Market Observations for the Coming Week: We didn't get any gap-down open on the SPX Monday morning and we took profits on some of our put hedges. We still could see a move below last week's low going into the Fed minutes on Wednesday.
10/31/16 (Commentary for Monday) Once again early strength in the NDX and SPX gave way to selling and we made a back-to-back close below SPX 2130. There is a chance of another leg down going into the Fed minutes on Wednesday. The SPX, NDX and Russell 2000 may be in C-Waves down of a correction from their Sept/Oct highs and that could bring more selling into this week. Crude oil declined sharply into today's New Moon Timing Window - one more leg down Tuesday may be needed to complete the correction. The IBB finished an EW 5-wave move from last week and looks ready to bounce. We view the IBB as a coiled spring that might be the best post-election trade. The NDX may have finished a Wave C of a bullish "running B-Wave" pattern on the hourly chart Friday and that has bullish ramifications for the rest of this week. Overall, the threat of a Democratic sweep of the Presidency and Congress (and the control of Congressional committees) may have decreased Friday afternoon with the FBI disclosure on Clinton emails, but a rising interest rate environment could still upset the market heading into the election. After a stiff decline on Thursday, bonds only managed a sideways bearish consolidation into Monday - this is bearish for both bonds and stocks. Our short-term stock market bias is still bearish as a deeper correction in crude oil could also pressure the SPX Tuesday. We plan to buy dips in selected biotech shares while keeping a large cash reserve. The GDX rally into the New Moon Timing Window on Monday looks corrective and another leg down may be needed into this Friday's NFP jobs report - we added some GDX puts. The USD appears to be extending its correction beyond a "minimal EW a-b-c" correction - this argues that a low in the Euro could be in.
- Big Picture on Stocks (UPDATED) - The NDX may have finished the Wave C of a "running B-Wave correction" on Friday - this could be bullish for the market after the Fed minutes on Wednesday.
- Big Picture on PMs (UPDATED) - The GDX just bounced correctively from Friday into Monday's New Moon Timing Window - another leg down below GDX 21.00 may be needed to finish the correction.
- Stocks - We didn't get a gap-down open in today's New Moon Timing Window - this is bullish. Also, the Russell 2000 showed relative strength today against the SPX. We sold most of our SPY, QQQ and IWM puts before the close.
- Gold - The GDX gave us just a 3-wave corrective bounce from Friday into Monday's New Moon Timing Window - this argues for another leg down in the GDX below 21.00.
- Silver – Silver may have finished an EW a-b-c correction from Friday into Monday's New Moon Timing Window but the action on Tuesday will be key.
- Crude Oil - Crude oil broke below $47 going into today's New Moon Timing Window - we may need one more lower low Tuesday.
- Bonds - Bonds made an EW 5-waves down on the daily which confirms the start of a bear market and perhaps a generational low in rates. Bonds only gave us a 3-wave bounce from Friday - this looked bearish and we added some TLT puts.
- Dollar Index – The USD is extending its pullback beyond a "minimal EW a-b-c correction" - this is bullish for gold and the Euro.
TURNING POINT DAY
The 10/30-10/31 New Moon Timing window should bring us volatility in the PM sector and the SPX.