Folks,
Market Observations for the Week: After the huge down day on Wednesday, the SPX only gave us a choppy, corrective looking rally on Thursday. Our bias was for stock market strength on tomorrow’s monthly option expiration, but anything could happen. More stock market rally into Friday/Monday could give us another stock market top worth shorting early next week. Bitcoin is testing 31000 overnight and that is a positive tell for early strength in the SPX on Friday. The DJIA made a lower low today but the SPX and NDX did not which is a sign of bullish divergence. The bond market continues to rally and US rates continue to cool off which is helping stocks. Crude oil gave us an EW 5-waves down on the hourly chart and a SELL SIGNAL. For the USD, we got a 5-wave decline below 103.194 which is also a SELL SIGNAL.
5/19/22 (Commentary for Thursday) After the drubbing on Wednesday, the SPX rally attempt today looked rather weak. However, our bias remains for a SPX rally into Friday/Monday before the next leg down. Bitcoin is testing 31000 overnight which is a positive tell early for the SPX on Friday. The IWM rally on Thursday was strong and looks likely to continue on Friday. A lot of market puts were bought on Wednesday and market makers could push the market up into the weekend before the SPX trend resumes down next week. We’ll see. Crude oil gave us a 5-wave decline on the hourly chart which is a SELL SIGNAL, and the USD gave us 5-waves down on the hourly chart for a SELL SIGNAL. Our current holdings are ~80% cash and ~ 20% in physical gold/silver/platinum and PM equities – we also hold some FXY (Yen) shares.
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 gave us a crappy looking rally attempt Thursday but our bias is still higher into option expiration with the IWM leading the market higher.
- Gold – Gold tested $1848 today as the GDX outperformed. We may have seen the gold ICL at $1785 early Monday.
- Silver – After the false break down attempt below $21, silver rallied in 5-waves on the hourly chart which is bullish.
- Bonds – Bonds gave us an EW 5-waves down on the hourly chart which is a SELL SIGNAL.
- Crude Oil – Crude oil fell hard to $103.2 on Wednesday and the XLE pulled back. The XLE is too far above its 200-dma to buy on dips.
- Dollar Index – The USD gave us an EW 5-wave decline on its hourly chart for a SELL SIGNAL – the Yen and Euro could make a run higher.
TURNING POINT DAY
The turn window for this week is 5/16-5/18 on the Full moon Timing Window.
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