Folks,
Market Observations for the Week: The negative close for the SPX on Friday turned our short-term market bias to bearish and the rise in the 10-yr US rate to 1.866% on Monday dropped the SPX like a stone below Friday’s lows. The only positive sector today was the energy sector (XLE) as crude oil spiked to $86.37, an eight-year high, in the 1/16-1/18 Full Moon Timing Window. How the SPX rallies on Wednesday will tell us about the overall pattern that we are in. 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 hawkish FOMC that wants to rein in inflation and unwind the Fed balance sheet more aggressively than the market anticipated. On its solar/lunar Big Range Day, gold tested $1805 around 8:30 AM EDT and then rallied quickly to test its Person’s Pivot at $1819. Silver was more impressive as it took out its $23.48 high on a daily close – how we trade in gold and silver on Wednesday is key to the short-term trend. We were wrong about a short-term pullback in the 10-yr US rate - the 10-yr US rate rallied to test a 52-wk high of 1.866% on Tuesday and that pressured stocks. With rates rising, the USD climbed to 95.71 and pressured gold late in the session.
1/18/22 (Commentary for Tuesday) The Empire state manufacturing index came in weaker than expected, but the 10-yr US rate rallied hard up to 1.866, a 52-wk high, and the SPX got sold hard – even the bank stocks. Crude oil did spike to $86.37 and kept the energy sector (XLE) positive on the close. The SPX may be close to some kind of low, but we are going to let the market action early Wednesday tell us where we are at. Several of our short-term indicators have turned bearish on Friday and that has turned us very cautious. We sold out of our FCX position on its early rally to $46.2 and kept that money in cash. The important 1/26-1/28 turn window lies ahead of us and it could still be either an important SPX HIGH or LOW. Remember, we are still in the orb of the 34-year step out from crash of 1987 and the Russell 2000 high of 11/8 could have been a significant high. The 10-yr US rate did not spike last fall as we anticipated because the Chinese led global credit contraction kept the USD high and the US long bonds well bid – but that could be changing as the 10-yr US rate launched to 52-wk highs today on weak US economic news. Bitcoin bounced above it Person’s pivot overnight at 42264 and may be hinting at an SPX rally attempt early Wednesday. Our bias was that the QQQ finished an EW a-b-c correction from 11/22 into 1/10 but taking out the 1/10 low at 369.31 will negate that idea. The “bull-hammer candlestick” on the SPY that we got on 1/10 only gave us a two day corrective rally, and the EW pattern down from Wednesday continued to sub-divide down into today. Crude oil spiked higher to $86.41 into the 1/16-1/18 Full Moon Timing Window and is still holding up Tuesday night. 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 hawkish FOMC targeting inflation and Fed balance sheet runoff. The US economy is highly-levered to widespread speculation in stocks, stock options and digital currencies and Bitcoin trading profits may be hard to come by in 2022. On its solar/lunar Big Range Day today, gold tested $1805 early before running up to its Person’s pivot at $1819 in the morning – gold pulled back into the 1/16-1/18 Full Moon Timing Window and the 34-day Fibonacci step out from 12/15 and may have made a low today, but how we trade on Wednesday is key. 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. Bonds got hit this morning, and the 10-yr US rate made a 52-week high at 1.866% on Tuesday. The USD tested 94.63 early Friday and then bounced back to test 95.71 on Monday which pressured gold.
Big Picture on Stocks (UPDATED) – Our short-term bias changed to cautious late Friday on the short-covering close on the SPX and taking out Friday’s low this morning turned us bearish. The QQQ may have finished an EW a-b-c correction from the 11/22 high into 1/10 and held up reasonably well considering the move higher in US rates. Taking out the 1/10 QQQ low at 369.17, however, would be bearish.
Big Picture on PMs (UPDATED) – On gold’s Big Range Day today gold pulled back to test $1805 early, before a run higher to $1819. Gold needs a close above $1835 to continue its uptrend.
- Stocks – The 10-yr US rate rallied to 1.866% and that pounded the SPX below its 1/10 low which turned our short-term market bias to bearish - we sold our FCX near its high for the day and kept it in cash. How we trade early Wednesday will illuminate the pattern for us.
- Gold – On its solar/lunar Big Range Day, gold tested $1805 and may have made a low in the 1/16-1/18 Full Moon Timing Window and the 34-day Fibonacci step out from 12/15 – how we trade early Wednesday will be key. Gold needs to close above $1835 to resume its uptrend.
- Silver – Silver tested $22.84 early Tuesday and then launched to close the day above $23.48 which got the bulls running – silver may have confirmed its uptrend.
- Bonds – Bonds sold off on Tuesday as the 10-yr US rate climbed to 1.866%.
- Crude Oil – Crude oil spiked into the 1/16-1/18 Full Moon Timing Window and tested $86.41 late Tuesday as the hot XLE tested 65.50.
- Dollar Index – As the 10-yr US rate rallied to 1.866% on Tuesday, the USD climbed higher to test 95.71.
TURNING POINT DAY
The turn window for this week is 1/16-1/18, which is the Full Moon Timing Window.
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