Folks,
Market Observations for the Week: Bitcoin is the speculative leader of the great stock market rally of 2020-2021 and its recent failed breakout attempt should be concerning to the most ardent bulls. What is the recent weakness in Bitcoin telling the market? Is it possible that the gold/bitcoin arbitrage has turned in favor of gold? Is money flowing from Bitcoin into gold and silver? The SPX made its high for the week in the 12/27-12/28 turn window and continued its correction into Wednesday. The rally from 12/20 made a solid EW 5-waves up on the hourly chart and we are now getting a consolidation. Bitcoin is languishing below its Person’s Pivot overnight around 46700 and looks weak. Crude oil, however, is holding above its Person’s Pivot at $76.50 overnight and looks strong going into the New Moon weekend. 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 gave us a sharp 3-wave correction from its $1821 high yesterday and tested $1790 before rebounding to $1806 - the big cap gold stocks (NEM, GOLD and AEM) led the metals back from an early hole today. The USD continued to oscillate around 96 as the 10-yr US rate rallied to 1.56%.
12/29/21 (Commentary for Wednesday) The SPX continued its correction today after making its second weekly divergent high at 4807.02 early Tuesday before a pullback. 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 rising 10-yr US rate pressured tech stocks today and extended the market correction into Wednesday. 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 but so far the SPX is holding up. Bitcoin looks weak overnight and remains below 47000 – what is Bitcoin telling us about the health of Mr. Market here. Crude oil tested $77.37 early Wednesday and is holding up overnight – our favorite oil stocks, XOM, CVX and COP, have all given 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 early Tuesday and started a quick 3-wave correction that tested $1790 early Wednesday before a snapback rally that got to $1806– we need to see gold get above $1835 to take it seriously here. 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) – We are adamant that the SPX is in the process of making a historic top and that the market is 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 early Tuesday, gold made a multi-week high at $1821 before a fast 3-wave correction to $1790 early Wednesday. 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 into year end 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 a quick 3-wave pullback to $1790 early Wednesday. Gold needs to quickly recover and take out $1835 to be taken seriously.
- Silver – Silver also made an early Tuesday high before pulling back in a quick 3-wave correction into early Wednesday – how we trade on Thursday will bi interesting.
- Bonds – Bonds got sold on Wednesday as the 10-yr US rate got to 1.56%.
- Crude Oil – Crude oil continues to hold up above $77 overnight as we approach the weekend New Moon.
- 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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