Folks,
Market Observations for the Week: The 10-day trading cycle and the 12/18-12/20 Full Moon Timing Window + Venus retrograde argues for a low on Monday. Also, our Option Premium Ratio indicator rallied from .94 to 1.05 on Friday which argues for lower prices on Monday as well. Will the important 12/18-12/20 Full Moon Timing Window + Venus retrograde be a market high or low – our bias is still for a market low on 12/20 and some kind of reversal higher on Tuesday – the Tuesday after a monthly expiration is a turn window in our work (courtesy of Chris Cadbury). 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. 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 theirs last week. 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 Full Moon while oil stocks got smacked down. Bitcoin tested 45000 again on Friday and bounced but remains below the key 50000 level . Gold continued its rally and tested $1815 before a pullback on quad-witching Friday, and the GDX started to lead after the GDX/GLD ratio tested its 9/29 low. Gold made a multi-week low on Wednesday as the E-mini made an all-time high early Thursday. The USD bounced hard to test 96.70 on Friday and we believe that both the USD and gold are poised to rally here as the global credit contraction led by China chugs along.
12/19/21 (Commentary for Sunday) Our bias is that the 12/18-12/20 turn window will be a low for the SPX. A lower low on Monday is predicted but the pattern of the reversal higher on Tuesday will tell us the short-term trend into year end. The SPX reversed down into Friday in 5-waves on the hourly and that looks like the start of a C-Wave down with a symmetry target below the 12/1 low at 4495 by the 12/18-12/20 turn window. The big range days 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 on 12/10. Chairman Powell doubled the taper on Wednesday and put the market on notice for three rate hikes in 2022 on Wednesday, but the US Fed is clearly behind the Bank of England which raised rates on Thursday. The US Fed is definitely behind the curve on interest rates and the tech sector knows this. 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. After testing 50000 yesterday, Bitcoin tested 45000 on Friday and bounced over the weekend but still remains below 50000 – this is a bearish sign for the stock market. 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 made a multi-week low on Wednesday at $1853 as the E-mini made an all-time high and reversed to test the 50% retracement at $1815 on Friday before a back test of $1800. 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 this week’s Fed meeting despite slowing global growth concerns. The USD spiked to 96.70 on Friday and is holding up into Sunday night.
Big Picture on Stocks (UPDATED) – On Thursday, the SPX made a B-Wave test of the 11/22 high at 4743 before reversing down impulsively into Friday. We may see a symmetry correction which undercuts the 12/1 low at 4495 Tuesday. The Russell 2000 gave us an EW 5-wave decline on the daily chart into Wednesday which is a bear market signal.
Big Picture on PMs (UPDATED) – Gold bottomed its 20-day cycle low at $1753 Wednesday and then cleared $1800 late Thursday– we could see a strong bounce above $1800 into late December.
- Stocks – The SPX made a B-Wave test of the 11/22 high at 4743 early Thursday and then reversed down in 5-waves into Friday on the hourly chart – more down is likely into Monday/Tuesday.
- Gold – Gold bottomed its 20-day cycle low at 1753 and then reversed up to the 50% retracement at $1815 before correcting– we’re looking for a strong bounce into late December.
- Silver – Silver double-bottomed at $21.41 on Wednesday before reversing up to test $22.70 early Friday. The silver stocks are coming to life which is a positive.
- Bonds – The bonds are testing 163’10 Sunday night as the E-mini futures get sold.
- Crude Oil – Crude oil is plunging below $68 Sunday night into the Full Moon Timing Window – this is a sell signal for the stock market.
- Dollar Index –The USD spiked to 96.70 on Friday and is holding up into Sunday evening.
TURNING POINT DAY
The turn window for this week is 12/19-12/21.
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