Folks,
Market Observations for the Week: After the “Zweig Breadth Thrust” seen on Friday going into the holiday weekend, Tuesday turned out to be a correction day. However, 95% of S&P stocks rallied into Friday last week, and that strength argues for more SPX rally into 6/3-6/6. Our bias is that the rally from 5/20 is a “bear market rally” and today’s corrective action argues for an extension into this weekend. The New Moon Timing Window helped pull the SPX up into the weekend and Tuesday only gave us corrective action, so we are bullish for more rally. The bond market corrected into Tuesday and the 10-yr US rate tested 2.88%. Crude oil tested $120 on Tuesday and then reversed down – how we navigate the New Moon Timing Window will tell us about the near-term trend of crude oil. The USD bounced to test 102.16 – both the Yen and Euro corrected.
5/31/22 (Commentary for Tuesday) After a strong market breadth day on Friday which gave us a “Zweig Breadth Thrust”, the SPX gave us a correction today which argues for an extension of the rally from 5/20 into 6/3-6/6. Still, we view the market rally from 5/20 as just a “bear market rally” and all the 5+% rallied in the SPX in 2022 have been reversed to lower lows. The Option Premium Ratio gave us another pullback from 1.78 to 1.31 on Tuesday and that argues for early strength on Wednesday. The CORRECTIVE PULLBACK in the SPX seen on Tuesday argues for a higher target in this “bear market rally” to 4200-4300 by 6/3-6/6. The bond market corrected into Tuesday and gave us a bounce in the 10-yr US rate to 2.88%. In typical fashion, crude oil spiked to test $120 in the New Moon Timing Window – how we trade into Wednesday will set the near-term trend of crude oil. Typically, the price of gasoline peaks on Memorial Day weekend with all the national travel going on – how gasoline trades later this week will set the near-term trend as well. Gold rallied in 5-waves higher from the $1785 low and corrected that move down into Tuesday – if gold pulls back and makes a higher low, this will be constructive in the short term. The USD bounced correctively to 102.16 on Tuesday and the Yen got sold. 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 5/20 but that hasn’t been confirmed yet. Longer term, 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 may have seen an intermediate cycle low at $1785 on 5/16 and if gold pulls back to a higher low this week above $1785 that could be bullish.
- Stocks – The E-mini peaked at 4200 overnight Sunday before correcting into Tuesday – this correction after Monday’s New Moon argues for a rally extension to SPX 4300 by 6/3-6/6. This “bear market rally” could run a few days longer until we get a TRIN-5 sell signal.
- Gold – Gold gave us a B-Wave test of $1873 early Friday and continued a C-Wave down to test $1800.
- Silver – Silver pulled back to test $21.45 early Tuesday before bouncing.
- Bonds – Bonds gave us a 3-wave correction into Tuesday and appears to be bouncing correctively.
- Crude Oil – Crude oil spiked on Tuesday to test $120 and then reversed down – just a 3-wave correction will be bullish. The XLE had a good rally on Tuesday and tested 90.46 – highs for the year.
- Dollar Index – The USD bounced to 102.16 Tuesday and pressured the Yen.
TURNING POINT DAY
The turn window for this week is 5/31 which is in the New Moon Timing Window.
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