Market Observations for the Coming Week: The SPX topped an EW a-b-c bounce from Thursday as it touched the 50% retracement from the 4/5 high - we reversed impulsively down into the close. We sold our UVXY calls and SPY puts near the close and plan to repurchase early Thursday for a test of last week's low at SPX 2322.
4/19/17 (Commentary for Wednesday) The SPX opened strong this morning and finished an EW a-b-c bounce from last Thursday's close before reversing down impulsively down into the close. IBM was sold off hard after it's earning report and this dragged the DJIA down big but there was a lot more to today's tape than IBM. Rising oil inventories this morning caused a big reversal down in crude oil and pressured the oil stocks into the close. We're looking to short the SPX early Thursday on opening strength and are looking for a test of last week's low. Our read on the CBOE and ISE option tape saw "euphoric call buying" at times and reinforces our bearishness into Friday/Monday. However, we must emphasize that with Mercury retrograde in force, this is a very difficult period for day traders and swing traders - we prefer to trade small and with hedges. This is a big earnings week for many high profile companies and many stocks with good earnings (BAC, DAL, JPM, etc.) have been sold off - playing the earnings trade setups have been treacherous to say the least in this weak market. We will watch Thursday's trade closely to see if the ES gets a corrective bounce into the open. Gold stocks were slammed hard today, but the PM sector may get a bounce Thursday if the stock market sells off. Still, it looks like gold may have put in a weekly high Sunday evening and the PM sector needs more consolidation. The USD may be close to ending it's correction - we're looking to short a bounce in the Euro on Thursday.
Big Picture on Stocks (UPDATED) - The SPX made a B-Wave top on 4/5 on the daily SPX chart of the 34-day Fibonacci step out from 3/1 - this now argues for a C-Wave down into May/June before a summer rally and we may have started this move in earnest on 4/13. We could see significant selling after the 4/18 Tax Day to pay for capital gains taken last year.
Big Picture on PMs (UPDATED) - Gold's test of $1300 Sunday evening may have put in a weekly high - we need more correction in time and price for the PM sector.
- Stocks - The SPX may have ended an EW a-b-c bounce from 4/13 - we're looking to short early strength on Thursday.
- Gold - Gold may have made a weekly high on its test of $1300 Sunday evening. The PM sector may bounce on Thursday and we will be looking to sell our GLD calls.
- Silver – We're looking for silver to bounce on Thursday.
- Crude Oil - Building oil inventories sent crude oil down hard today - the XLE may be leading the market down again.
- Bonds - Too many traders are short this market. We plan to add TLT calls on weakness.
- Dollar Index – The Dollar Index may be close to ending its correction. The Euro looks vulnerable.
TURNING POINT DAY
The turn window for this week is 4/19 which comes after the 4/18 Tax Day.