Folks,
Market Observations for the Week: The post-Fed SPX bounce got erased today and once again more than 90% of stocks in the S&P 500 declined. It’s the fifth time in the past seven trading days and since 1928, there have been exactly zero precedents. We are witnessing the fiercest display of market selling in US market history. Our TRIN-5 indicator remains elevated at 8.76 – and this highly oversold level could still lead to more washout on quad-witching Friday. The Option Premium Ratio plunged from 3.29 to 1.74 today and that argues for early strength on Friday. Our closing $TRIN was 2.02 and that also argues for statistical SPX strength early Friday. We have experienced tremendous volatility this week from the following five factors: the 6/13-6/15 Full Moon Timing Window, the 6/14 monthly VIX expiration, multiple astro-finance aspects, the 6/15 Fed day and the 6/17 quad-witching expiration – so traders need to buckle up. The SPX has a 3-star critical reversal day on 6/21-6/22 and that should be a reversal higher – perhaps after a mini-crash first. Bonds made a lower low early Thursday at 131’01 before rallying into the close – this could have been a bearish Running B-Wave continuation pattern. Crude oil made an undercut low at $110.43 early Thursday before bouncing in 3-waves – the XLE continues to roll over. Gold rallied in 3-waves and tested $1861 before reversing down. The USD powered to another 20-yr high at 105.79 and then declined in 3-waves to 103.5 after the Swiss central bank raised its rate by 50-basis points.
6/16/22 (Commentary for Thursday) The SPX is close to staging a reversal higher, but it may need a final minicrash first. The SPX has a 3-star critical reversal day on June 21-22 and that should come in as a low. The SPX is on a historic run of 90% down days and this market has become historically oversold. We are expecting more volatility on Friday, but it is probably getting too late to try shorting. Quad-witching Friday could give us volatility on steroids. This extremely volatile week came from five sources: the 6/13-6/15 Full Moon Timing Window, the 6/14 monthly VIX expiration, multiple astro-finance aspects, the 6/15 Fed Day and the 6/17 quad-witching expiration. Our TRIN-5 indicator remains elevated at 8.76 and is still conducive to more market sell off. Bitcoin found support at 20025 and is trying to form a bottom. Crude oil continued to decline after the Full Moon and tested $110.43 before bouncing, but the XLE continues to correct. Gold bounced in 3-waves to test $1851 before reversing down. The USD tested 105.79, another 20-yr high, and then declined sharply in 3-waves after the Swiss central bank raised rates by 50-basis points. Our current holdings are ~80% cash and ~20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) – Monday’s SPX action confirmed that the first leg down in the 2022 Bear Market is still ongoing. Longer term, the SPX could give us a 20%-50% correction by spring 2023 as the 20-yr cycle low lands and the US economy slows to a recession. We favor a high percentage of cash for capital preservation.
Big Picture on PMs (UPDATED) – Gold made an intermediate cycle low at $1785 on 5/16 and then bounced to $1882.5 on Friday after the CPI report. Gold gave us 5-waves down from $1882.5 and just a 3-wave bounce today to $1861 on Thursday.
- Stocks – The SPX rapidly erased the post-Fed pop in another 90% down today. The SPX is historically oversold and we are approaching the 6/21-6/22 3-star critical reversal window which should be a low. The Option Premium Ratio plunged from 3.29 to 1.74 as traders expect an early rally on Friday.
- Gold – Gold rallied in a 3-wave bounce and tested $1851 before reversing down.
- Silver – Silver tested $22 on Thursday before pulling back late to tag its Person’s pivot at $21.75.
- Bonds – Bonds bounced in a 3-wave corrective structure that made an early low at 131’01 before rallying into the close.
- Crude Oil – Crude oil declined to test $110.43 before getting a 3-wave bounce but the XLE continued to get sold hard.
- Dollar Index – The USD tested 105.79 on Wednesday before declining in 3-waves to test 103.5 on Thursday.
TURNING POINT DAY
The turn window for this week is 6/13-6/14.
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