Folks,
Market Observations for the Week: The SPX gave us a gap-down open at 4114.65 after the overnight Russian invasion of the Ukraine. In a classic “sell the rumor, buy the news” event, the SPX stormed back to close positive. The NDX especially made a breathtaking reversal with AAPL and MSFT leading the way. Is the SPX low in? Maybe, but today’s rally could be a just a wave 4 of C down from 2/2. Ideally, a SPX “symmetry correction” would take us down near 3980 into Monday, the 55-day Fibonacci step out from the 1/4/22 high. How the SPX trades early Friday after multiple PCE inflation reports will give us some insight. The Bitcoin rally overnight to 38940 is a bullish omen for tomorrow. Crude oil tested new highs for the year at $100.54 before falling below $92 as the SPX roared back. Gold tested $1976.5 before falling back nearly $100 in 5-waves to test $1880. How the PCE inflation reports break out early Friday will set the short-term trend for the PM sector. If the SPX pulls back into Monday, we plan to put some of our ~80% cash to work for a rally into March. We also have a 20% allocation to gold/silver/platinum in various forms. The USD tested 97.74 Thursday as a flight to quality on the Ukrainian invasion.
2/24/22 (Commentary for Thursday) After the SPX gap-down open, the SPX made an impressive rally to close the day positive, but the NDX was the real star. Our price and time target for the SPX remains ~3980, a “symmetry correction” by the 55-day Fibonacci step out on Monday. How the SPX responds to the various PCE inflation reports early Friday will set the tone. We are holding ~80% cash here and ~ 20% in physical gold/silver/platinum and PM equities. Making a SPX pullback into Monday will get us long AAPL, MSFT and FCX if we get good setups for a trade into March. Bitcoin is testing 38850 overnight and staying above its Person’s pivot which is a bullish omen for stocks early Friday. Crude oil spiked to test our short-term target of $100 early Thursday before rolling over below $92 – oil stocks like XOM and CVX closed way below opening highs. Gold tested $1976.5 early Thursday before staging a 5-wave $100 drop – how we respond to several PCE inflation reports early Friday will set the short-term trend. Overall, we hold ~80% cash and 20% in gold/silver/platinum in various forms. A pullback in the SPX and the NDX into Monday will see us adding some AAPL, MSFT and FCX shares for a trade into March. We will still retain > 50% cash as 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 tested 156’19 early Thursday as the Russians began a large-scale invasion of the Ukraine. The USD rallied to test 97.75 Thursday 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. We have a SPX “symmetry target” of ~3980 by Monday, the 55-day Fibonacci step out from the Jan 4 high.
Big Picture on PMs (UPDATED) – Gold tested $1975.6 early Thursday but dropped a $100. A close above $1960 is needed to confirm that a major rally is underway.
- Stocks – The SPX gave us a gap-down open to 4114.65 early Thursday before staging an impressive rebound to close positive. Led by AAPL and MSFT, the NDX reversed huge losses to score a big close. We are holding ~80% cash but plan to add some AAPL, MSFT and FCX shares on a pullback into Monday.
- Gold – Gold tested $1976.5 early Thursday after the Russian invasion and then dropped $100 – gold made a key reversal day – how we trade after the early Friday PCE reports will set the tone. A close above $1960 is needed to confirm a substantial rally higher is underway. We still hold about 20% in PM assets.
- Silver – The SLV traded huge volume on a key reversal day today - how we trade after the PCE inflation reports early Friday will set the tone.
- Bonds – Bonds tested 156’19 early Thursday on a global flight to quality.
- Crude Oil – Crude oil tested our $100 target early Thursday but then fell below $92 – XOM and CVX made their high of the day near the open.
- Dollar Index – The USD tested 97.75 Thursday 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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