Folks,
Market Observations for the Week: Rising US long rates rallied overnight Sunday and pressured stock futures down – the NDX was especially hard-hit Monday and AAPL led Big Tech down. Still, the $TRIN stayed below 1 and the CBOE stayed subdued (< .70) – WHERE’S THE FEAR? We tested the QQQ 50-dma at 318 today and could get a strong bounce into Tuesday. The spike in long rates could tip the scales for a deeper correction this week – perhaps into the 2/26-2/27 Full Moon Timing Window. Crude oil is testing $63 Monday night and that is bullish for a SPX rally early tomorrow – we favor the bank and oil stocks early for a quick day trade if we get good setups. Gold completed a EW 5-wave correction from 1/6 on the daily chart and bullishly closed above $1800 – a quick rally to $1850 resistance is possible this week – we may have seen an important intermediate low on Friday. The USD is sub-dividing down impulsively Monday night and testing 90 – this is bullish for the PM sector.
2/22/21 (Commentary Monday) We did see a short-term top in the 2/11-2/12 +/- 1 TD time window for the NDX and the SPX and rising US long rates (>1.37%) Sunday intensified the Big Tech correction. After a retracement rally early Tuesday, we are looking for the QQQ to pull back and test the 50-dma near 318. Rising long rates are especially pressuring Big Tech and we have seen a QQQ 5-waves down on the hourly chart which is a SELL SIGNAL. With seven gap-up opens since 2/1, this is the kind of action that can end an important rally phase or top a multi-year bull market – we will soon find out if this thesis is correct. Bitcoin rallied to 57,790 overnight Sunday before a 10% correction into the low early Monday – we got an EW 5-waves down on the hourly chart to log a short-term high here. The completion of a 5-wave rally on the daily chart for the SPX and bitcoin from last fall could lead to a sizable correction into the end of February – it feels that we are getting there. We looked for another leg up in long rates (>1.33%) to be the catalyst for a deeper stock market correction. The SPX has already priced in the passage of Biden’s $1.9T stimulus bill and any hitch along the way could add to the selling pressure. Our favored sectors remain the XLF (banks), and the XLE (energy stocks) – the XLF made highs for the year early last week and could rally more on a further spike in long rates. The energy, banking and materials sectors remain our favorite investment vehicles going forward and deserve allocation from investors on any market correction into March. Crude oil is testing $63 Monday night and that should support a SPX bounce early Tuesday. Gold undercut the 11/30 low to $1759 on Thursday night – we may have put in an important intermediate cycle low – closing above $1800 on Monday was bullish as we head into Comex option expiration on Tuesday. The USD has sub-divided down impulsively from 2/17 and is testing 90 Monday night – this is bullish for the PM sector.
Big Picture on Stocks (UPDATED) – The QQQ gave us 5-waves down on the hourly chart from 2/15 – we tested the 50-dma at 318 Monday and should get a big bounce into Tuesday. BE PRUDENT AND BE DEFENSIVE here and RAISE YOUR CASH LEVELS – the flush on VXX on expiration Friday may have put in an important low for volatility. We like the XLE, XLF, and XLB ETFs on any pullback into March.
Big Picture on PMs (UPDATED) – Gold undercut the 11/30 low at $1759 late Thursday – we may have formed an important intermediate cycle low. Comex option expiration on Tuesday could squeeze prices higher.
- Stocks – A rally higher in US long rates pressured the QQQ down on Monday. We tested the QQQ 50-dma today at 318 and could get a strong bounce into Tuesday. We used strength in energy stocks and bank stocks Monday to raise more cash. Rising long rates will be a catalyst for the next leg down in the QQQ.
- Gold – Gold may have made an important short-term low at $1759 late Thursday. On Monday we closed above $1800 which is bullish - we could see gold squeezed higher on Comex option expiration on Tuesday.
- Silver – Silver rallied hard on Monday. The physical is being accumulated aggressively and there may be a price squeeze this week on the Comex option expiration Tuesday.
- Bonds – Bonds are the 800-lb gorilla in the financial markets here. Bonds undercut last week’s low on Sunday night and US 10-yr rates climbed to 1.37% - this could be the catalyst for a deeper stock market correction.
- Crude Oil – Crude oil is testing $63 Monday night and this could be a catalyst for a SPX bounce early Tuesday.
- Dollar Index – The USD sub-divided down impulsively from last week and is testing 90 Monday night - this is bullish for the PM sector.
TURNING POINT DAY
The turn window for this week is 2/26-2/27 – the Full Moon Timing Window.
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