Folks,
Market Observations for the Week: The SPX rally from Friday continued on Wednesday and our take remains a run up to SPX 4100-4200 into Friday. Our bias is that we made a SPX trading low on 5/20 and after a rally on Monday, the SPX pulled back into Tuesday’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 working sideways overnight with no clear bias for the SPX early Thursday. The bond market rallied to another high today as the 10-yr US rate fell to 2.708% on a weaker than expected Durable Goods report. Crude oil gave us EW 5-waves down on the hourly chart last week and just a corrective bounce so far this week that loos weak. The oil stocks rallied hard today into the close, but the short-term trend of crude oil is in doubt here. The USD gave us a corrective bounce today – both the Yen and Euro are poised to move higher.
5/25/22 (Commentary for Wednesday) A string of weaker than expected US economic reports gave bonds a bounce early and stocks rallying into the close. A move above SPX 4000 could give a short-covering kick to 4100. 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 working sideways overnight and that is a neutral tell for the SPX so far 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 saw a volatile today but ended the session with highs for the day in the last hour. Our bias is for a run higher to SPX 4100-4200 by the holiday weekend. A break about SPX 4000 could get a boost from short covering.
- Gold – After Mars changed sign, gold gave us a $30 day decline into Wednesday and tested $1838 in the 5/24-5/25 Comex gold option expiration. We may have already seen the gold ICL at $1785 on 5/16.
- Silver – Silver pulled back to $21.61 into the Comex silver option expiration on 5/25.
- Bonds – Bonds spiked to a multi-week high at 142’22 while the 10-yr US rate fell to 2.708%.
- Crude Oil – Crude oil fell in 5-waves on the hourly with just a corrective bounce so far that looks short-term bearish. The XLE had a good rally into the close and tested 86.2 – highs for the year.
- Dollar Index – The USD bounced today, but the Yen and Euro are still poised for a run higher.
TURNING POINT DAY
The turn window for the next week is 5/24.
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