Folks,
Market Observations for the Week: The SPX did make a short-term top in the 12/27-12/28 turn window and started a correction. The rally from 12/20 made a solid EW 5-waves up on the hourly chart and we are now getting a consolidation. Bitcoin gave us a failed break out attempt to 52200 on Monday and now is languishing below its Person’s Pivot at 48554 Tuesday night. Bitcoin is the speculative leader of the great stock market rally of 2020-2021 and its failed breakout should be concerning to the ardent bulls. Crude oil, however, rallied to test $77 early Tuesday and is bullishly 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 bounced early to test $1821 on the 55-day Fibonacci step out from 11/3 and then started a correction. The USD continues to oscillate around 96 as the 10-yr US rate coils below 1.50%.
12/28/21 (Commentary for Tuesday) The SPX rallied into the 12/27-12/28 turn window and completed an EW 5-wave rally on the hourly chart to make another all-time divergent high at 4807.02 before a correction. 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. The tech sector was once again the big enabler of today’s early new SPX rally high which allowed another 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 wilted after its false break out higher to test 52200 on Monday and is languishing Tuesday night below 48000 – the question for us all is what is Bitcoin telling us about the health of Mr. Market here. Crude oil tested $77 early Tuesday and is holding up overnight – our favorite oil stocks, XOM, CVX and COP, all gave us a pretty good run since the 12/20 low. 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 the 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. On its 55-day Fibonacci step out from the 11/3 low, gold spiked to test $1821 before starting a correction– we need to see gold get above $1835 to take it seriously. In the US, the background monetary conditions have been deteriorating for months and the Fed quickened the reduction of financial liquidity from the US stock market at the December 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 into 12/20. The SPX blew off into the 12/27-12/28 turn window which includes the 34-day Fibonacci step out from the 11/22 high.
Big Picture on PMs (UPDATED) – On the 55-day Fibonacci step out from its 11/3 low, gold made a multi-week high at $1821 before correcting. Gold needs to quickly recover and get above $1835 to be taken seriously here.
- Stocks – The SPX blew off into the 12/27-12/28 turn window and made a higher high at 4807.02 early Tuesday before pulling back. Just a corrective pullback in the SPX here will be bullish for an early 2022 rally.
- Gold – On the 55-day Fibonacci step out from its 11/3 low, gold made a multi-week high at $1821 before pulling back. Gold needs to quickly recover and take out $1835 to be taken seriously.
- Silver – Silver tested $23.48 early Tuesday before quickly shedding $.40 in a quick EW a-b-c correction.
- 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 $77 early Tuesday – 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 12/27-12/28.
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