Folks,
Market Observations for the Week: The SPX bounced early but then succumbed to a selloff into the close that undercut the 1/24 low at 4222. To us, that implies a “trapdoor” will open that could send the SPX quickly down to test SPX 4000 by the 55-day Fibonacci step out on Monday, 2/28. The SPX is in a “bear market” and the Russian invasion of greater Ukraine Wednesday evening is taking the E-mini down 90 points overnight. Gold is shooting up to test $1950 as Bitcoin declines to 34500, in sympathy with the US stock futures. Crude oil is testing new highs for the year at $96– a target of $100 is still possible if we see a full invasion of greater Ukraine by early Thursday. Having 10%-20% invested in physical gold/silver/platinum will be wise in 2022. We remain in ~80% 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 also have a 20% allocation to gold/silver/platinum in various forms. The USD is rallying to 96.75 Wednesday evening as a flight to quality on the Ukrainian invasion.
2/23/22 (Commentary for Wednesday) The SPX bounced early Wednesday but reversed course to undercut the key 4222 level near the close. Despite record short statistics, the SPX is in a bear market and the undercut of 4222 today could lead to a “trapdoor move” down in the SPX on Thursday to test SPX 4000. Taking out SPX 4222 today confirms a “bear market” started in the SPX on 1/4/22. We are holding ~80% cash here and own ~ 20% in physical gold/silver/platinum and PM equities. Taking out SPX 4222 suggests a quick move down to test SPX 4000 by 2/28 on the 55-day Fibonacci step out from the 1/4/22 high. Bitcoin is shadowing stock futures down Wednesday night and tested 34500. Crude oil spiked to test $96 Wednesday evening and a test of $100 is possible if a full-scale invasion of the Ukraine proceeds early Thursday. Gold is testing $1951 overnight after bullishly holding up early Wednesday. Overall, we hold ~80% cash and 20% in gold/silver/platinum in various forms 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) and the Fed’s tightening will accelerate this. The US bonds are testing 156’02 Wednesday evening as the Russians begin a large-scale invasion of the Ukraine. The USD is rallying to 96.75 Wednesday night on a global flight to quality.
Big Picture on Stocks (UPDATED) – We undercut the key SPX 4222 level Wednesday which confirmed a “bear market” in the SPX. We are holding about 80% cash in our stock accounts and ~20% in gold/silver/platinum in various forms.
Big Picture on PMs (UPDATED) – After testing $1920 on Monday, gold only pulled back to $1892 before rebounding to test $1951 Wednesday evening. A close above $1960 will confirm that a major rally is underway.
- Stocks – The SPX undercut 4222 on Wednesday and opens a trapdoor move down to test SPX 4000 by Monday, 2/28. The E-mini is down 90 points overnight as Russian is mounting a full-scale invasion of the Ukraine. We are holding ~80% cash and a 20% holding in gold/silver/platinum in various forms.
- Gold – Gold is testing $1951 overnight Wednesday on the full-scale attack on the Ukraine. A close above $1960 on Thursday would be very bullish. We are holding some GLD, AEM and GOLD shares.
- Silver – Silver closed above its 200-dma today and looks like it is starting a big run – silver is testing $25 on Wednesday night.
- Bonds – Bonds is testing 156’02 Wednesday night on a global flight to quality.
- Crude Oil – Crude oil is testing $96 Wednesday evening – a test of $100 is possible later this week on a full Russian invasion.
- Dollar Index – The USD is testing 96.75 Wednesday night on a global flight of capital to the US buck.
TURNING POINT DAY
The turn window for this week is 2/21-2/23.
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