Folks,
Market Observations for the Week: We were wrong about the SPX peaking its rally on Monday – the SPX opened with a gap up higher, and after a head-fake down, rallied into the close. The NYSE market breadth stayed up near +2000 throughout the session, a sign of strength. We did get a TRIN-5 reading of 3.56 at the close, however, which is a SPX sell signal and we are expecting a “volatile, big-range trading day” on Wednesday. We had a monthly VIX expiration day today and that has led to a “big-range trading day” the following Wednesday in every month so far in 2022. Gold tested $1835 early but then declined into the close and tested $1810. Crude oil rallied to $115.56 early Tuesday before rolling over impulsively to test $111 – the XLE rallied to a new high at 84.39 in after-hours trading. The USD declined on Monday and is testing $104 overnight.
5/17/22 (Commentary for Tuesday) It appeared that the SPX finished a Running B-Wave correction from Thursday on Monday – the low volume of the SPX on Monday looked bearish as did the Doji candlestick. Our bias is for more correction down in the SPX on Tuesday. A move down to test 3800 is still possible this week as we approach monthly option expiration. The Option Premium Ratio held up at 2.84 today and that argues for lows below SPX 3858 by next week. Last week started off with Mercury going retrograde on Monday and it appeared that stocks, bonds and currencies were poised for reversals from short-term lows, however, the stock rally into Monday is not convincing to us so far. Bitcoin is holding above 30000 and its Person’s pivot on Monday night and that is positive for the open on Tuesday. Our current holdings are ~80% cash and ~ 20% in physical gold/silver/platinum and PM equities – we also hold some FXY (Yen) shares. Crude oil is testing $115 Monday evening on the Full Moon. The USD rolled over to test 103 on Tuesday as the Euro tries to break out higher.
Big Picture on Stocks (UPDATED) – We believe that the SPX could give us a 20%-50% correction by spring 2023 as the 20-yr cycle low hits and the US economy slows to a recession. We favor a high percentage of cash for capital preservation.
Big Picture on PMs (UPDATED) – Gold is close to an intermediate cycle low that should bottom by early next week if it didn’t already at $1785 early Monday.
- Stocks – The SPX kept its rally going into late Monday and gave us a Positive Volume Reversal Day which is bullish. However, we got a TRIN-5 sell signal at the close which could give us a market reversal down sometime Wednesday. We are expecting a lot of volatility tomorrow since it is the Wednesday after a monthly VIX expiration and that has brought us a Big-Range Day in every month of 2022.
- Gold – Gold extended its bounce to $1835 early Tuesday before a pullback to $1810 into the evening. We may have seen the ICL at $1785 early Monday.
- Silver – Silver may have given us a false breakdown last week before bouncing up to test its R1 resistance pivot at $21.95 early Tuesday.
- Bonds – Bonds appear to be bouncing correctively from 134’30 and that implies a test of 3.17% on the 10-yr US rate.
- Crude Oil – Crude oil rallied to $115.56 early Tuesday before rolling over to test $111 overnight.
- Dollar Index – The USD rolled over to test 103 on a stronger Euro – an EW 5-wave decline on its hourly chart would be a sell signal.
TURNING POINT DAY
The turn window for the next week is 5/16.
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