“And a white blinding light makes it all seems so right
And you feel like the King of the Hill” King Of The Hill, Roger McGuinn
“It is an old cliché that they don’t ring a bell at the tops and bottoms of markets, but it is not entirely true. Occasionally someone climbs up in the belfry and does just that, as a public service, but knowing that few are likely to heed the bell.” Bill Miller
Wednesday morning’s Hit and Run Report shows an hourly SPX with an large Gap & Go courtesy an extension of tariffs on the EU.
The momentum left an Island Bottom in turn producing breakage above a declining trendline from the May 19th high.
From my perspective there are three important technicals on the table based on the Hit and Run Methodology that warrant caution::
1) The high for the move on May 19 left a theoretically bullish outside up day continuation signal
The bulls were unable to capitalize on the setup. Instead May 19 marked a high prior to a 200 point SPX pullback in 4 days that satisfied a test of the 200 day moving average.
The normal expectation is for a rally off the first time back down to test the 200 day especially after a vertical run.
The market exploded off the 200 dma the very next session. As I like to say the new breaks with the cycles, not the other way around, but the news also breaks with the patterns.
2) May 19 is pivotal because it is 90 days/degree from the Feb 19 all-time high.
As well as shown in real time, May 19 squares 594 (5940) on the Square of 9 Wheel producing a Time/Price square-out or balancing out of Time and Price.
3) Yesterday the market surged again with the SPY up 10 points overnight to 600. This is an important level not just because it is an important psychological round number but because it marks the low of the high bar week from the week of the high in mid-Feb. In other words the SPX tested the low of the high bar week overnight before Thursday’s open. However, by the time the market opened the SPY was back below the pivotal 594 level. The market respected this key 594 pivot opening on what would turn out to be session highs at 593 before relinquishing the entire surge and dropping to 586.
In so doing the SPY traded above Wednesday’s high on the open and below Wednesday’s low leaving an outside down bar on a day that should have been a powerful bullish catalyst:
If the weekends Tariff Pause perpetuated a massive surge, you would think that Thursday’s “permanent” injunction would stick.
However as warned in Thursday morning’s report, Headline Roulette, Tariff Craps: “Rather than resolve things, I have fa feeling this is going to cause more uncertainty and volatility. Miss FOMO may just turn into a Keno girl.” Free drinks, no wins.
The bulls snatched defeat from the jaws of victory on Thursday.
We got an initial confirmation of a top—at least for a pullback— on trade below Wednesday’s low.
Further confirmation will come on trade back below the Triangle on the above SPX hourly.
Allow me to explain.
The SPX/SPY broke above a triangle Tuesday. A failure back below the bottom of the Triangle triggers what I call a Triangle Pendulum sell signal.
You see when you get a breakout of a triangle, one way or the other, and then price reverses back thru the other side of the triangle you get a signal in the opposite direction.
Fast moves come from false moves.
Breakage below the bottom of the Triangle at the 5870 (587) region opens the down door.
Interestingly, the SPY flirted with breakage yesterday: it dropped to 586 before rebounding to close at 590.
It will be interesting to see if we get downside follow thru from Thursday’s reversal with the 590 strike acting as resistance.
Caution is warranted because several General ran from the battlefield yesterday.
For example SPOT followed thru to the downside closing below its 20 day moving average following Tuesday’s signal reversal bar on a day where the market soared.
DAVE carved out was is essentially a Key Reversal Day.
GEV (a short idea intraday on Thursday) also left what is essentially a Key Reversal Day.
The poster child for recent the speculative momentum trade has been recent IPO CRWV.
CRWV (flagged as an actionable short intraday Thursday) wasn’t a hot IPO but it made up for it in May.
As flagged on the Hit and Run Private Twitter Feed, 118 satisfies a square-out from the lows with a possible 90 degree Throw Over projecting to 130.
As well, notice that 130 squares out with May 28/29.
On the heels of the market FOMO on Thursday morning, CRWV spiked to 130 before reversing to 118.
When CRWV broke the 118 square it waterfalled to 105 in 3 hours.
Amazing.
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In sum, our daily Roadmap forecast a straight line move from the open.
With the futes 30 points off their pre-market high of + 100, the Roadmap did a good job telegraphing the bulls retreat.
Moreover, when more than a few Generals get shot, the troops are likely to turn tail and for the hills.