Folks,
Market Observations for the Week: From the 12/20 low, the SPX is trying to rally into the Christmas weekend – is this the start of a year-end rally? The E-mini appears to have the best chance of making a new all-time high but our Option Premium Indicator spiked to 1.11 today, the highest in several days, which says that some bearish option positions were put on Wednesday. The SPX made an all-time high on 11/22 at 4743.83 and the 34-day Fibonacci step out falls on 12/26 – this date could be an important high or low. How we trade into 12/23-12/27 will tell us. The huge intra-day volatility that we have witnessed the past few weeks is consistent with a topping market - 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 on 12/16 but this was a divergent high not confirmed by any other stock index. 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 their rates this month. 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 then reversed higher in 5-waves to test $73.27– closing above $70 is bullish for crude oil and the stock market. Bitcoin appears to be coiling under the key 50000 level – a US market close above 50000 would be bullish. After the decline into Tuesday at $1785, gold has bounced back to test $1810 – gold and silver rallied on today’s solar-lunar Big Range Day. The USD may have finished an EW a-b-c correction today on the 3-wave pullback to test 96.
12/22/21 (Commentary for Wednesday) The SPX continued its rally today after Monday’s low. How we trade into 12/23-12/27 is key for the year-end trend for stocks. The big range days up and down 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 around 12/10 – the E-mini did make a divergent high on 12/16. Chairman Powell doubled the taper on 12/15 and put the market on notice for three rate hikes in 2022, but the US Fed is clearly behind the Bank of England which raised rates on 12/16. 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 coiling under key resistance at 50000 – a US daily close above 50000 would be bullish for bitcoin and the SPX. 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 Friday, the 50% retracement of the big leg down into $1853, and then we declined in 5-waves down into Monday evening before bouncing up to test $1810 on Wednesday. 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 may have bottomed an EW a-b-c decline today which tested 96.
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 rally from Tuesday, that will argue that the SPX trend is down into year end.
Big Picture on PMs (UPDATED) – Gold tested $1815 on Friday and reversed down in 5-waves into Monday evening which is short-term bearish. Gold then rallied from $1785 on Tuesday to test $1810 on Wednesday’s solar-lunar Big Range Day. The GDX still looks shaky here.
- Stocks – The SPX bottomed on its 10-day trading cycle low on Monday and continued its rally into Wednesday - has the holiday rally started? That depends. Just a 3-wave corrective reversal higher in the SPX will imply a bearish trend into yearend – how we trade into 12/23-12/27 will enlighten us.
- Gold – Gold tested $1785 on Tuesday and then bounced higher to test $1810 on today’s solar-lunar Big Range Day. The GDX still looks shaky here and is lagging the SPX on the rally from Monday.
- Silver – Silver double-bottomed at $21.41 on 12/15 and is now testing $22.90 Wednesday evening. The rally still looks corrective to us.
- Bonds – Bonds may have finished an EW a-b-c correction on Tuesday.
- Crude Oil – After bottoming in the Full Moon Window on Monday, crude oil has roared up to test $73.27 on Wednesday – a close above $70 was bullish for the stock market.
- Dollar Index –The USD may have ended an EW a-b-c correction to test 96 on Wednesday.
TURNING POINT DAY
The turn window for this week is 12/20-12/21.
Comments