Folks,
Market Observations for the Week: The SPX blow off to 4177 late Thursday was the high for the week and the pullback on Friday went deeper than we expected. Friday’s NFP report came in stronger than expected and the most market reaction, to us, was in the continued sell off in bonds and rise in rates. With the 3-star critical reversal day falling on 5/31 for the SPX, the 4177 high near the close on Thursday appears to have been an important high – 5-waves up from the SPX 3810 low on 5/20. In the short-term, we are looking for at least a 3-wave correction now from SPX 4177. The AAII sentiment report on Thursday showed an increase in bullish sentiment consistent with a topping “bear market rally” as more bears jumped aboard the rally. After a 3-wave move down into early Thursday, crude oil is test new rally highs at $121 Sunday evening. Bonds reacted to the strong NFP report with another undercut low and the 10-yr US rate looks to test 3.0% soon. Rising nominal US rates also pressured gold on Friday. The USD bounced to 102.25 after the strong NFP jobs report and was supported by a decline in the Yen.
6/05/22 (Commentary for Sunday) The bond market reacted negatively to the NFP jobs report and made an undercut low to the S1 pivot at 137’18 and the 10-yr US rate should now test 3.0% on Monday. Our bias is that the SPX printed an EW 5-waves up from 3810 into 4177 late Thursday and has now started an EW a-b-c correction that should continue down into Monday in a Wave C with a symmetry target of 4060. 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. After just a 3-wave correction last week, crude oil rallied up to make new multi-week highs at $121. Bitcoin is rallying up to test R2 resistance at 31265 overnight Sunday but the correlation with the NDX has not been as strong in the last week or so. 3-wave correction into early Thursday, so another test of the $120 high is possible. Gasoline futures hit its high for the year at $4.32 overnight Sunday. Gold rolled over after the strong NFP jobs report pressured by rising nominal US rates – gold tested its Person’s pivot at $1860 overnight Sunday. After the stronger than expected NFP jobs report, the USD bounced to test 102.25. 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 Thursday– a 5-wave decline from late Thursday would argue for a test of $1800.
- Stocks – The SPX peaked 5-waves up from the 3810 low at 4177 late Thursday and may have started a 3- wave correction that has more to go on Monday.
- Gold – Gold rallied to test $1878.6 overnight Thursday – 5-waves down on the hourly chart argues for another retest of $1800.
- Silver – Silver is holding up overnight Sunday at $22.30.
- Bonds – Bonds gave us an undercut low at 137’18 after the strong NFP jobs report and then just a corrective bounce – the 10-yr US rate could be testing 3.0% early Monday.
- Crude Oil – After just a 3-wave correction after last week’s New Moon, crude oil rallied to test multi-week highs at $121 overnight Sunday.
- Dollar Index – The USD bounced on Friday to test 102.25 but the action looked corrective.
TURNING POINT DAY
The turn window for this week is 6/6-6/7.
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