Stocks fell sharply Wednesday, January 18th after the SPX reversed once again from our 4013 target.
Hit and Run members were prepared for the reversal with the knowledge that 4013 is exactly one 360-degree price cycle up from the 3764 December 2022 low based on our Square Of 9 Wheel Of Time and Price.
The SPX was rejected from 4015 on Tuesday and succumbed to an Up FOMO Open (UFO) on Wednesday at 4014.
The second mouse got the bear cheese: Tuesday’s decline was minor; Wednesday the SPX reversed 88 SPX points from high to low.
The media was quick to make the culprit for Wednesday’s downdraft on weak Retail Sales in December’s holiday season.
However, if the market had wanted to, it could have embraced this news with the slant that the slowdown in economic activity means the Fed could come down from its Hawkish perch.
The reality is: the news breaks with the cycles, not the other way around.
There were three cycles Hit and Run was flagging:
1) Late January is 60 months from the January 2018 Airpocketism that elicited one year of intense swings and volatility that culminated with the Christmas Crash of 2008.
60 months is an important Gann Cycle.
2) Mid-January is 90 days/degrees from the important October 13th reversal.
3) January 17th was what is called a Bradley Turn Date. These don’t always exert their influence; but when they do they warrant respecting.
All these cycles were on deck as the 4013 price cycle was satisfied and BOOM.
You can’t make this stuff up.
While many market participants were positioned for the SPX to plunge from a two-week Bear Flag/Triangle carved out from December 20th thru January 5th, to start what was a too well-advertised bearish 3rd of a 3rd of a 3rd wave decline in Elliott Wave terms, we warned that a post-tax selling rally in the new year would trigger a breakout to 4030.
While the SPX has dropped to backtest its 50-day moving average yesterday, it will be magnetized to Phil De Gap at 3920 this morning.
In a bullish pullback that region should act as support; however, the DJIA knifed and closed below its 50 and 20 day moving averages on Tuesday.
The SPX is poised to play catch-up.
If the 50-day ma is lost, it opens the door for the SPX to test the top of the aforesaid Bear Flag/Triangle at 3860. This is key support.
Breakage into the Triangle is a red flag.
Breakage below the bottom of the formation triggers a Triangle Pendulum sell signal and is a blaring sell siren that could open the door for a drive to the October lows.
On the above daily SPX, notice that the ramp to the 200-day moving average was signaled by a large range breakout at the top of “The Triangle” on January 6th.
That breakout perpetuated a test of the overhead 200-day moving average.
Will Tuesday’s large range decline with follow through thru the SPX 50-day ma signal a failure through the bottom of the triangle?
Notice the apex of the triangle “points” to this week.
My expectation is the market is going to tip its hand before the end of the week.