“Tight consolidations in which a breakout occurs for reasons NO ONE UNDERSTANDS are usually great risk/reward trades.” Bruce Kovner
“On the December 21st Winter Solstice (on the Cardinal Cross of my Square of 9 Wheel– due north/south and east/west axis), the SPX rallied to 3890 turning its dailies up for the first time since the slide started from 4080.
The next day the index lounged to 3764.
Those two days form the bookends for a 126-point triangle the SPX has been locked in through Thursday.
I can’t help but think that with the Jobs Report, we may break out of the range–especially as today is the first weekly Opex for 2023.
With today’s catalyst, we may see this 10-day trading range exceeded.
If the triangle breaks, is it possible we get either a drop to the 3700 strikes OR A RUN TO THE 3900 strike?
Conclusion. Today may be the pivot for a turning point because January 6th aligns with 349 (3490) the low for 2022 on October 13th.”
We wrote the above in Friday morning's Hit and Run Report, Turning Point.
The SPX spiked 45 points higher after the Jobs Report but reversed red.
It looked like another failure but when the market turned green it kept grinding higher and there was no mistake about the agenda for the 390 SPY strike.
See the Square of 9 below to show the 349/January 6th alignment or time/price convergence.
One of the factors underpinning my forecast that a rally on Friday could see explosive magnetizing the index to 3900, is that 389 (3890) is 180 degrees straight across and opposite January 6th.
So the end of the first trading week of 2023 is synergistic to the 3490 low for 2022 and the key 3890-3900 region based on the Square of 9 Wheel in keeping with Gann’s Law Of Vibration.
It will be critical to see whether we get upside follow-through from Friday’s “Turning Point” based on the two vibrations of 3490, the low for the bear market to date and 3890/3900–a time/price square-out with Friday.
While the SPX broke out of its two-week triangle, it backtested its 50-day line…which is resistance until reclaimed.
As well, as flagged on Thursday, we must be mindful of a possible Triangle Pendulum signal.
This occurs when the price breaks out of a triangle and quickly reverses back into the body of the triangle and accelerates through the other side.
Now we have a breakout through the top of the triangle. A decline back into the body of the triangle with downside follow-through below the bottom of the triangle at 3810, Friday’s low, should see accelerated momentum to the downside.
This is the nature of my Triangle Pendulum setup– fast moves come from false moves.
While many view the current Elliott Wave structure of the SPX as being on the cusp of a dramatic 3rd of a 3rd wave decline, a failure to break down over coming hours with upside follow through above the 50-day line suggests the bulls have field position for the moment.
The price action in the leading SMH (semi-conductor ETF), which recaptured its 50-day line with authority and TLT’s knife higher (lower yields), underpins the potential for an extension higher in stocks.
Hit and Run anticipated the turn to the topside in TLT taking two long swing positions recently…one from 99.43 and another from 101.80 banking on a move to 112/113,.
If the correlation between the TLT and the SPX continues, it opens the door to higher prices for stocks.
At the same time, we must be mindful that Leading Diagonals such as the one the SPX has been locked can see a sharp retracement prior to a genuine breakout.
In sum, the SPX struck it’s low for the decline on October 13th, this week is 90 days/degrees from low.
That said the market is not a fine Swiss watch. W D Gann said to key off the weekly swing charts to determine the trend. We must give the weeklies + or – 1 week to define that trend.
Either last week was an important low, this week, or the following will be another high.
The end of this week will also be 7 months from the important June low, so the market is at a point of recognition here.
Checking a big picture IWM since its high shows the bearish “count”.
This interpretation shows June as Intermediate Wave 1 low in June (red 1).
From there an Intermediate Wave 2 (red 2).
The September/October low in this instance would be the first wave down of Wave 3 (purple 1 of 3).
Subsequently wave 2 of 3 was the December 1 high (purple 2 of 3).
The most powerful leg down, 3 of 3 follows.
The T Rex in the ointment is that the last two weeks sideways stint does not feel consistent with a dramatic
3rd of a 3rd wave down.
Be that as it may, it is clear that this week indicates a POR (Point Of Recognition)—notably the intersection of the lower rail of the trend channel (black) with the blue declining trend line.
The convergence appears to be at 181/182 this week.
Conclusion. From IWM’s June to October, low is a geometric 120 days/degrees.
Another 120-day cycle gives mid-February.
On my Square of 9 Wheel, 181/182 is opposition or 180 degrees straight across and opposite mid-February.
Is it possible Mr. Market chops around for another month before showing its hand?