The Next Pullback Holds the Cards
By: Jeff Cooper
As flagged on the Hit and Run Private Twitter Feed on Tuesday, the QQQ turned its 3 Day Chart down on a text-book backtest of its 20/50 Moving Average Bowtie.
We noted that each time they have done so since their mid-June low has defined a low.
These are June 30 and July 13, both of which traced out higher lows from the mid-June low.
We stated in Wednesday morning’s Hit and Run Report “If the same behavior plays out from yesterday’s turndown it will leave a 3rd higher low.
As W D Gann wrote, fast moves often come from 3rd higher lows.
This morning’s upthrust on the futures suggests the impulsive move I was looking for yesterday above 395- is playing out.
IF SO, THE SPX SHOULD CHALLENGE 4020. IF THAT ATTACK IS SUCCESSFUL, THE SPX MONTHLY SWING CHART WILL TURN UP IN EARLY AUGUST ON THE WAY TO 4100 +”
On Friday the SPX closed at 4130 with 4134 being 720 degrees up from the 3636 June low.
As well, the SPY low in mid-June squares-out with July 29/August 1.
362/363 is square July 29/August 1
So the presumption is a pullback is on deck.
Whether that comes before the Monthly Swing Charts turn up on the indices (on trade over their July highs) is to be determined.
A relatively shallow pullback prior to the monthlies turning up looks buyable as there is a strong likelihood the monthlies will turn up. The market did not come this far this quick not to do so.
A shallow pullback should hold the 4040 to 4060 region.
If the indices push above July’s high immediately to kick off August, the likelihood is that an ensuing pullback will be a sharper and multiday event, possibly lasting into August 9-12 according to my cycle work.
The market is relatively simple right here.
The SPX exploded above the key 4020 level and as long as the key 4020 breakout “square” acts as support the market is in a short-term uptrend.
At the same time a correction should hit this week for several reasons:
1) 4130 being 720 degrees up from high on the Square of 9.
2) A 50% retrace from the secondary high, the March 2022 high is 4137. The SPX struck a high of 4140 on Friday.
3) The Monthly Swing Charts on the indices should turn up on trade over July’s high (Friday’s high). The last time the SPX Monthly Swing Chart turned up was March which defined a secondary high.
4) The SPX 3 Week Chart is set to turn up on trade this week, above last week's high (4140). If the bear market is still exerting its influence, this should define a high…at least for a shake-out.
There have been two other instances since the SPX ATH where the 3 Week Chart has turned down:
The week of March 28th, directly preceding a waterfall decline.
The week of May 30th which also defined a high prior to panic selling into the low. However, the 3 Week Chart turn up into May 30th was less than orthodox based on week 1…the outside down week of May 16th.
If the 3 Week Chart turns up this week which is basically a “no-brainer”, it would be a more impulsive pattern akin to the turn-up in late March.
5) The SPX may be carving out a Pinocchio of its declining 20 week moving average for a weekly Holy Grail sell signal– just as it did at the end of March.
In sum, as you can see, we have two events on deck this week which will tell us a lot about the market according to my time-based Hit & Run Methodology:
The Monthly Swing Charts could turn up in tandem with the SPX 3 Week Chart.
Two big Wheels of Time could turn this week which should perpetuate a pullback.
The behavior and character of that pullback and subsequent behavior if stocks should push to a new high will tell us if the July fireworks will trigger the guns of August.