Market Observations for the Coming Week: The SPY may have made a Wave 5 of C low late Friday as the House vote on the AHCA was pulled. The market breadth has been bullishly diverging during the C-Wave down of an EW a-b-c decline from 3/1 - this is BULLISH. We're looking to buy weakness in the financials, biotech, and QQQ going into the 3/27-3/29 turn window. We're looking for IRA contributions to drive the SPX and DJIA to new highs by 4/15 (Tax Day).
3/26/17 (Commentary for Sunday) We are very close to to a price low in the EW a-b-c correction from 3/1 for the SPX and DJIA - we may have seen the low late Friday when the AHCA vote was pulled. The market needed a quick and scary correction to rebalance sentiment and we may have seen most of it - we're looking to buy weakness on Monday in financials and biotech - we are looking for a test of the highs going into 4/15 (Tax Day) as IRA contributions flow in for the year. Market breadth improved notably last week on down days and that argues for a rally phase to start early in the week. Our TRIN5 indicator went above 7 last week (very oversold) and our Option Premium Ratio hit a six month high for a possible intermediate low - we're looking for an important market low early this week. The potential slow down of the Trump agenda over the failure of the AHCA bill weighed heavily on the market Friday, but we think that we are close to at least a tradable bounce. Crude oil continues to hold support at $47 but more down looks in the cards going into mid-April as the bearish COTs cast a pallor over this market - we will watch oil stocks closely on Monday for bullish divergence. We continue to trade UVXY calls intra-day to hedge downside risk in the SPX if we get a good pattern set up. Gold finished an EW 5-wave rally from 3/10 Wednesday and continues to hold up today, but a reversal down today in the GDX/GDX argues for near-term weakness in the PM complex. The Dollar Index finished 5-waves down on the hourly chart Wednesday but continues to look weak - Monday's trade will be illuminating.
Big Picture on Stocks (UPDATED) - The SPX and DJIA are close to finishing their EW a-b-c correction from 3/1. Our bias is for a trading low early this week - we plan to buy financials and biotech. We are looking for all-time highs by April in the SPX.
Big Picture on PMs (UPDATED) - We got an important trading low in gold on 3/10 in the Full Moon Timing Window and finished an EW 5-wave rally into Wednesday (the 21-day Fibonacci step out), but weakness in gold stocks argues for a pullback into April - Patience.
- Stocks - We're still looking for a 5th wave of C down by Friday/Monday in the SPX to finish an EW a-b-c correction from 3/1 - we are looking to buy early weakness on Monday in the financials and the biotech.
- Gold - Gold finished an EW 5-waves up from 3/10 on Wednesday but weakness in the GDX argues for more pullback in the PM sector into April.
- Silver – Silver continued to grind higher bullishly on Friday.
- Crude Oil - Crude oil still held above $47 on Friday, but we may see another leg down into mid-April.
- Bonds - US bonds made an EW 5-wave advance on the hourly into 3/20 and keeps sub-dividing up impulsively - we plan to buy TLT calls on dips.
- Dollar Index – The $DXY finished 5-waves down on the hourly Wednesday but still looks weak - a lack of a bounce Monday will be bearish.
TURNING POINT DAY
The turn window for this week is 3/21-3/22.