Folks,
Market Observations for the Week: The SPX may have ended a 3-wave correction from the 2/9 high at 4365. The threat of a Russian invasion of the Ukraine still hangs over the market’s head and the Fed President Bullard not only DID NOT WALK BACK his hawkish comment about raising the Fed Funds rate 0.50% at the March meeting, but he also RE-EMPHASIZED the reasoning behind it. Despite all of this, the SPX still managed to close above 4400. The EW count from the 1/24 SPX low is difficult to count – it is now 3-waves up and 3-waves down, and the next move could be a 5-wave rally affair. The PPI inflation report early Tuesday is key here, and if the market gets a “weaker-than-expected” inflation print of some kind, the SPX could get a big “relief rally”. If the bearish count is still working, we could see the SPX close below 4400 on Tuesday. If we get a “relief rally” from the PPI report we could get a “gap-up” open early Tuesday and a sharp “short-covering” rally that could test SPX 4500 by Tuesday’s close. Be agile, cash is still our largest position (>60%) and our best asset in this volatile market. Today we added some SPY shares near the SPX 4365 low with the idea of holding into next week. Bitcoin is rallying Monday night and testing its R2 resistance pivot at 43660 – this is foreshadowing SPX strength for tomorrow. Crude oil continued to surge as we approach the 12/16 Full Moon – a spike to $100 is possible with this lunar cycle energy. Even so, the BPENER (bullish percent for energy stocks) is at 100% - pretty toppy here in the short term and WE WOULD BE A SELLER OF OIL STOCKS. 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.) but we are now holding some SPY, FCX and LABU shares for a run into March. Gold is also spiking into the 2/16 Full Moon and took out the 11/8 high at $1879 – gold is rallying as a risk-off play here and may be starting something big. The USD tested its R2 pivot at 96.4 and is pulling back overnight to its Person’s Pivot at 96.21.
2/14/22 (Commentary for Monday) The Russians did not invade the Ukraine early Monday and this by itself could have rallied the SPX but for Fed President Bullard who re-iterated his hawkish comments about raising the Fed funds rate by 0.50% at the March Fed meeting. Still, rumors of an imminent Russian invasion are hanging over the market as it gets the PPI inflation report early Tuesday. A “weaker-than-expected” PPI inflation reading could give us a “gap-up” open on the SPX. The bulls are hoping for “no invasion” into Tuesday morning and a bullish market reaction to the PPI report – but another strong inflation print could rattle the markets. The bears hope for a close below SPX 4400 by Tuesday’s close. The intra-day SPX move Friday below 4401 turned us cautious. Our short-term market bias is CAUTIOUS until the SPX gets above 4500 by the 2/15-2/16 Full Moon Timing Window – a close below 4400 by Tuesday, however, would turn us bearish. The SPY bears did well on Thursday/Friday by shorting the SPY, but we warn against continuing to hold shorts here against the SPY or QQQ and prefer to hold cash. We got a 3-start critical reversal day in the SPX on 2/3 and that gave us a .618 retracement of the SPX rally from 1/24 to 2/2 going into Monday’s low at 4365. Our market bias is that the SPX started a “Final Blow Off” on 1/24 and that we could start a “Secular Bear Market” sometime in the March-May window. Bitcoin is rallying to test its R2 pivot resistance at 43560 Monday night which is bullish for stocks early Tuesday. Crude oil is on a run up into the 2/15-2/16 Full Moon Timing Window and could test $100. Last week, the BPENER hit 100% bullish – this looks a little toppy to us for oil stocks in the short-term. Gold is also ramping up into the 2/16 Full Moon and exceeded the 11/8 high at $1879 – gold could be starting a big move higher. Overall, we still hold ~60% cash as we feel that the macro risks of being 100% long are just too high with the global credit contraction led by China still progressing and a more hawkish FOMC targeting inflation. The US economy is highly levered to widespread speculation in stocks, stock options and digital currencies and trading profits may be difficult this year. In the US, the background monetary conditions have been deteriorating for months and (see the Closed End Fund (CEF) bond sector A/D line). The 10-yr US rate pulled back correctively on Monday as bonds bounced on Ukrainian invasion rumors. The USD is testing its Person’s Pivot at 96.21 Monday night.
Big Picture on Stocks (UPDATED) – We added a few SPY shares when the SPX tested the .618 retracement of the 1/24-2/2 rally at SPX 4365 Monday but need to see the SPX prove itself by closing over 4500 by Wednesday’s Full Moon. We are holding about 50% cash in our stock accounts but are holding a few shares in SPY, FCX, LABU, and F this week for a run into March.
Big Picture on PMs (UPDATED) – Gold took out the 11/8 high at $1879 Monday evening – it is ramping into the 2/16 Full Moon on a risk-off trade focused on the fears of an imminent Ukrainian invasion. Gold may have started a major rally.
- Stocks – The SPX may have finished an EW a-b-c correction from 2/2 that retraced .618 of the rally from 1/24 to 2/2 at SPX 4365 – we need to close above SPX 4500 by Wednesday to reconfirm the bullish trend.
- Gold – Gold is testing $1882 late Monday on a rumor of an imminent Ukrainian invasion - we could see a ramp into the 2/16 Full Moon.
- Silver – Silver is testing $24 Monday evening.
- Bonds – Bonds are trying to bounce correctively.
- Crude Oil – Crude oil blasted to test $95.82 on Monday as it ramps up into the 2/16 Full Moon - the BPENER (bullish percent energy stocks) is still at 100% - a little toppy for oil stocks in the short term.
- Dollar Index – The USD is testing 96.20 late Monday.
TURNING POINT DAY
The turn window for this week is 2/14-2/15.
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