Folks,
Market Observations for the Week: The 10-day trading cycle and the 12/18-12/20 Full Moon Timing Window + Venus retrograde argues that we should make a low today or early Tuesday. We are looking for a bounce to begin on Tuesday and the nature of the rally will tell us a lot – if the SPX rally is corrective, that will be bearish. We still view this market as dangerous and urge that at least 50% cash be held. The stock market has been making a broadening top since the summer and the Russell 2000 has given us 5-waves down on the daily chart which is a BEAR MARKET SIGNAL. The impressive 12/11 alignment of Uranus, the Moon, Jupiter, Saturn, Neptune and Venus led to the all-time high reading of 4752.50 in the E-mini. Chairman Powell has raised inflation to his number one priority and our gut is telling us that the Fed will be forced to raise rates sooner rather than later – especially after the Bank of England raised theirs last week. 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 pulled back into the 12/18-12/20 Full Moon Timing Window and is reversing higher. Bitcoin is rallying overnight to test its R2 resistance pivot at 48640 but still remains below the key 50000 level. Gold continued its retracement after testing $1815 on quad-witching Friday, but we need a follow through day higher to convince us of the bullish intent of this market. The USD continues to oscillate around 96.50 as the credit contraction led by China continues to give US long bonds a bid.
12/20/21 (Commentary for Monday) The 12/18-12/20 turn window is coming in as a low and we expect some kind of SPX reversal higher by early Tuesday. Just a 3-wave corrective bounce by the SPX will be bearish for the stock market and will argue for a bearish trend into year end. 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 12/11 argued that an important top was made on 12/10. Chairman Powell doubled the taper on Wednesday and put the market on notice for three rate hikes in 2022 on Wednesday, but the US Fed is clearly behind the Bank of England which raised rates on Thursday. 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 is testing 48460, its R2 resistance pivot overnight but still remains below 50000 – 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 tested $1815 on quad-witching Friday and is giving us a corrective retracement. In the US, the background monetary conditions have been deteriorating for months and the Fed has quickened the reduction of financial liquidity from the US stock market at last week’s Fed meeting despite slowing global growth concerns. The USD continues to hold up around 96.50 as the global credit contraction deepens.
Big Picture on Stocks (UPDATED) – The SPX is in the process of making a historic top and we are living on borrowed time. The Russell 2000 has already given us a bear market signal – an EW 5-waves down on the daily chart. If we get just a 3-wave corrective bounce from Tuesday, that will argue that the SPX trend is down into year end.
Big Picture on PMs (UPDATED) – Gold tested $1815 on Friday before a retracement down into the 12/18-12/20 Full Moon Timing Window. We need gold to give us a follow-through day higher to prove its bullish conviction.
- Stocks – The SPX is dropping into its 10-day cycle low on Monday or early Tuesday – the Tuesday after a monthly expiration is a turning point day. Just a 3-wave corrective reversal higher in the SPX will imply a bearish trend into year end.
- Gold – Gold tested $1815 resistance on Friday and pulled back into the Full Moon Timing Window on Monday – we need to get a bullish follow-through day Tuesday to take this market serious after over a year of consolidation.
- Silver – Silver double-bottomed at $21.41 on Wednesday before reversing up to test $22.70 early Friday. Like gold, silver pulled back into the Full Moon Timing Window on Monday but is reversing higher overnight.
- Bonds – The bonds pulled back today after the 10-yr rate tested 1.42%.
- Crude Oil – Crude oil plunged to $66 into Monday’s Full Moon Timing Window before a sharp reversal higher overnight to test $70.
- Dollar Index –The USD continues to hold up around 96.50 as the global credit contraction gives the US buck a bid.
TURNING POINT DAY
The turn window for this week is 12/20-12/21.
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