Folks,
Market Observations for the Week: With the help of Big Tech, the SPX exploded to a new all-time high at 4791.49 into Monday’s turn window. The rally from 12/20 is now a solid EW 5-waves up on the hourly chart and we now expect a consolidation. Bitcoin tested its R1 resistance pivot at 52200 and then rolled over to test its S2 pivot support at 49640 which implies a consolidation period for the SPX. Crude oil rallied to test $76.20 and is holding up overnight. 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. Gold dropped early to test $1803 but bullishly bounced back to test $1815 – a break above $1815 would make us short-term bullish on gold. Crude oil is bullishly holding above $75 overnight and that is bullish for the stock market. The USD continues to oscillate around 96 as the 10-yr US rate coils below 1.50%.
12/27/21 (Commentary for Monday) The SPX rallied into the 12/27 turn window and completed an EW 5-wave rally on the hourly chart to make an all-time divergent high at 4791.49. So far in December, the SPX has rallied past the Dec 4 eclipse, the Dec 11 planetary alignment and the 12/19 Venus retrograde and has continued to make higher highs which is bullish. Big Tech was once again the big enabler of today’s rally – NVIDIA, AAPL, MSFT, FB, .etc allowed the SPX to make a new divergent high. 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 tested 52200 during the day but fell below 50,000 overnight which implies some near-term weakness. Crude oil rallied to test $76.20 on Monday and is holding up above $75 overnight. 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 early December 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. From the 12/21 low at $1785, gold tested $1815 on Monday and is coiling sideways in a bullish manner – the Big Range Day in gold and silver on Monday predicted volatility and we got that. 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 has been oscillating around 96 for three days in a row.
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. The SPX blew off into the 12/27 turn window which includes the 34-day Fibonacci step out from the 11/22 high.
Big Picture on PMs (UPDATED) – Gold tested $1785 on Tuesday and rallied up to test the $1815 high on Monday. Monday was a solar-lunar Big Range Day and brought us some volatility.
- Stocks – The SPX blew off into the 12/27 turn window which included the key 34-day Fibonacci step-out from the 11/22 SPX high on 12/26 – just a corrective pullback in the SPX here will be bullish for an early 2022 rally.
- Gold – Gold tested $1785 on Tuesday and then bounced higher to test $1815 on Monday where it started to coil sideways in a bullish manner. A break above $1815 would be short-term bullish for gold.
- Silver – Silver double-bottomed at $21.41 on 12/15 and tested $23.15 on Monday’s volatile session.
- Bonds – Bonds appear close to bottoming an EW a-b-c decline on the daily chart.
- Crude Oil – After bottoming on the Full Moon Window on 12/20, crude oil has roared up impulsively to test $76.20 on Monday – this is bullish for the stock market.
- Dollar Index –The USD continues to oscillate around 96 in a tight range.
TURNING POINT DAY
The turn window for this week is 12/27.
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