Folks,
Market Observations for the Week: Retail sales disappointed on Friday as X-mas sales got pulled into November. Also, the SPX market didn’t like the pre-market bank earnings. Overall, our market bias turned to cautious on Friday as we appeared to make an EW 5-waves down from Wednesday into early Friday. The short-covering SPX rally that we expected early Friday did not materialize and several of our indicators turned bearish. The SPX could be forming a head and shoulders pattern on the daily chart centered around the Jan 4 high and we have turned cautious. Taking out the Friday lows at SPX 4615.22 would be bearish. Crude oil kept rallying into the 1/17-1/18 Full Moon Timing Window and the XLE is testing 65. 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 $1829 pre-market Friday before falling to $1814 – gold needs to close above $1835 to resume its uptrend. The 10-yr US rate rallied to test a 52-wk high of 1.808% early Monday, but then pulled back in 5-waves to 1.706% early Friday before rebounding. The USD tested important support 94.63 today pre-market Friday before rebounding sharply which pressured the PM sector.
1/16/22 (Commentary for Sunday) Retail sales came in weaker than expected early Friday and bank earnings disappointed and this led to an EW 5-waves down on the hourly into the open. Several of our short-term indicators have turned bearish and that has turned us cautious. The important 1/26-1/28 turn window lies ahead of us and it could still be either an important HIGH or LOW. 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. Bitcoin is holding within a potentially bullish pattern from the 1/10 reversal high – this is a plus for the stock market. Our bias is that the NDX did finish an EW a-b-c correction from 11/22 into 1/10 but the 5-wave decline in the 10-yr US rate did not spark an obviously impulsive rally pattern on Friday. The “bull-hammer candlesticks” on the SPY that we got 1/10 and on 12/20 argue for a retest of the highs into the important January 26-28 turn window, but the EW 5-wave pattern down from Wednesday into Friday is making us cautious. Crude oil remains in bullish mode as it continues to rally into the 1/17 Full Moon – it tested $84.45 late Friday and the XLE tested 65. Bitcoin is holding up into the 1/16-1/18 Full Moon Timing Window and its pattern looks potentially bullish. 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 $1830 before being pulled back to $1814 near the close of the Comex session – gold may be pulling back into the 1/16-1/18 Full Moon Timing Window. 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 10-yr US rate made a 52-week high at 1.808% early Monday and pulled back in 5-waves to 1.706 % early Friday which is bullish for the QQQ. The USD tested 94.63 early Friday and bounced which pressured the PM sector.
Big Picture on Stocks (UPDATED) – Our short-term bias changed again on Friday – the EW 5-waves down from Wednesday into early Friday turned us cautious and the SPX may be just forming the right shoulder of a head and shoulders topping pattern centered around the Jan 4 high. The QQQ may have finished an EW a-b-c correction from the 11/22 high into 1/10 but the 5-wave decline in the 10-yr US rate into Friday did not spark a rally in the NDX which turned us cautious.
Big Picture on PMs (UPDATED) – Gold tested $1829 pre-market Friday and then got pulled down to $1814 on gold’s Big Range Day. Gold needs a close above $1835 to continue its uptrend.
- Stocks –Weaker than expected retail sales and poorly received bank earnings gave us a weak opening on Friday and just a corrective looking retracement in the SPY and QQQ - our short-term bias turned to cautious when the QQQ failed to rally on the 5-wave decline of the 10-yr US rate.
- Gold – On its solar/lunar Big Range Day, gold tested $1829 pre-market before falling back to $1814 at the close of Comex trading. Gold may be pulling back into the 1/16-1/18 Full Moon Timing Window. Gold needs to close above $1835 to resume its uptrend.
- Silver – Silver tested the recent high at $23.48 pre-market Friday before closing Friday at $22.99 going into the Full Moon Timing Window – silver needs to take out $23.48 to confirm an uptrend.
- Bonds – Bonds pulled back on Friday as the 10-yr US rate bounced and this pressured the SPX and NDX.
- Crude Oil – Crude oil continued to climb into the 1/16-1/18 Full Moon Timing Window and tested $84.45 late Friday as the hot XLE tested 65.
- Dollar Index – As the 10-yr US rate declined to 1.706% early Friday, the USD tested key support at 96.63 before bouncing.
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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