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META-morphosis

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“I cannot make you understand. I cannot make anyone understand what is happening inside me.”
-The Metamorphosis, Franz Kafka

Markets turn on a dime, most traders cannot.

If you can’t measure risk, you can’t manage risk.

This is the unique character of the Square of 9… to take the measure of the market and pinpoint

Changes in trend on multiple time frames.

“On my Square of 9 Wheel of Time & Price, 510 (5100) squares out with Wednesday-Friday this week.”

The above is from Wednesday’s Hit and Run Report.

The index gaped up to an opening spike high of 5089.48 and reversed with authority on Wednesday.

The reversal dropped through the open gap, triggering a Jump The Creek sell signal (offsetting the open gap).

A mid-day rally tried to recapture the region where the Jump The Creek sell signal occurred, but the bears maintained possession of the ball.

As offered Wednesday morning, trade over Tuesday’s high would turn the 3 Day Chart back up.

This occurs with 3 consecutive higher daily highs (not necessarily higher closes).

The turn up occurred in the context of a strongly downtrending market: the 20 day moving average is pointing down and the 50 day moving average is starting to roll over.

In a strongly downtrending market, a turn up of the 3 Day Chart will define a high soon in terms of time and price.

It did… but it was not unequivocal until after META reported.

Checking an hourly SPX shows that Wednesday’s high kissed resistance carving out a 3rd lower high.

Fast moves often times come from 3rd lower highs.

We got one post-META.

90 degrees up from the idealized 4970 low (typo on chart).

Is 5041.

That is set to be challenged this morning.

Breakage thru 5041 opens the door to the a full test of last weeks lows.

As well notice the potential inverse right shoulder on a drop to the 5010 region.

If that level is not defended by the bulls the market will be in a vulnerable position.

Why?

Because the entire rally attempt was predicated on three things:

1)      a drop that satisfied 360 degrees down from the ATH

2)      A test of the rising 20 week moving average

3)      The notion that a turndown in the 3 Week Chart for the first time since the rally started last October would define a low.

Consequently, if last week'ss lows are squandered, Mr. Market may ride a heat seeking missile to the 200 day moving average currently residing at 4680.

Checking a daily QQQ shows their 20 day had already crossed over its 50 day moving average when they went into a Minus One/Plus Two sell signal Wednesday morning.

The pattern looks like a rounding top followed by a wave 1 down and a countertrend wave 2 rally.

META may have lit the fuse for a wave 3 decline.

Keep in mind that wherever this initial 5 wave decline culminates, we should see a short-lived (like Monday/Tuesday) rally followed by a waterfall decline.

From the QQQ 449 a 360 degree decline is 368.

This ties to the high of the first week up off the late October low….the breakout pivot following the July-October 2023 sell-off.

So there is some good symmetry pointing to a drop to the 368 QQQ region.

May Day should see a complete transformation of the bullish narrative.

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