Folks,
Market Observations for the Week: On today’s Fed minutes day, the SPX tested the upper trendline of its bearish wedge and reversed down near the close. If the SPX declines below 3738, there is a chance for more selling into the 7/20-7/21 turn window. A typical “bear flag pattern” will include three rally attempts and we may have ended today on the 3rd rally attempt today. From here, taking out SPX 3738 would argue for more washout into the 7/20-7/21 34-day Fibonacci step out from the 6/17 low. Crude oil tested $95.51 and bounced correctively – we may have entered a Wave 3 of C down to test $90 soon. Bitcoin held up above 20000 for most of the trading day and tested its R1 resistance pivot at 20620 overnight. The Euro’s collapse to 20-yr lows spiked the USD to 107.26 which pressured gold down to $1730.7.
7/06/22 (Commentary for Wednesday) The SPX tested the upper trendline of its bearish wedge late in the session and reversed down but the NDX outperformed because of its interest rate sensitivity. On a weaker than expected NFP jobs report on Friday, the SPX could test the 6/17 low at 3637 but the strength in the NDX is bullish and makes that market projection too problematical to trade for us. The market is shifting from inflation fears to recession fears as many key commodities like crude oil and copper have been rolling over. However, our TRIN-5 indicator continues very oversold at an elevated 7.46 and this could still prime the SPX for more washout this week in the SPX. Crude oil fell to test $95.1 before the Fed minutes today and started to bounce correctively overnight. Our bias remains that crude oil is in a C-Wave down from the B-Wave top at $123.57 on 6/14 and that it could test $87-$90 soon. A collapsing Euro spiked the USD to multi-year highs at 107.29 and that pressured gold down to $1730.7. Our current holdings are ~80% cash and ~20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) – The SPX is tracing out a “bear flag pattern” and today’s post-Fed rally tested the upper trendline of its bearish wedge before reversing down. 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 was further pressured down today and tested $1930.7 as the USD spiked to 107.29. The sideways action late in the session argues for more down into Friday’s NFP jobs report.
- Stocks – The SPX continued its rally after the FOMC minutes but reversed down after testing the upper trendline of the bearish wedge. The support at 3730 did hold today but the late rally may be the 3rd and final rally attempt in a “bear flag pattern” that looks terminal. A flush to SPX 3500 is possible if we get a weak NFP jobs report on Friday.
- Gold – Gold got slammed down again to $1730.7 from the collapsing Euro and spiking USD. Gold has a tendency to decline into Friday’s NFP jobs report.
- Silver – Silver tested $18.97 today and looks lower. Silver typically declines into the monthly NFP jobs report on Friday.
- Bonds – Bonds spiked to 142’06 today as the 10-yr US rate tested 2.91% - the stock market is shifting its concerns away from inflation to recession.
- Crude Oil – Crude oil plunged below $101.53 and may have entered a Wave 3 of C down – we tested $95.1.
- Dollar Index – The USD spiked to 107.26 on Wednesday and appears to have higher targets in mind.
TURNING POINT DAY
The turn window for this week is 7/8 – the NFP jobs report.
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