Market Observations for the Coming Week: The dovish language after the FOMC rate hike Wednesday gave the SPX and GDX big rallies into the close on Wednesday, but there was no follow through on Thursday. The SPX and DJIA did not confirm the NDX at new all-time highs, this is bearish divergence, and we could still see a scary C-Wave down in the SPX from the 3/1 high.
3/16/17 (Commentary for Thursday) The SPX and NDX gave us no follow through today after Wednesday's big rally. In fact, the SPX and DJIA may have finished a B-Wave late Wednesday and we could be rolling over in a C-Wave down from the 3/1 high. The market loved the dovish spin from Yellen Wednesday on future rate hikes in 2017 and the NDX made new closing highs - but the SPX and DJIA failed to make new highs for a case of bearish divergence. The potential slow down of the Trump agenda with the complexities of the AHCA act is still a threat to the market here, and the SPX and DJIA are still lagging the NDX, but you have to respect the resiliency of this bull market. Crude oil made a low in the orb of the Full Moon/solar eclipse and rallied in 5-waves into Wednesday's close - we're inclined to buy dips in the oil stocks. The VIX took out multi-week lows, and the market remains a difficult short here, but the ISEE call/put ratio reached euphoric levels during the day and this does not bode well for a sustained market advance. The release of the Republican health care proposal to replace Obama Care is stirring up some opposition especially in the realm of excessive high-income tax deductions and too meager low-income tax credits - it would not be surprising to see some market angst over the slowdown in the Trump agenda, but inflows into stock IRA funds could still hold the SPX and DJIA up into 4/15. Our tactic now is to buy dips in oil stocks and steel stocks. The GDX looked weak today and we took some profits - more sideways activity is possible into early next week. The Dollar Index is close to finishing 5-waves down on the hourly chart- we may get a bounce by Monday.
Big Picture on Stocks (UPDATED) - The NDX closed at new all-time highs after the FOMC rate hike but the DJIA and SPX bearishly diverged. Euphoric ISEE call/put ratios are screaming that a C-Wave down in the SPX from the 3/1 high is still a risk. Overall, we still expect that the SPX will hold up into the 4/15 tax day on the weight of stock inflows into IRA accounts.
Big Picture on PMs (UPDATED) - We got an important trading low in gold on 3/10 in the Full Moon Timing Window and in silver on 3/15 - we may have started an important rally in the PM sector, but more sideways action is likely going into late March.
- Stocks - Euphoric call buying in the ISEE call/put ratio makes us cautious here. The XLF(financials) may need a C-Wave down from 3/1 and the IBB may be rolling over. We added SPY puts near the close.
- Gold - Gold may have made an important intermediate low at $1194.5 - but we may see sideways action going into next week.
- Silver – Silver made an important low in our 3/15-3/17 turn window - we plan to buy dips in SLW calls.
- Crude Oil - Crude oil made an important low early Tuesday - we're looking to buy dips in CVX, COP and SLB calls.
- Bonds - US bonds made a low early Tuesday and then rallied hard after the FOMC rate hike - we're standing aside this market on Friday but we have a bullish bias.
- Dollar Index – The $DXY is close to 5-waves down on the hourly - we're looking for a bounce by Monday.
TURNING POINT DAY
The turn window for this week is 3/14-3/15 and includes the 3/15 rate hike decision.