The Rebound
Following Turnaround Tuesday’s rally off Monday’s test of the idealized/perfected low area of 4278, Wednesday put the hook in painting the overnight session crimson leading to a gap down.
But Miss Direction was at the helm.
The gap down open was an ambush and misdirection to the buying agenda lurking under the surface that sprang as soon as the bell rang.
The buying agenda was exemplified by AFRM, which was the first glamour I spotted turning green.
I alerted members on the Hit & Run Private Twitter Feed to take it long on a swing with AFMR near 112.50.
A quick analysis of multiple time frames pointed to a solid long setup:
1) AFRM had flushed its 20 day moving average to start the week with the dailies leaving an NR 7 Day on Tuesday…the narrowest range in 7 days which implied a potential explosive move.
2) AFRM’s green bean in a sea of red from the Wednesday’s bell implied an hourly Rule of 4 Breakout—a breakout over a declining hourly 3 point trendline.
3) Monday’s drop saw AFRM turn its Weekly Swing Chart down for the first time since exploding in August.
Many glamours followed suit. Names include UPST, NET and ASAN …all of which were long plays over the past two sessions.
Buy the Dip was back in spades on select leadership, but what do they do for an encore with the uptrend in the SPX suspect:
The declining 20 and 50 day moving averages and the behavior of the 3 Day Chart underpin a new downtrend.
That said the SPX stopped precisely on our projected 4278 target… based on the Square of 9 Wheel this represents a 360 degree decline from the 4545 ATH.
So a retrace from that 4278 level is the presumption and we’re getting it from a ‘double bottom’.
There is room to run.
180 degrees up ties to the 4400 region.
This also ties to the level of my Pocket Pivot Indicator.
The SPX has not carved out two consecutive higher daily highs (intraday, not closing) since 9/23 on a Pinocchio of its 50 day line.
I would not be surprised to see a repeat.
If a test/Pinocchio of the SPX 50 day ma plays out and the index rolls over, it satisfies the idea of an A B C Wave 2 corrective rally.
At that point, the second mouse may get the cheese for the bears.
The legend of Red October looms large.
In sum, breakage by 3 points below the 4278 perfected level and ‘double bottom’ is the Sign of the Bear.
Get scared if it happens.
What’s interesting is the action in the precious metals complex this week.
GDXJ has knifed back up through a prior swing low in the spirit of a Soup Nazi buy signal.
Yes GDXJ has given many false signals of an upturn in recent months, but as you know cycles were set to collide in October.
While the jury is far from deliving a verdict as to a new uptrend, the bearish downtrend is looking to receive a guilty verdict if
We get an impulsive 5 wave structure on upside follow through above a declining trend line from the early June swing high.
As well, gold streamer FNV left a Lizard buy signal on Tuesday (a new 10 day Bottoming Tail) and followed through nicely on Wednesday. Members took a pilot long swing in FNV on Wednesday morning.
The upside pivot is 134/135 which ties to the 20 day moving average, a declining trend line from early August.
Momentum through 135 opens the door to 140.
Recapturing 140 opens the door to Moving Average Pinball and the 50 day line near 145.
As noted earlier this week on the Hit & Run Private Twitter Feed, with sentiment on the metals complex as negative as it was at the March 2020 low, I would not be surprised to see a much stronger rally in the sector than the vast majority believe is possible.
As for gold itself, with most eyeing the 1920 region, the bull high from 2011, as the upside pivot, the 1815-1825 level looks like it could lite a fuse in a vacuum of bullish sentiment eliciting a quick 100 point rally.
A daily GLD shows an angular Rule of 4 Breakout is on deck. This is a breakout over a 3 point declining trend line.
If it plays out it occurs above the 50 day moving average.
The last time GLD reclaimed its 50 day line in April it ran 14 points.
It had the benefit of a double bottom.
Ditto the current picture… except that this time the 200 day moving average has come down to meet the price action — offering a more explosive setup.
Tomorrow, we’ll walk through the potential breakout setup in the metals.
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