Folks,
Market Observations for the Week: The hotter than expected PPI report for wholesale inflation rattled the SPX early in the session before a fractional comeback into the close. Our bias is that a C-Wave down started on Monday and could continue down after the FOMC minutes into the weekend where the Full Moon on 12/18 and the Venus retrograde on 12/19 could give us a trading low on Monday. The 12/18-12/20 Full Moon Timing Window/Venus retrograde turn window could bottom the C-Wave that started on Monday. 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 at hand. Chairman Powell has raised inflation to his number one priority and the new FOMC committee appear receptive to the idea of a stronger 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 is rolling over and that is market bearish. After testing 45700 on Monday, Bitcoin bounced to 48315 on Tuesday but continues to trade below 50000 which looks bearish for the stock market. Gold fell to $1770 Tuesday evening and tends to decline into the FOMC minutes – a 20-day cycle low is due this week. The USD continues to consolidate sideways and continues to hold up near 96.50.
12/14/21 (Commentary for Tuesday) The hot PPI report pressured the SPX at the open, and despite the bounce into the close, the SPX appears to be sub-dividing down in a C-Wave with a symmetry target below the 12/1 low at 4495 by the 12/18-12/20 turn window which could be the start of a X-mas rally. 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 and 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 fell hard today and 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 continued their corrective bounce from 12/8 as this sector gets a flight to quality from asset reallocators. 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 made a B-Wave test of the 11/22 high at 4740. On Monday, the SPX started a C-Wave down which continued to sub-divide down on Tuesday – we may see a symmetry correction which undercuts the 12/1 low at 4495 by 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 that could give us a Daily Cycle Low (DCL) below $1762.
- Stocks – The SPX continued to sub-divide down in its C-Wave which should target the 12/1 low at 4495 by the 12/18-12/20 Full Moon Timing Window + Venus retrograde.
- Gold – Gold needs to hold $1762 to maintain a bullish pattern on its daily chart - an undercut low below $1758 would be bearish.
- Silver – Silver sliced through $22 and tested $21.67 today before bouncing – lower lows are possible after the FOMC minutes on Wednesday. The SIL made lower lows today which looks bearish for silver.
- Bonds – Bonds continued to bounce today on stock market weakness but the rally looks corrective.
- Crude Oil – Crude oil appears to be rolling over and that is another weak sign for the SPX.
- Dollar Index –The USD continued to hold up near 96.51 on Tuesday despite the hot PPI report.
TURNING POINT DAY
The turn windows for this week is 12/13 and 12/15.
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