By: Jeff Cooper

Hit and Run Trading Morning Report - May 24, 2024

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Key Reversal As the Ducks Are Fed

Today’s report is brief as we got the Spike & Reversal from the SPX 5340 region.

The Spike was the square-out level shown previously.

The Reversal traded down to the prior March 28th  5264 ATH.

In fact the SPX broke below 5264 to 5256 before bouncing to close just a tad above The Pivot.

The index closed at 5267.

You can’t make this stuff up.

Be that as it may, the SPX carved out a Key Reversal Day.

Before the bulls go kissing themselves due to green arrows this morning, it is worth noting that the lack of IMMEDIAATE follow thru is not required to backstop the significance of a Key Reversal Day.

Indeed, the July 27, 2023 top was a Key Reversal Day.

The SPX spent 3 inside days before a Breakaway Gap to the downside marked the beginning of a severed downdraft.

November 22, 2021 was a Key Reversal Day in the SPX which marked a 7 day 150 point + slide.

As well, it was the Orthodox High prior to a false breakout in January 2022.

In fact go back and look at the price action going into the January 4th high again.

As you recall I mentioned the other day that it mirrored the current price action with a flat 4 to 5 day “Bull Flag” followed by a 1 day pop and reversal.

Like yesterday.

But want I want to draw your attention to is a comparison between the 2020 pre-Covid Crash and the current pattern.

The pattern in 2024 looks like a fractal of that in 2020.

There was a strong persistent rally phase into an initial top in January 2020 followed by a pullback which perpetuated a B Wave new high.

Enter the Crash.

2024 shows an identical pattern. It is a fractal of the 2020 pattern. Difference being the pullback from the initial high (March) in 2024 was deeper that the initial pullback in 2020.

Likewise the rally to the new high is sharper.

Is it possible then that the ensuing drop (assuming that’s what plays out) is going to be greater than what occurred after Feb 19, 2020?

Of course that was the Covid Crash. It was the fastest deepest crash in history.

Is it possible something greater than that is on the table?

In a word, yes. It is possible. Anything is possible in the market. The question is whether it is probable.

Cycles and The Wheel suggest there is a likelihood of a big waterfall. Something of the order of a 5000 point plumb-line drop in a short period in the DJIA.