Folks,
Market Observations for the Week: The stock market is a battleground between the traders trying to price in the slowing effects of the corona virus on China and the global economy and the fearless dip buyers who want to buy dips in the big tech stocks like AAPl, MSFT and TSLA. The B-Wave bounce in the SPX and NDX from Monday has turned complex and gave us a C-Wave bounce into the close . We would raise cash here where possible after a historic run in stocks from early October to late January. Gold and bonds pulled back late as stocks rallied hard into the close.
1/30/20 (Commentary for Thursday) Good earnings from AMZN and TSLA are keeping the NQ futures elevated overnight. Also, the lack of travel restriction recommendations from the WHO on account of the corona virus gave stocks a boost late in the day. Still, the DJIA gave us another triple-digit day on negative market breadth and that is bearish. The smart money OEX traders gave us the largest closing put/call ratio (6.94) that we have ever seen in our data base and that is bearish. Big Tech earnings are trying to hold the markets up - today's came on negative breadth readings on the Nasdaq and the NYSE - the average stock is being sold. Our bias this week was for a low on Monday and then a bounce into the Fed minutes before the next leg down, but the late SPX rally today shows that the B-Wave rally from Monday has turned complex. The two-day SPX close below 3300 on Monday/Tuesday is has turned the market trend down. The high we made at SPX 3337 on 1/22 looks very important - perhaps more than a daily cycle high. It took an exotic shock to the system(like the Chinese corona virus) to trigger a pullback and it could unfold with a lot of volatility into February. Our bias is for the SPX to test the 50-dma around 3200 by Monday/Tuesday. Gold pulled back into the FOMC minutes on the 21-day Fibonacci step out from the 1/8 high at $1613 and reversed higher from $1564 - we tested $1590 resistance Thursday before a pullback late. Gold made a mid-December seasonal low which usually leads to a rally into February and the expansion of volatility in the gold market is a harbinger of much higher highs in 2020. The USD peaked at 98.188 early Wednesday before the FOMC minutes and then a strengthening British Pound gave the USD a pullback. The strong USD is crushing crude oil, copper, coffee and other commodities.
- Big Picture on Stocks (UPDATED) – The SPX peaked at 3337 on 1/22 - a quick 5-8% correction is underway - we could see a test of SPX 3200, the 50-dma, Monday/Tuesday.
- Big Picture on PMs (UPDATED) – Gold pulled back into the FOMC minutes and the 21-day Fibonacci step out from the 1/8 high - gold reversed higher after the FOMC minutes and tested $1590 resistance on Thursday before pulling back.
- Stocks – The SPX B-Wave rally from Monday's low has turned complex - a test of its 50-dma at 3200 by Monday/Tuesday is a possibility.
- Gold – Gold pulled back into today's FOMC minutes and the 21-day Fibonacci step out from the 1/8 high at $1613 - gold reversed higher after the FOMC minutes and tested $1590 Thursday before a correction.
- Silver – Silver bottomed at $17.28 and rallied hard into Thursday before pulling back late.
- Bonds - Bonds peaked at 163'12 Thursday before pulling back.
- Crude Oil – Crude oil broke to $51.66 before bouncing.
- Dollar Index – The USD peaked at 98.188 early Wednesday before reversing down on a strengthening British Pound.
TURNING POINT DAY
The turn windows for this week are 1/27 and 1/29.