Before I get into the meaning of the title of this report, I want to review a few things.
Let’s start with the glamour QQQ.
As you recall, I mentioned several times in March that when the Monthly Swing Chart turns up, if the primary trend is down which is the presumption, that it should define a high soon in terms of time and price.
Well the Q’s turned their monthlies up at the end of March into our cluster of turn dates spread through the last week of March and into early April.
Boom.
What I did not fully appreciate was the nature of the Snapper (rebound) off the turn down in the 3 Month chart in February.
The explosion off that turndown exemplifies the power of the 3 Month Chart (and the 3 Week Chart).
As you can see, the Q’s time above the February high was short-lived.
As well, the Q’s triggered a Jump the Creek sell signal when they caved in through the open gap from March 29 — the day the Monthly Swing Chart turned up.
The Q’s recaptured the gap on Monday, but could not sustain the attempt.
When they lost the gap for the 2nd time yesterday, the wheels came off.
As I like to say, the first mouse got the cheese (the first sell signal through the open gap) and the second mouse got the cheese — the Bear cheese.
An hourly QQQ shows short-term support at the 358 region. They closed at 361.
Breakage of 358 opens the door to lower prices.
This ties to our short-term support on SPX at 4501, which is 180 degrees down from the 4637 recovery high.
Allow me to point out what I think is critical to gauge with the 200 day ma now.
A daily SPX shows the index lost the 200 day in January but reclaimed it quickly in February.
It fell through the 200 day for a second time in mid-February.
This time the SPX had a lot of wood to chop to reclaim the 200 day, which it did on March 22.
However, now it is flirting with a 3rd drop below the 200 day.
My feeling is three strikes and you’re out.
The psychology is this.
The first time the SPX regained its 200 day moving average relatively quickly, breathing hope into the bulls and the BTD legions.
The large range reversal on February 24 on an undercut of the January 24 low arguably could be viewed as a successful test once the 200 day m.a. was recaptured again on March 22.
Clearly the spike higher into March 29 on the 3rd reclaim of the 200 day underpins that bullish notion.
But, now the SPX is flirting with a 3rd break of the 200 day. A failure here below the 200 day, especially into the Friday weekly closing basis, and the bulls have whiffed it.
You can be hopeful once. You can summon up hope twice, but hope evaporates the third go round.
It’s like walking out into the middle of a frozen lake where the ice is too thin and it breaks.
You try to pull yourself up once and fall back in.
You try to pull yourself up the second time and fall back in.
You summon all the remaining strength you have to pull yourself onto safety
But the 200 day “ice” snaps and you fall back into the brink.
This is where the SPX finds itself in the cruelest month. The Ice Man may not cometh today or Thursday, but my expectation is that he will before the weekend given the pattern at hand.
Why? Tuesday was the worst NYSE breadth since the decapitation in early January.
The pattern of the false breakout on January 4 may be a good map as to the slide ahead if the 200 day moving average breaks.
In sum, the market caved on Tuesday in large part due to the Fed’s Lael Brainard turning from the most dovish board member to one of the most hawkish.
Now there are those that think the Fed is trying to jawbone the Inflation Genie back into the bottle.
It is truly ironic that the Fed must be make the economy and market go cold turkey when it was the dealer who supplied the heroin for too long and too often in the first place.
I think they know jaw boning isn’t going to work and their hawkish stance is not fully being discounted by the market. Why? — because market participants are fixated on the Fed Put and the Fed Pivot.
When the SPX snaps its 200 day moving average with authority again, the panic phase will set in I think.
And Tuesday being the highest volume of 2022 looks like it signals that panic phase is around the corner.
