Folks,
Market Observations for the Week: The SPX ended Monday’s session with an “Ending Diagonal” pattern that was shorted by some savvy traders. Today, the SPX gapped down and tested its S2 pivot support at 3880 before rallying late to close its opening gap after some comments from Fed Chairman Powell. Our take is that we made a SPX trading low on 5/13 and after a rally on Monday, the SPX pulled back into today’s turning point window before reversing higher into the close. The SPX tested the .382 retracement of the post-Covid rally from 3/23/20 at SPX 3810 on Friday and that appears to be a trading low that started a bear market rally that could test SPX 4200 by Fri – seven down weeks in a row for the DJIA needs an upside correction. Bitcoin is rallying overnight and tested its R1 pivot resistance at 28811 and could give us a positive bias early Wednesday for the SPX. The bond market rallied to a multi-week high today as the 10-yr US rate fell to 2.71% on weaker than expected home sales. Crude oil gave us EW 5-waves down on the hourly chart last week and just a corrective bounce so far that looks weak. The USD continues to sub-divide down impulsively – both the Yen and Euro are poised to move higher.
5/24/22 (Commentary for Tuesday) After Monday’s stock rally day, the SPX pulled back to 3880 into our turn window today before reversing higher into the close. The SPX gave us 5-waves up from Friday with an ending diagonal today into the close on Monday that was ripe for shorting. Did the SPX make an important low last Friday or not? Our bias is for a SPX rally to 4200 by this weekend. Bitcoin is rallying above 30000 overnight and that is a positive tell for the SPX on Wednesday’s open. Monday was the 55-day Fibonacci step out from the important high on 3/29 and we may have seen the low for the first leg down in the 2022/2023 Bear Market on expiration Friday. Crude oil gave us a 5-wave decline on the hourly chart last week and just a 3-wave bounce so far which is BEARISH, and the USD gave us 5-waves down on the hourly chart for a SELL SIGNAL which is bullish for the Yen and Euro. 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 may have seen the end of the first leg down in the 2022-2023 Bear Market on Friday but that hasn’t been confirmed yet. 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 the Comex Gold option expiration on 5/25 if it didn’t already at $1785 early on 5/16.
- Stocks – The SPX pulled back correctively into Tuesday and then finished the day by filling the opening down gap. Our bias is for a run higher to SPX 4100-4200 by the holiday weekend.
- Gold – As Mars ingresses, gold made a high at $1869 Tuesday and could now correct into the 5/24-5/25 Comex gold option expiration. We may have seen the gold ICL at $1785 on 5/16.
- Silver – Silver tested $22.21 on Tuesday and should now correct into Comex option expiration on 5/24-5/25.
- Bonds – Bonds spiked to a multi-week high at 142’16 while the 10-yr US rate fell to 2.71%.
- Crude Oil – Crude oil fell in 5-waves on the hourly with just a corrective bounce which looks short-term bearish. The XLE is too far above its 200-dma to buy on dips here for us.
- Dollar Index – The USD continues to decline impulsively– the Yen and Euro are poised for a run higher.
TURNING POINT DAY
The turn window for the next week is 5/24.
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