Folks,
Market Observations for the Week: Our weekend bias was that the E-mini would test highs today before bullishly consolidating into Fed Day on Wednesday – that did not happen and we got more defensive. We now our focused on the possibility that Friday made a B-Wave test of the 11/22 high at 4740 and we started a C-Wave down today. This week includes a Fed meeting and we should see some Wave 2 of C consolidation in the SPX going into Wednesday before a Wave 3 of C down. On 12/19, Venus will go retrograde and that could mark the last chance for a high SPX print before a sharp correction into January. On Saturday, we saw an impressive alignment of Uranus, the Moon, Jupiter, Saturn, Neptune and Venus and this could signal that a major top is close at hand. Chairman Powell has raised inflation to his number one priority and the new FOMC committee appear receptive to the idea of a near-term tightening of monetary policy. We remain in 50% cash because of the macro factors facing the global economy (Chinese credit contraction, rising global inflation, and rising global rates, new Covid variant, etc.) and now a more aggressive Fed that wants to rein in inflation. Crude oil appears to be rolling over and that is market bearish. Bitcoin tested its S2 pivot at 45575 Monday night and continues to trade below 50000 which looks bearish for the stock market. Gold continues to hold up below $1800 as we approach Fed Wednesday and a 20-day cycle low is due this week. The USD continues to consolidate sideways and is holding up near 96.50.
12/13/21 (Commentary for Monday) Market action today was bearish and made Friday look like a B-Wave test of the 11/22 high at 4740. The E-mini may have started a C-Wave down today and we could see a Wave 2 consolidation into Wednesday. The big range days over the last two weeks in the NDX and SPX are indicative of a topping bull market – the “planetary alignment that clustered on both sides of the Moon” into Saturday argues that an important top was made on Friday. Chairman Powell said that he will present a “more aggressive tapering plan” to the new FOMC at the December meeting despite back-to-back months of weaker than expected NFP job creation. Historically, when the Fed has drained liquidity from the financial markets via cuts in bond purchases, big moves down have started in the stock market since 2008. Bitcoin continues to trade weak and is holding below the key 50000 level – this is a bearish sign for the stock market. The trendlines from the Covid low on 3/23 turned back the last speculative highs in TSLA, Bitcoin, and the IWM near the 11/4 New Moon continue to remain as stiff resistance. We still hold 50% cash as we feel that the macro risks of being 100% long are just too great with the global credit contraction led by China still progressing and a now more aggressive Fed targeting inflation. Another scary signal came from recent news that the down payments of 20% of first home buyers came from Bitcoin profits – the US economy is highly-levered to widespread speculation in stocks, stock options and digital currencies. Gold may have made a DCL (Daily Cycle Low) at $1762.2 Thursday afternoon and gold needs to hold above $1762 this week to remain in a short-term bullish formation. Crude oil rolled over on Monday and looks short-term bearish. Bonds tested 164’12 on 12/3 before declining in an EW 5-waves down into 12/8 to test 160’13 – bonds rallied on stock weakness on Monday. In the US, the background monetary conditions have been deteriorating for months but the Fed looks determined to quicken the withdrawal of financial liquidity from the US stock market at this week’s Fed meeting despite slowing global growth concerns. The USD continued to trade sideways into Monday and is still holding around 96.50.
Big Picture on Stocks (UPDATED) –Friday, the SPX may have made a B-Wave test of the 11/22 high at 4740 – we may have started a C-Wave down on Monday. The Russell 2000 and the NYSE Composite have already given us an EW 5-wave decline on the daily charts into 12/1 which is a bear market signal.
Big Picture on PMs (UPDATED) – Gold needs to hold above $1762 going into the weekend to maintain a short-term bullish posture. Gold is bottoming a 20-day cycle this week and we should see a move above $1800.
- Stocks – Today’s market tape strongly suggests to us that the SPX made a B-Wave test of the 11/22 highs at 4745 on Friday – we may have started a C-Wave down today.
- Gold – Gold may have made a DCL (Daily Cycle low) on 12/2 but needs to rally above $1800 to convince us that an important low was made last week. An undercut low below $1758 would be bearish.
- Silver – Silver tested $22.44 on Monday and the SIL (silver stocks) is trying to lead silver which is bullish.
- Bonds – Bonds declined in 5-waves from 164’12 on last week to 160’13 on 12/8 and got a bounce into Monday.
- Crude Oil – Crude oil bounced and appears to be rolling over.
- Dollar Index –The USD continued to hold up Monday despite the hot CPI report early Friday.
TURNING POINT DAY
The turn window3 for this week is 12/13 and 12/15.
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