In our last update on COMP [see: Apr 25, 2022 Update] I noted that after reversing within 0.3% of our 16,158 upside target in November 2021……COMP had dropped to our 12,813 downside target three separate times. I wondered what it would take for COMP to reach our next lower target at 10,122.

[Last November] we identified two downside targets: 12,813 and 10,122.  COMP topped out at 16,212 the very next session and reached 12,813 on Feb 24.  And, again on Mar 14. And, again today. What the heck is going on? After three separate attempts, is 10,122 still on the table?

As we found out earlier this morning, 10,122 was definitely on the table.  In fact, tagging it has touched off one of the biggest single-day bounces we’ve seen in ages.

continued for members…

When we get a bounce like this, we have to think of Jun 17 when COMP tagged the bottom of its rising purple channel and precipitated a very impressive bounce among all major indices (25% for COMP itself.)

The channel was a little raggedy, having briefly broken down during the COVID crash in 2020 to get a bounce off its 200-week MA.  Now, it has broken down again – raising the obvious question of whether it can recover that channel or it will fall to a lower level of support. It would be wise to keep an eye on the SMA10, currently around 10,750. If we zoom out, we can see that the purple channel is embedded in a much larger red channel dating back to the Middle Ages. The .236 line of the red channel happens to intersect with purple .886 and red 1.618 where the falling white channel crosses them in Jun 2023.

Of course, this would require that COMP drops through the white 2.24 it just bounced off of as well as the 2020 highs just below at 9839. But, why shouldn’t it? This drop through the purple channel bottom should be different from the Mar 2020 one. Back then, the Fed was throwing every scintilla of support they could at the markets, trying to prevent a meltdown.

This time, they’re tightening. And, based on this morning’s CPI report, they’re a long way from slowing their rate hikes. If a backtest of the 2020 highs is in order, why not a backtest of the 2000 highs? The falling white channel intersects the bottom of the red channel and the 2000 highs in Sep 2024.

Stay tuned.