Folks,
Market Observations for the Week: The SPX ended a 3-wave correction from the 2/9 high at 4365 and reversed higher to 4471 on Tuesday’s close – we are cautiously bullish for higher highs into next week. Reports of actual Russian troop withdrawals are being questioned and more satellite evidence of Russian pullbacks will be bullish for the SPX early Wednesday. The stock market has digested a 0.50% Fed rate hike in March and the threat of a Russian invasion and we could see a relief rally tomorrow – smart money has been accumulating the SPX for the last week. The EW count from the 1/24 SPX low can still be counted as a very bullish 1-2, i-ii pattern but at the very least it is now 3-waves up and 3-waves down, and the next move should be a 5-wave rally affair. The PPI inflation report came in very hot and the 10-yr US rate ran back up to test 2.06% but stocks held up on the encouraging de-escalation reports from the Ukraine. On Monday, we added some SPY shares near the SPX 4365 low with the idea of holding into next week. Bitcoin rallied to test its R1 pivot resistance at 44706 and then pulled back to test its Person’s Pivot at 43695. Crude oil is pulling back in 5-waves into tomorrow’s New Moon – a spike to $100 is possible with this lunar cycle energy if a Russian attack materializes. 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, F and LABU shares for a run into March. Gold also declined into the 2/15-2/16 Full Moon Timing Window – gold rallied as a risk-off play this week but may be starting a big rally. The USD continues to oscillate around 96 which appears to be its happy place.
2/15/22 (Commentary for Tuesday) The SPX gapped up Tuesday morning on scattered reports of Russian de-escalation and overcame a very hot PPI report. Our short-term market bias is BULLISH here and more good news from the Ukraine could start a substantial relief rally early Wednesday which also has the Fed minutes at 2:00 PM EDT. The bulls are hoping for “no invasion” into Wednesday morning and a bullish market reaction to the FOMC minutes. The bears are hoping for more hawkish comments on interest rate policy from the FOMC. Our short-term market bias is BULLISH as the SPX closed at the high of the day at 4471. 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 pulling back to test its Person’s Pivot at 43706 Tuesday night which could give the SPX a weak open on Wednesday. Crude oil pulled back in 5-waves into the 2/15-2/16 Full Moon Timing Window and could test $100 if the Ukraine situation gets hot. Last week, the BPENER hit 100% bullish – this looks a little toppy to us for oil stocks in the short-term. Gold pulled back into the 2/15-2/16 Full Moon Timing Window but looks bullish – gold eclipsed the 11/8 high at $1881 and 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 tested highs today near 2.06% on the hot PPI number. The USD tested its Person’s Pivot at 96.07 Tuesday 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 60% cash in our stock accounts but are holding a few shares in SPY, 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 now pulling back 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 finished an EW a-b-c correction from 2/2 that retraced .618 of the rally from 1/24 to 2/2 and tagged SPX 4365 – we need to close above SPX 4500 by Wednesday to reconfirm the bullish trend.
- Gold – Gold made a 3-month high at $1882 before pulling back into the 2/15-2/16 Full Moon Timing Window - we are holding NEM and GOLD shares.
- Silver – Silver tested $24 Monday evening before pulling back into the 2/15-2/16 Full Moon Timing Window.
- Bonds – Bonds got hit by a hot PPI number and the 10-yr US rate tested 2.06%.
- Crude Oil – Crude oil declined in 5-waves into the 2/15-2/16 Full Moon Timing Window - the BPENER (bullish percent energy stocks) is still at 100% - a little toppy for oil stocks in the short term.
- Dollar Index – The USD tested its Person’s Pivot at 96.07 Tuesday evening.
TURNING POINT DAY
The turn window for this week is 2/15-2/16 which includes the Full Moon.
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