Folks,
Market Observations for the Week: We looked for a reversal week last week – did we get a reversal higher on Thursday as Jim Cramer of CNBC thinks? On Friday, three analysts on CNBC argued for SPX 4500 by year end – we are very skeptical of this idea, Still, we got historically oversold last week on the SPX based on data going back to 1928. However, our bias is that the Fed engineered “A Bubble of Everything” after the 3/23/20 Covid low and the financial markets are now adjusting in a “historical way” to the popping of this bubble. Our TRIN-5 indicator remains elevated at 8.33 and our Option Premium Ratio jumped from 1.74 to 3.60 which argues for weakness sometime tomorrow. The Tuesday after a monthly option expiration is a turning point day in our work. Our next target of SPX 3500 could still be in play in the short-term. If we do get a mini-crash washout on Tuesday, there is a hard financial-astro aspect (Venus square Saturn) that should bring a strong reversal higher and last longer than the “bear market bounce” from 5/20 to 6/2. A VIX spike > 50 will tell us that a strong reversal is at hand. Gold rallied in 3-waves and tested $1861 last week before reversing down. The USD is tracing out a large EW a-b-c correction after the Swiss central bank raised its rate by 50-basis points.
6/20/22 (Commentary for Monday) The SPX is close to staging a reversal higher, but it may need a final minicrash to SPX 3500 first on Tuesday/Wednesday. The SPX has a 3-star critical reversal day on June 21-22 and that could come in as a low – if it comes in as a high on Tuesday/Wednesday that would be a bearish for another leg down in the SPX. The SPX got historically oversold last week but the rebound from last Thursday is not obviously impulsive – we may need a mini-crash down to 3500 this week before a substantial rebound. The high TRIN-5 number at 8.33 and the 5-yr high on the Option Premium Ratio of 3.6 argue for weakness on Tuesday. The SPX is bouncing from Thursday and contacting the powerful Venus square Saturn aspect on Tuesday/Wednesday which could give us a reversal back down. Bitcoin traded below 20000 over the holiday weekend. Crude oil is rebounding to its R2 resistance pivot at $110.59 overnight Monday. Gold bounced in 3-waves to test $1861 after the Fed rate hike 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) – 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 bounced to $1861 after the 50-basis rate hike from the Fed and then declined into the holiday weekend. Gold gave us 5-waves down from $1882.5 on 6/10 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 $1861 on 6/16 post-Fed before correcting.
- Silver – Silver continues to consolidate after the Fed rate hike between $21.50 and $22.00.
- Bonds – Bonds bounced in a 3-wave corrective structure that made an early low at 131’01 on Thursday before rallying into the holiday weekend.
- Crude Oil – Crude oil declined to $106.4 on Friday before bouncing to $110.5 overnight Monday.
- Dollar Index – The USD declined in 3-waves after the Swiss central bank raised its rate by 50-basis point on Thursday 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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