Market Observations for the Coming Week: The SPX and NDX appear to be tracing out a small correction into the March monthly expiration turn window. We are looking for a reversal up by 3/22, the Tuesday after a monthly expiration is a turning point day in our work. The financials may have ended a mild EW a-b-c correction on Friday.
3/19/17 (Commentary for Sunday) Our bias is that the stock market will hold up into 4/15 (Tax Day) before a significant correction. The financials (XLF) have been weak since the SPX high on 3/1, but we may have ended a mild EW a-b-c correction on Friday - we like financials on any further weakness into 3/21. The NDX made an all-time high on the dovish spin from Yellen Wednesday, but the SPX and DJIA failed to make new highs for a case of bearish divergence. Still, the market remains a tough short here as IRA inflows continue into 4/15. The potential slow down of the Trump agenda with the complexities of the AHCA act is still a threat to the market in the short-term, 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 on Monday. 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 in the short term. Our tactic now is to buy dips in oil stocks and steel stocks. The GDX started correcting Thursday - more sideways activity is possible into the 3/21 turn window. 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 going forward. 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 - The SPX may be giving us a small correction into the 3/21 turn window, and the XLF(financials) may have ended an EW a-b-c correction on Friday. We will watch the financials closely on Monday.
- Gold - Gold may have made an important intermediate low at $1194.5 - but we may see more sideways action going into next week.
- Silver – Silver may be giving us just an EW a-b-c correction from the important 2/28 high - we plan to buy dips in SLW calls on down days.
- Crude Oil - Crude oil may have made an important low near the Full Moon, but the COTs look very bearish and a break of $47 could take us to $45 very quickly.
- Bonds - US bonds made an EW 5-wave advance on the hourly- we have a short-term 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 3/21-3/22.