Folks,
Market Observations for the Week: We had a huge whipsaw day on Friday’s expiration and the SPX was actually squeezed to a positive value. Are we seeing a “bear trap” here in the SPX or could we see the “whoosh down” on Monday on the 55-day Fibonacci step out from the important SPX high at 4637 on 3/29? A “whoosh down” could take us to a rapid test of the 200-dma near 3500 which would could lead to a big reversal higher into 5/31 or so. Our bias on Friday was for more market strength which came early on a run up to SPX 3943 before wild volatility into the close. If we do get a market flush on Monday, our bias is to go long AAPL or XOM by the close. Bitcoin is testing 30447 overnight Sunday and that is a positive tell for early strength in the SPX early Monday. The DJIA, SPX and NDX all made lows for the year on Friday before the bounce into the close. The bond market continues to consolidate sideways from Thursday. Crude oil gave us EW 5-waves down on the hourly chart last week and just a 3-wave bounce so far which looks weak. For the USD, we got a 5-wave decline below 103.194 which is also a SELL SIGNAL and just a weak bounce – both the Yen and Euro are poised to move higher.
5/22/22 (Commentary for Sunday) We saw wild SPX volatility on expiration Friday. Our bias for this week is a low on Mon/Tues (that could contain a whoosh down to SPX 3500) followed by a strong rally into the holiday weekend. Bitcoin is testing 31477 overnight Sunday which is a positive tell early for the SPX on Monday. However, Monday is the 55-day Fibonacci step out from the important high on 3/29 and could set the low for the first leg down in the 2022/2023 Bear Market. The rally into Friday’s close only managed a NYSE breadth of -250 and could be just another small “wave 2” of a 3rd wave down in progress. Crude oil gave us a 5-wave decline on the hourly chart last week and just a 3-wave bounce 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 believe that the SPX is close to the end of the first leg down in the 2022-2023 Bear Market. 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 5/25 Comex Gold Expiration if it hasn’t already at $1785 early Monday.
- Stocks – Our bias is for a SPX low on Monday/Tuesday that could be scary followed by a strong reversal into the holiday weekend.
- Gold – Gold is testing $1860 as we enter the Monday before Comex Gold Expiration on 5/25. 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 and is testing $21.9 overnight Sunday.
- Bonds – Bonds have been correcting sideways since Thursday.
- Crude Oil – Crude oil fell in 5-waves on the hourly with just a 3-wave bounce which looks short-term bearish. 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 are poised for a run higher.
TURNING POINT DAY
The turn window for the next week is 5/24.
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