Folks,
Market Observations for the Week: Today was an important day in our work and the price patterns in the SPX altered our short-term outlook. The SPX price action from Tuesday-Thursday is not a 4th wave correction in our opinion – we now favor a bullish short-term view going into Powell’s speech on Friday. The SPX ONLY DECLINED in an EW a-b-c corrective pattern from last week’s high at 4326 into Tuesday’s turn window and we have then rallied in an EW 5-waves from Wednesday morning into Thursday’s close in the SPX, NDX and IWM – we view this as bullish price action. The SPX was able to overcome a “hotter than expected” inflation number of 8.9% from the revised Q2 GDP and also the bearish roadmap laid out by St. Louis Fed governor Bullard that sees the Fed Funds rate at 3.75-4.0% by year end. What is Powell going to say tomorrow that is more hawkish than that? Our short-term view is that if we get just a 3-wave pullback in the SPX early Friday that we could then rally back up to test 4326 into early next week. The SPX spoke today and we listened – we would not be trying to short the SPX early Friday. Crude oil pulled back to $92.36 this morning but could still spike and test $96 on early Friday’s New Moon. Gold rallied to $1778 this morning and started pulling back after Bullard’s hawkish roadmap into yearend for Fed rate policy. The USD appears to be coiling in a “bull flag” between 108 and 109 as we approach Powell’s speech early Friday.
8/25/22 (Commentary for Thursday) The SPX price action today in the face of a revised Q2 PCI inflation number(8.9%) and the hawkish Fed policy roadmap from Bullard has charged our view to short-term bullish. We would not try to short the SPX early Friday. We only have a 3-wave correction from SPX 4325 into our Tuesday turn window and then we rallied in 5-waves higher from early Wednesday to the close of Thursday in the SPX, NDX and IWM – this is bullish behavior in face of two negative news items this morning. Crude oil pulled back to $92.36 this morning but could still spike higher to test $96 on early Friday’s exact New Moon. After test $1778, gold rolled over on the hot 8.9% PCI inflation number and the hawkish Fed roadmap laid out by Bullard. The USD appears to be tracing out a “bull flag” as we approach Powell’s speech on Friday. Our current holdings are ~80% cash and ~20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) – The SPX only declined in an EW a-b-c from last week’s print of 4325 into Tuesday’s turn window – the 5-waves higher from early Wednesday has turned us short-term bullish for a rally back up to test 4325 early next week. 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 tested $1778 early Thursday and rolled over on a hotter PCI inflation number (8.9%) and Bullard’s hawkish roadmap for Fed policy into year end.
- Stocks – The SPX shook off two negative new items early this morning and rallied in 5-waves into the close to test 4200 – this is short-term bullish behavior. We are now looking for a rally that retests SPX 4325 into early next week.
- Gold – Gold tested $1778 into the 8/25-8/26 New Moon Timing Window this morning and then rolled over on Bullard’s hawkish Fed funds roadmap into yearend.
- Silver – Silver’s rally from early Monday looks corrective to us and we are looking for an undercut low below $18.60.
- Bonds – Bonds made an early low for the week at 136’00 but then rallied into the close after Bullard’s hawkish roadmap – this is short-term bullish.
- Crude Oil – Crude oil pulled back early to $92.36 but is still poised to spike higher on Friday’s exact New Moon.
- Dollar Index – The USD is coiling in a bull flag as we approach Powell’s speech on Friday.
TURNING POINT DAY
The turn window for this week is 8/25-8/26 which is the New Moon Timing Window.
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