Folks,
Market Observations for the Week: The SPX continued its rally from Monday’s close and tested 4471 – how we trade on Wednesday will determine whether the rally from Monday is just an EW a-b-c bounce or a more substantial rally. Earnings are rolling in and IBM, a safe haven for 2022, is up to $131.55 afterhours and NFLX is down big to $256 on big losses in subscribers. Bitcoin rallied to 41620 and tested its R1 pivot – how we trade overnight will guide the Wednesday morning open on the SPX. We looked for a short-covering rally to SPX 4480 today and we made it to SPX 4471. The SPX trade on Wednesday will determine the durability of this rally and we will adjust accordingly. Traders are convinced that “peak inflation” is behind us and that coming Fed rate hikes are “already priced into the stock market”. We are maintaining our ~80% cash holdings and 20% in the PM sector – we sold our SPY calls today and bought GOLD and NEM on gold’s big down day. We expect the US economy to be in recession by Q4 and the 20-yr stock cycle points to much lower stock prices by the end of 2022/early 2023. We view the US financial war against Russia as highly destabilizing to the global USD hegemony and we could see enormous volatility in the Euro and Yen in April/May and a large USD increase in the price of gold in the second half of 2022. After leaving the Full Moon Timing Window, crude oil got knocked down to $101.76 today. The USD rallied to 101.02 on Monday, the high for the year, as the 10-yr US rate made its high at 2.93%. The high USD is a headwind for the US multi-national companies.
4/19/22 (Commentary for Tuesday) The SPX gave us a “trend move” today and made it to test 4471 before a pullback into the close – it appeared that traders got over Fed governor Bullard’s talk of a 75 bps rate hike in May to catch up with inflation. Bitcoin may be giving us just a sideways EW a-b-c here and that makes us cautious for the SPX tomorrow. Some analysts think that Bitcoin reversed higher from a “daily cycle low” early Monday but we need more follow through Wednesday to convince us. Our current holdings are ~80% cash and ~ 20% in physical gold/silver/platinum and PM equities. If the SPX rally extends, we will adjust accordingly. Today we sold our SPY calls and bought some GOLD and NEM on the decline in gold today. Bonds continue to grind lower here which is giving us the highest 10-yr US rate in years. The fundamentals of this market are not stock friendly here – 1) we have a Fed that has lost its credibility on forecasting and containing inflation, 2) a crude oil price that more than doubled in the past 12 months and 3) a 2-yr/10-yr yield curve that inverted – a US recession by Q4 is likely. Also, the US-led financial war against Russia could lead to blow backs on the Euro, Yen and USD price of gold. After traversing the Full Moon Timing Window, crude oil pulled back to test $102 Tuesday making the oil stocks one of the few sectors to close down today. Gold also fell hard to test $1945 Tuesday evening – the test of $2000 on 4/18 came in as a short-term high. Bonds are continuing their decline to 138’14 and so we are looking for the 10-yr US rate to test 2.95% early Wednesday. The USD is making highs for the year Tuesday night at 101.04 and that is becoming a headwind for US multi-national companies.
Big Picture on Stocks (UPDATED) – The SPX tested 4471 Tuesday and may have ended an EW a-b-c correction that started last week. How the SPX trades on Wednesday will enlighten us to the short-term trend.
Big Picture on PMs (UPDATED) – Gold made a monthly close at $1942 on 3/31, so both the monthly and quarterly charts look bullish. After testing $2003 on Monday in the Full Moon Timing Window, gold is plunging to test $1945 Tuesday evening.
- Stocks – The SPX rallied to test 4471 today but we may have just finished an EW a-b-c correction. How the SPX trades on Wednesday will enlighten us as to how far this SPX can go. We sold our SPY calls today before the close.
- Gold – Gold spiked to test $2003 Monday in the Full Moon Timing Window and now is testing $1945 Tuesday evening on the solar-lunar Big Range Day. The high on Monday at $2003 argues that it was the 3-star critical reversal day.
- Silver – Silver tested $26.49 on Monday and is falling to test $25 Tuesday evening.
- Bonds – Bonds continue to grind to new lows – 138’14 on Tuesday evening and that could give us a US 10-year rate above 2.95% early Wednesday.
- Crude Oil – Crude oil fell to 102.02 on Tuesday but the XLE held up reasonably well.
- Dollar Index – The USD is making highs for the year at 101.04 Tuesday night and is becoming a headwind for US multi-national companies.
TURNING POINT DAY
The turn window for this week is the 4/15-4/18 Full Moon Timing Window which includes a 3-star critical reversal day for the SPX and gold.
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