Market Observations for the Coming Week: The ES made an EW 5-wave decline on the hourly chart from pre-market 1/26 into early Monday - this is a sign of an important top - we're now looking for a bounce into the 2/1 FOMC minutes release and then another impulsive leg down into February. Our Option Premium Ratio (OPR) also gave us a spike low of 0.62 (a 52-week low) on 1/26 which we consider a major sell signal.
1/31/17 (Commentary for Tuesday) Our work has confirmed the following - the ES made an important high in the 1/26 New Moon Timing Window and declined in an EW 5-wave impulsive pattern into early Monday - this is a sign of an important top that could hold into February. Our Option Premium Ratio made a 52-week low (0.62) and also generated a major sell signal - on Tuesday we got a corrective bounce that should run into Wednesday's FOMC minutes before the next leg down. We're expecting a correction that should run into mid-February and reset the market's sentiment tank - we're still bullish in the intermediate term and expect the high for the year to be made in the July/August time window at much higher levels (SPX 2500-2600). Silver continued to rally impulsively on Tuesday - this is BULLISH FOR THE PM sector - we plan to buy a corrective decline after the 2/1 FOMC minutes. Gold and silver traditionally decline into the NFP jobs report on 2/3 and we plan to buy dips into Friday. This week contains a FOMC meeting(Wed), a NFP jobs report(Fri) and some key earnings reports - we will have many chances for market volatility. For the first time in recent memory, a US Treasury secretary is trying to talk up the Euro - the times are certainly changing. The Dollar Index gave us an EW 5-waves down on the hourly chart into 1/25 and finished an EW a-b-c correction into early Monday before starting another leg down - the Yen and Euro have made major lows and the PM sector has room to rally, especially after the 2/1 FOMC minutes.
- Big Picture on Stocks (UPDATED) - The ES made an important top on 1/26 in the New Moon Timing Window - we plan to short a corrective bounce into the 2/1 FOMC minutes.
- Big Picture on PMs (UPDATED) - The GDX finished 5-wave rally into 24.25 on the 1/23-1/24 turn window and we got just a corrective pullback into the 1/27 New Moon. Silver rallied in an EW 5-wave impulse pattern on the hourly chart from Friday into Monday - this is BULLISH FOR THE PM SECTOR - we plan to buy dips into the 2/1 FOMC minutes. Recent record low sentiment for gold in late 2016 argues that this rally could be the start of something big in 2017 since so many analysts have discounted that possibility.
- Stocks - ALERT! The ES declined in an EW 5-wave impulse pattern since 1/26 - we've seen an important top. We're looking to short a bounce into the 2/1 FOMC minutes for a decline into mid-February.
- Gold - The GDX took out Monday's high today - we're looking to buy dips in PM stock calls after the 2/1 FOMC minutes and going into Friday's NFP jobs report.
- Silver – Silver continues to rally impulsively - we plan to buy dips in silvers stocks after the FOMC minutes on Wednesday.
- Crude Oil - The XLE continues to lead to lead the SPX down - crude oil has a bearish seasonal into February.
- Bonds - Bonds are rallying impulsively from 1/26 - we're still looking for TLT to fill its gap at 126. We plan to buy dips in TLT calls.
- Dollar Index – The Dollar Index gave us an EW 5-waves down on the hourly chart into 1/25 and finished an EW a-b-c bounce into early Monday - the Yen, Euro and gold have made confirmed lows. We plan to buy dips in gold stocks after the 2/1 FOMC minutes.
TURNING POINT DAY
The 1/27 (New Moon) turn window, the 2/1 (FOMC) turn date and the 2/3 (NFP) turn date should be key for both stocks and gold this week.