Folks,
Market Observations for the Week: The very oversold SPX bounced back on Monday but the E-mini looks like it is tracing out just an EW a-b-c from last Wednesday’s close. The Option Premium Ratio jumped to 1.12 - highs for the correction. The key economic report for the week is the CPI report early Friday. Chairman Powell has raised inflation to his number one priority and the new FOMC committee appear receptive to the idea of a near-term tightening of monetary policy. Our bias is that the broad market may have peaked on 11/8 but the SPX and NDX are giving us a “broadening top formation” which could give us another rally phase soon to build out a right-hand shoulder. CEOs and other corporate insiders sold a record $69B of stock this year – an all-time record – another sign of a euphoric and topping market that is close to making a historic peak. The SPX is getting hit with a one-two punch from the Omicron variant and a more aggressive Fed and is trading below some heavy Dark Pool prints on the SPY which is bearish. 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 appears to be giving us an EW a-b-c bounce that is testing $70 Monday evening. Bitcoin bounced off its S2 support pivot at 48280 and is testing its R1 resistance pivot at 51562. Gold bounced to test $1786 on Monday after making a low in the New Moon Timing Window. The USD declined in 5-waves on the hourly chart before spiking higher to 96.61 after the start of Powell’s testimony – the action since 11/30 looks like a corrective consolidation.
12/06/21 (Commentary for Monday) The oversold E-mini rebounded from 12/1 but the pattern looks corrective so far. The big range days over the last two weeks in the NDX and SPX are indicative of a topping bull market – the one-two punch of the Omicron variant and a hawkish Fed could topple the SPX and NDX over into a bear market after the broad market topped with the Russell 2000 on 11/8. Chairman Powell said that he will present a “more aggressive tapering plan” to the new FOMC at the December meeting but the much weaker than expected NFP jobs number may complicate that. 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. Led by MARA, Bitcoin rebounded strong to test its R1 resistance pivot at 51540 Monday night. 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 then the NYSE Composite gave us an EW 5-waves down on the daily chart into 12/1. 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 news that the down payments of 20% of first home buyers came from Bitcoin profits last week – the US economy is highly-levered to widespread speculation in stocks, stock options and digital currencies. Gold and the GDX traded down into Friday’s NFP jobs report and the New Moon Timing Window – gold may have made a DCL (Daily Cycle Low) at $1762.2 Thursday afternoon – but needs to see a rally above $1800 to be convincing. Crude oil traced out another undercut low at $62.43 before the New Moon and bounced correctively to test $70 on Monday. Bonds sub-divided higher to test 164’12 Friday before correcting on Monday. In the US, the background monetary conditions have been deteriorating for months but the Fed looks determined to quicken the withdrawal of financial liquidity from the US stock market at the December meeting despite slowing global growth concerns. The USD declined in 5-waves on the hourly chart going into Powell’s testimony but did get a spike higher to 96.61 which is getting corrected into Monday night.
Big Picture on Stocks (UPDATED) –The E-mini gave us an EW 5-waves down into the 12/1 close and appears to be giving us an EW a-b-c bounce into Monday evening. The Russell 2000 and the NYSE Composite have already given us an EW 5-wave decline on the daily charts into 12/1 which is a bear market signal – the Russell 2000 bounced correctively into Monday night.
Big Picture on PMs (UPDATED) – Gold may have finished a DCL (Daily Cycle Low) on Thursday but has only given us a weak bounce to $1786 on Monday. W e need to see a bounce over $1800 to verify the DCL.
- Stocks – After 5-waves down into the 12/1 close, the E-mini is giving us just a sideways EW a-b-c into Monday night which looks bearish.
- Gold – Gold may have made a DCL (Daily Cycle low) Thursday afternoon but needs to rally above $1800 to convince us. An undercut low below $1758 would be bearish.
- Silver – Silver gave us an undercut low to $22.03 early Friday and only gave us a weak bounce after the New Moon Timing Window.
- Bonds – Bonds pulled back correctively from 164’12 on Monday.
- Crude Oil – Crude oil tested $62.43 early Thursday before the New Moon and then bounced correctively to test $70 on Monday.
- Dollar Index –The USD declined in 5-waves on the hourly chart into Chairman Powell’s statement and then briefly spiked to 96.64 on Tuesday before correcting into Monday.
TURNING POINT DAY
The turn window for this week is 12/3-12/6, the New Moon Timing Window.
Comments