The Daily JDV Market Timer - June 8, 2022

Folks,

Market Observations for the Week:  The SPX continues its volatile, sideways consolidation into early Friday’s CPI report. This sideways consolidation from last week is most likely a 4^th wave of C correction off the 5/20 low which appears to be a “Running B-Wave low” to us. The market is hoping for a sign of a weaker YoY CPI number and if it gets one, we could see a 5^th wave higher off the 5/20 low that could test 4200 and finish a “Running B-Wave correction” from the 5/12 low. 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 spike higher to test E-mini 4210-4230 before coming back before the market opens. 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 the important SPX high in our work – a post CPI rally may only give the E-mini a 5^th wave spike higher. 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 broke out above $121 today as the latest US crude oil inventories are coming in much lower than the average summer trends in years 2009-2021. After yesterday’s 3-wave bounce, bonds look determined to test lows again and mark the US 10-yr rate above 3.1%. Gold gave us a 5-wave decline on the hourly followed by the 3-wave bounce yesterday – this looks bearish to us.

6/08/22 (Commentary for Wednesday) Our bias is that a “Running B-Wave” correction started on 5/12 and that the 5/20 low was a B-Wave low followed by a C-Wave rally that is now underway. The sideways action seen over the last week is the 4^th wave of the C-Wave and we could see the start of the 5^th wave higher after the CPI report early Friday where the market is hoping for a weaker YoY number than the consensus. The SPX can be viewed as tracing out waves 1 to 3 of a C-Wave up from 3810 into 4177 late 6/2 and is now tracing out a sideways 4^th wave consolidation into the key CPI inflation report on Friday. With that viewpoint, we are looking for a 5^th wave thrust after the CPI report that could be reversed down later in the day. 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 broke above $121 today and could move higher since the monthly trend in US crude oil inventories in 2022 is falling far under the average trend from 2009-2021. Bitcoin has oscillated around the 30000 level the last four trading days. Gold has printed 5-waves down on the hourly chart and just a 3-wave bounce which looks bearish. The USD pulled is coiling around 102.5 overnight Wednesday as the Yen continues to melt down. Our current holdings are ~80% cash and ~ 20% in physical gold/silver/platinum and PM equities.

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 and 3-wave bounce move on the gold hourly argues for a retest of $1800.  

• Stocks – In our EW count, the SPX has been giving us a “Running B-Wave correction” from 5/12 and the sideways action from last week is a 4^th wave of C higher – we could see the 5^th wave of C higher after the CPI report on Friday.
• Gold – Gold gave us an EW 5-waves down on the hourly and a 3-wave bounce which is bearish.
• Silver – Silver has been tracing out a sideways pattern the last four trading days heading into Friday’s CPI report.
• Bonds – Bonds just gave us a 3-wave bounce on Tuesday and is now rolling over to test lows.
• Crude Oil – Crude oil spiked a 5^th wave higher above $121 on Wednesday.
• Dollar Index – The USD is coiling around its Person’s Pivot at 102.5 overnight Wednesday.

TURNING POINT DAY

The turn window for this week is 6/10.