“There is a definite relation between price and time. When time and price square-out expect a change in trend.”
-W.D. Gann
There always seems to be something new on the horizon in trading that captivates market operators in their quest for the Holy Grail.
People think the magic always changes. In the end it, always comes down to human beings with their emotions.
One of the greatest fallacies of economists is their assumption that humans are rational human beings.
This why we have the economy and the market, a company and its stock price which often have no connection to each other.
Why do cycles work? Because of emotions, the sine wave of fear and greed, hope and despair.
This is why price goes to extremes. Price isn’t based on logic. It’s based on perception.
And, in markets, perception always trumps reality.
Legendary trader W.D. Gann, who keyed off cycles and developed what he referred to as a Master Time Factor, wrote that “Time is more important than price.”
Indeed, but price is the final arbiter. Price is how we determine if cycles are exerting their pressure.
Underpinning the predominance of cycles, Gann emphasized the significance of anniversary dates.
Many market participants believe this is voodoo analysis.
However, allow me to give you two powerful examples.
The bottom of the Bear Market (SPX)that ended in 2002 occurred on October 11th.
The top of the Bull Market (SPX) that ended in 2007 occurred on October 11th.
The NAZ struck its historic Bubble Top on March 10, 2000.
The NAZ struck a secondary/test low on March 12th 2003…a low from which it exploded to October 11, 2007 (the NAZ had a one day false breakout on October 31st, 2007, the Mother Of All Hooks).
As you can see last year’s October 13th low ties closely to the above turning points.
The NAZ rallied 20% from October 13,2022 to February 2nd, 2023.
In mid-February Hit and Run asked the question: is a major turning point here?
We showed the following chart depicting the turning points aligned with mid-August and early February.
Thursday and Friday the SPX gapped down with the index closing below its 20 day moving average for the first time since it reclaimed it on January 6th.
In addition, the SPX closed below a rising trend line for 2023.
That said the index tailed up closing near the open and leaving a Lizard buy setup.
A Lizard buy setup is a new 10 day low with a close at/near the open in the top 25% of the day’s range.
Will Friday prove to be a bullish undercut of the 20 day moving average or a bearish Breakaway Gap?
As Hit and Run has been mapping, 4077 is a key pivot. The SPX broke that level with authority Friday, but rebounded to close right on it.
Follow thru, up or down, at this key 4077 region is going to be key to the next two turning points on our radar.
The first ties to early March and the 14th anniversary of the March 6th, 2009 Bear Market low.
The second ties to mid-May and the 15th anniversary of the May 19th, 2008 pre-crash high from where the SPX dropped nearly 50% in 6 months.
As Hit and Run members know the 14 year cycle is an important cycle.
The 15 year cycle is 180 months. So this may will be opposition to the May 2008 major high.
May 17th is also the anniversary of the NYSE start in 1792.
That was 231 years ago.
231 is very synergistic with the current market.
Why?
231 aligns with October 8th which ties to the week of October 13th, the low for the Bear, so far.
231 is also square January 4th, the SPX all-time high.
231 is opposition April 6th. So this is also a potential pivot this year…given the significance of early October and early February in this cycle.
In sum, The Line Of Least Resistance, the Bear Market Pivot is 3980. This currently ties to a backtest of the breakout of this declining trend line from the 2022 top.
Breakage below 3980 points us down to 3700-3800 region. Probably quickly.
That’s a big move and a good risk/reward setup.—especially because if accelerated momentum shows up, my expectation is that the downside projection is likely satisfied by the first week of March.
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Really enjoyed the insight and projections put forth in this article.
Appreciate you and all your efforts.
