

Additionally, there are triple hourly highs at the 5250 region.

These 3 dominoes fall and the SPX is in jeopardy.

This is because any top here should be a very significant top.

Even in the most bullish scenario, my expectation is for a 20% + decline.

We are overdue.

I paralleled a Bottoms Line on the above chart from the late October 2023 off the Tops Line.

It comes in at 4650 region and ties to Bottoms Line (magenta) from the October 2022 low.

Notice the Undercut and Rally off the late October 2023 low is a mirror image to the possible Throw Over at the March high.

As above, so below.

Interestingly, 90 days/degrees from the March 28 high is June 27th.

June 27th aligns with 473  (4730) on the Square of 9 Wheel.

While many are using the wave count on the above chart defining January 2022 as a 3rd Wave high with Oct 2022 marking a 4th wave low followed by a 5th wave top, I prefer the count where January 2022 is the 5th wave top followed by an A Wave drop into October 2022 making the advance off that low a B Wave. I have shown that count in May in this space.

It is really semantics because either way, a serious decline is on the table.

If the current period culminates 5 waves it is a full 5th of a 5th of a 5th.

Caution is warranted on an indication a top is in.

The plus years from the January 2022 top looks like a mirror image foldback of the 2 year bottoming process from 1980 to 1982.

If we start the Gann Panic Zone from the March 28th high, we get May 17th to May 26th for the eye of the hurricane.

Today will be the 3rd trading day since the SPX tailed off on May 16th.

If that high is not exceeded, and we start the Gann count from May 16th we get the Panic Zone from late June into July 8th.

Interestingly, July 8th was the Great Depression low.

That would be some mirror image foldback if we hit a low into July 8th, 2024

In sum, the SPX spike to a new all-time last Wednesday was engineered on another bogus CPI number. Everyone who eats or drives knows this.

Was the spike courtesy of OpEx Pinball?

Be that as it may, the main event will be Wednesday’s NVDA print after the bell.

NVDA carved out a large range Spike Volume Bottom to 756 on April 19th coinciding with the SPX low that day.

NVDA cubes out 540 degrees up from 756 at 930.

NVDA has eclipsed 930 with authority.

The next 90 degree decrement up is just overhead at 960.

Clearing 960 opens the door to 992.

May 23 (day after earnings) aligns with 1017.

If the reactions to the Magnificent One is bad, on the downside 894 aligns with May 23rd.

As you can see NVDA has broken out slightly above a triangle. Breakage back below the triangle will issue a Triangle Pendulum sell signal.

It looks like it all hinges on NVDA.

But in the meantime, the retailers and homebuilders are a blaring siren that a recession is also on deck.

LULU, TGT, DLTR and FIVE show how sick the retail sector is, to mention a few.

DHI, IBP and FIX reflect the heaviness in the home building and home building products sector.

Hit and Run covered it’s LULU short from 363.25 at 330.50 on Monday

Friday we covered FIX.

Hit and Run remains short TGT and DLTR.

After the close Monday, network security solutions company PANW reported and sank 21 points.

PANW had recently broken out above its 50 day line. Monday’s post-bell action put’s it hovering right back above the breakout point.

Is it possible, the breakout in the SPX above 5264 can see a similar reversal?

NVDA has a lot baked in the cake, it can’t just beat, it has to beat and raise.

Is it possible a spike above the psychological 1000 level elicits selling?

Is there anyone left to buy NVDA north of 1000?

Is the market in a box on this backtest of a broken trend channel?

“At the end of the game, the King and the Pawn go back in the same box.”
-Italian Proverb