Folks,
Market Observations for the Week: After an EW 5-wave advance from the 6/16 low into Wednesday, the SPX started a small EW a-b-c correction that ended around 1:00 PM EDT and then a “short-squeeze” drove the SPX and NDX higher into the close. The mild, sideways correction in the E-mini futures from Wednesday into Thursday was the tip off for a late rally in the SPX. The SPX may have started a 3rd wave higher from the 6/16 low at 3637. Bitcoin followed the SPX higher and is testing 21000 overnight Thursday. The GDX/GLD ratio continues to point down and that leaves gold in a choppy sideways phase – the GDX tested multi-month lows today. The USD continued to trade in a tight range around 104.
6/23/22 (Commentary for Thursday) The mild, sideways correction in the E-mini from Wednesday into Thursday afternoon was the fuse that lit the short-covering rally into Thursday’s close. We would not be short the SPX, NDX or IWM here. The SPX got historically oversold last week but the rebound from 6/16 lacked power so far until today. Bitcoin followed the SPX higher and is testing 21000 overnight Thursday which gives the SPX a positive bias for early Friday. Crude oil is correcting in a sideways wave 4 of 3 of a larger C-Wave down. We could be doing a C-Wave down from the B-Wave top at $123.57 on 6/14. The GDX tested multi-month lows at 28.64 and gold came back to the $1820s. The USD appears to be tracing out a complex correction and is holding up near its Person’s pivot of 104.41 overnight Thursday. Our current holdings are ~80% cash and ~20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) – Last week’s SPX action confirmed that the first leg down in the 2022 bear market may still be ongoing. Longer term, the SPX could give us a 20%-50% correction by spring 2023 as the 20-yr cycle low bottoms and the US economy slows to a recession. We favor a high percentage of cash for capital preservation.
Big Picture on PMs (UPDATED) – Gold stocks are underperforming gold here and that may relegate gold to a choppy sideways trading range in the near term. Weakly trending gold stocks may imply more weakness in the SPX.
- Stocks – The SPX rallied in an EW 5-waves higher into the 6/21-6/22 turn window and only gave us a mild 3-wave correction into Thursday. The run higher late Thursday may be the start a 3rd wave higher that could run higher on Friday.
- Gold – The GDX got hit hard today as underperforming gold fell and that argues for more choppy, sideways trading for gold.
- Silver – Silver continues in its trading range under $22 but the silver COTs continue to look strong.
- Bonds – Bonds continued to rally as the 10-yr US rate declined in 5-waves down on the hourly chart.
- Crude Oil – Crude oil declined to $101.75 early Wednesday and appears to be in a large C-Wave down from the Full Moon high at $123.68 on 6/14.
- Dollar Index – The USD declined in 3-waves after the Swiss central bank raised its rate by 50-basis point on 6/16 and the correction appears to be going complex.
TURNING POINT DAY
The turn window for this week is 6/21-6/22.
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