Folks,
Market Observations for the Week: The SPX gave us another volatile session, but the trading day set up well for traders that bought the early low and held into the close. Our bias is still that the SPX will stay in its trading range until the CPI report is released early Friday and then the market will stage a break higher or lower. With the 3-star critical reversal day falling on 5/31 for the SPX, the 4177 high near the close on 6/2 appears to have been an important high in our work. The AAII sentiment report on 6/2 showed an increase in bullish sentiment consistent with a topping “bear market rally” as more bears jumped aboard the rally – trading should remain in a volatile trading range going into Friday. Crude oil is doing a high-range consolidation near $121 and the XLE made a new high for the year – it was a great day-trading session for the oil stocks. Bonds bounced today as rates backed off a little. Gold bounced as rates backed up a little and the USD pulled back hard.
6/07/22 (Commentary for Tuesday) Our bias is that the SPX printed an EW 5-waves up from 3810 into 4177 late Thursday and is now tracing out a sideways consolidation into the key CPI inflation report on Friday. How the CPI inflation rate breaks out will generate a big move one way or another in the SPX. The 3-star critical reversal day for the SPX was due on 5/31 and may have landed on 6/2 after the short-covering rally into the close to 4177. Crude oil is giving us a bullish high-range consolidation and looks to make a 5th wave higher soon. Bitcoin is dropping hard overnight to test its S1 pivot support at 29808. Gasoline futures gave us a 3-wave correction after making an all-time high at $4.33 overnight Sunday. Gold managed to climb to $1858 as the USD pulled back and the 10-yr US rate pulled back below 3.0%. 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 then bounced to $1878.6 on 6/2. The 5-wave down move in gold is argues for a retest of $1800.
- Stocks – The SPX peaked 5-waves up from the 3810 low at 4177 late Thursday and may have started a sideways consolidation that could last into Friday’s CPI report.
- Gold – Gold gave us an EW 5-waves down on the hourly chart that tested $1840 and today we got a corrective bounce.
- Silver – Silver is pulling back correctively after testing $22.56 yesterday.
- Bonds – Bonds bounced today and the 10-yr rate pulled back below 3.0%.
- Crude Oil – Crude oil is coiling for a 5th wave leg higher above $121.
- Dollar Index – The USD tested 102.84 before its pullback.
TURNING POINT DAY
The turn window for this week is 6/6-6/7.
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