Folks,
Market Observations for the Week: The SPX traced out a potential bear flag pattern on Thursday’s intra-day chart. The market is close to a major turn here. Our Option Premium Ratio indicator has given us back-to-back readings of 0.87 which is a SELL SIGNAL. Our bias is for bigger than expected NFP jobs report that could rattle the market and kick off a correction. The EW 5-waves down on the bond market earlier this week was a tell for a hot NFP jobs report tomorrow. Rising rates could take the wind out of the technology stock rally which supported the SPX move to 4168. The SPX has a seasonal tendency to decline into Friday’s NFP jobs report but this week it has gone from sideways to higher so far. Bitcoin is bouncing overnight. As we have been steadfast for, crude oil took out $90 and tested $87.55 on Thursday – this is a sign of a global economic slowdown. Gold bounced back above $1800 and tested $1820 and traced out 5-waves higher from the $1678 low which is bullish. The USD appears to be coiling for more rally.
8/04/22 (Commentary for Thursday) The SPX appears close to a major pattern completion in the 4188-4190 area but the risk exceeds the reward to be holding long positions here. The 6/17 low at SPX 3636 was an intermediate cycle low and rallying past the 34-day Fibonacci step out on 7/22 was a Sign of Strength for more rally extension to perhaps 4200. The EW 5-wave down on the hourly bond chart has us expecting a hotter than expected NFP jobs report and a stock market sell off. After days of weak technical action, crude oil broke below $90 and tested $87.55 which could be a sign of global economic slowdown. Gold bounced above $1800 and tested $1812 on a 5-wave rally move off the $1678 low. The USD appears to be coiling for its next rally leg. Our current holdings are ~80% cash and ~20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) – The SPX stayed under yesterday’s high at 4168 and traced out a bear flag pattern – 4188-4190 looks like a pattern completion. 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 traced out 5-waves higher from the $1678 low when it bounced back above $1800 and tested $1812.
- Stocks – Our Option Premium Ratio gave us back-to-back values of .87 which is a SELL SIGNAL for the SPX – the risk is not worth the reward for the long traders here.
- Gold – Gold traced out an EW 5-waves higher to $1812 from the $1678 low – this is bullish.
- Silver – Silver is holding above $20 as we approach the NFP jobs report.
- Bonds – Bonds declined in 5-waves into Wednesday before a bounce Thursday – bonds may be anticipating a stronger than expected jobs report on Friday and more Fed rate hikes.
- Crude Oil – Crude oil is breaking down and tested $87.55 today.
- Dollar Index – The USD pulled back in just 3-waves to 105 Tuesday and could be coiling before its next rally.
TURNING POINT DAY
The turn window for this week is 8/1-8/2.
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