Market Observations for the Coming Week: The SPX reversed higher to take out Wednesday's high and the Nasdaq made an all-time high. We were stopped out of our QQQ puts and are standing aside until we see the market tape on Friday. Friday is the midpoint of the current Mercury retrograde period which has proven itself to be a very treacherous trading environment.
4/20/17 (Commentary for Thursday) The SPX opened strong this morning and added to gains in the afternoon as positive expectations from this weekend's French elections calmed the market and hopes of progress on the Trump agenda gave bids to financials and the steel stocks. We did add QQQ puts early in the session but stopped out before noon EST. The SPY did manage to close above its 50-day MA and now the pressure is on the bulls to show some follow through higher. With Mercury retrograde still in force, we prefer not to chase the market higher - we prefer to trade small and with hedges. We do believe, however, that the market correction from 3/1 is a "bullish consolidation" and that highs for the year will be seen in August - we're just not sure of the next two weeks. We did expect a sell off after the 4/18 Tax Day and today the market rallied in defiance of that idea - BULLISH. The IWM (Russell 2000) did hold above 130 and the IYT (DJ Transportation) held above 160 - BULLISH. 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 market. We will watch Friday's trade closely to see if the ES gets any follow through higher, but we will be in the grip of the April monthly expiration tape. The GDX gave us a weak bounce on Thursday and a lower low looks likely - the New Moon on 4/25 may give us a tradable low. Still, it looks like gold may have put in a weekly high Sunday evening and the PM sector appears to need more correction in time. The USD may be finishing a triangle on the daily chart - the Euro looks vulnerable here, but the French elections could change this outlook by Monday.
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. How the market trades after the 4/25 New Moon will be enlightening.
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 - We were stopped out of our QQQ puts before noon EST. With the April monthly expiration Friday and the French elections on Saturday, we plan to stand aside any big directional trades.
- Gold - Gold may have made a weekly high on its test of $1300 Sunday evening. The PM sector gave us a weak bounce on Thursday and argues for a lower low by the 4/25 New Moon.
- Silver – Weak action in the silver stocks and record high silver COT speculative longs keeps us cautious and looking for lower lows.
- Crude Oil - Crude oil got a bounce but weakness in SLB and HAL (oil service stocks) keeps us cautious.
- Bonds - Bonds refuse to decline impulsively and 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. The French elections on Saturday should move the Euro big one way or another.
TURNING POINT DAY
The turn window for this week is 4/19 which comes after the 4/18 Tax Day.