Folks,
Market Observations for the Week: The SPX and NDX are reeling from the 1-2 punch of news of the Omicron variant and Chairman Powell’s more hawkish take on the Fed’s financial taper. The much weaker than expected NFP jobs report underlies the risk that the US economy was weaker than expected even before the Omicron variant was announced and the weak Black Friday sales could augur a weak retail holiday season. The weaker than expected NFP jobs number may not stay the hand of Chairman Powell who has raised inflation to his number one priority. The stock market saw almost panic selling last week and we could be close to a trading low early Monday. The Russell 2000 and DJIA peaked on 11/8 and saw heaving selling and the SPX and NDX saw an all-time high on 11/22 and then gave us heaving selling. 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 are trading below some heavy Dark Pool prints on the SPY which is bearish. We are seeing a rebound in the SPX Sunday night in the 12/3-12/6 New Moon Timing Window and the 13-day Fibonacci step out from the 11/22 all-time high – a weaker than expected NFP jobs number will set the SPX tone at the open. Both the NYA (NYSE Composite) and the IWM finished an EW 5-wave decline on the daily chart on heavy volume days Tuesday and Wednesday – we are only getting a corrective-looking bounce Sunday night. 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 gave us an undercut low at $62.43 and is bouncing into Sunday night. Bitcoin is testing its S2 support pivot at 48280 and appears to be leading the stock market down. Gold is rebounding into Sunday night but the bounce does not look impressive so far. 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 late Tuesday looks like a corrective consolidation.
12/05/21 (Commentary for Sunday) The NFP jobs report on Friday came in much weaker than expected and questions remain about the US economy as we head into the holiday season. 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. The swing of the Fed’s focus to target inflation over further employment gains hit the markets hard last week and the E-mini tested lows for the week on Friday’s close before bouncing on Sunday night. 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. Bitcoin has been leading the stock market down recently and its plunge below 49000 Sunday night is bearish for the stock market after the 12/3-12/6 New Moon Timing Window. 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 Tuesday – this has bearish implications for the stock market after the retracement rally into the New Moon weekend. 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 and is bouncing into Sunday night. Bonds continued to sub-divide higher to test 164’12 Friday despite the hawkish tone taken by Chairman Powell on inflation. 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 Sunday night.
Big Picture on Stocks (UPDATED) –The E-mini gave us an EW 5-waves down into Wednesday’s close and appears to be giving us an EW a-b-c bounce into Sunday night. The Russell 2000 and the NYSE Composite have already given us an EW 5-wave decline on the daily charts into Tuesday which is a bear market signal – the Russell 2000 is bouncing correctively into Sunday night.
Big Picture on PMs (UPDATED) – Gold and the GDX are trending down into Friday’s NFP jobs report – a break below $1758 gold will be very bearish in our work. Gold may have finished a DCL (Daily Cycle Low) on Thursday but has only given us a weak bounce into Sunday night so far.
- Stocks – After 5-waves down into Wednesday’s close, the E-mini is giving us just a sideways EW a-b-c into Sunday 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 is bouncing into Sunday night.
- Bonds – Bonds continued to sub-divide up on Friday despite the hawkish tone from Chairman Powell.
- Crude Oil – Crude oil tested $62.43 early Thursday and is bouncing into the weekend New Moon.
- 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 Sunday night.
TURNING POINT DAY
The turn window for this week is 12/3-12/6, the New Moon Timing Window.
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