Folks,
Market Observations for the Week: We have been harping for weeks that traders underestimate the resolve of the Fed to raise rates into a recession and serious job loss, but Friday Chairman reiterated his resolve to raise rates again and the market listened. However, it terms of our change on Thursday night to short-term bullish before Chairman Powell’s speech - WE WERE JUST FLAT OUT WRONG based on the SPX’s reaction to Bullard’s hawkish rate comments on Thursday. The SPX price action last week was a Running B=Wave correction (4th wave) and we got a strong 5th wave down move on Friday. We should now get a rebound relay early next week – the $TRIN closed > 2.0 on Friday and that argues for a rally on Monday. Our short-term view is that we should see at least a 3-wave corrective bounce start on Monday. Crude oil tested $96 in the 8/25-8/26 New Moon Timing Window but fell to test $91 after Powell’s deflationary rhetoric. Gold sold off after Powell’s speech but held above its recent low ($1740) unlike the SPX. The USD broke down to lows for the week at 107.6 but rebounded to 108.8 on Friday’s close.
8/28/22 (Commentary for Sunday) Powell’s short but resolute speech about raising rates into economic pain pummeled the SPX on Friday. The big jump in the Option Premium Ratio on Thursday’s close from 0.98 to 1.51 showed that the bears had loaded up on puts going into Powell’s speech. However, with Venus going into Opposition with Saturn Sunday night, we are expecting some kind of reversal higher by early Monday. However, if we only get a 3-wave SPX rally on Monday, that will be potentially very bearish. We now have a potential 5-wave correction from SPX 4325 on 8/16 into Monday which is the 13-day Fibonacci step out – we are expecting some kind of rally to emerge by early Monday. After testing $96 in the 8/25-8/26 New Moon Timing Window, crude oil pulled back on Friday to test $91 after Powell’s deflationary-sounding speech. After testing $1778 on Thursday, gold pulled back in 3-waves on Friday but held above its $1740 low. The USD initially broke down to 107.6 after Powell’s speech but then rebounded to test its R1 resistance pivot at 108.84 by Friday’s close. Our current holdings are ~80% cash and ~20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) – The SPX made an EW 5-wave decline from 8/16 at 4326 into Friday’s close. We are expecting at least a 3-wave corrective bounce to emerge by Monday which is the 13-day Fibonacci step out from 8/16. 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 touched $1778 early Thursday and then rolled over in a 3-wave correction to test $1748 post-Fed on Friday. It was bullish that gold was able to hold above its recent low at $1740.
- Stocks – The SPX got pummeled Friday after Powell’s firm and resolute speech about raising rates to quench inflation. We are now looking for a rebound rally to start early Monday.
- Gold – Gold tested $1778 early Thursday and then rolled over in 3-waves to test $1748 post-Fed. Holding about the $1740 low was a positive on Friday.
- Silver – Silver’s rally from 8/22 looks corrective to us and we are looking for an undercut low below $18.60 by early Monday.
- Bonds – Bonds made an early low on Thursday at 136’00 but then gave us a 3-wave rally into Friday’s close with bearish divergence. How we trade on Monday will be enlightening.
- Crude Oil – Crude oil peaked near $96 in the New Moon Timing Window and then pulled back to test $91 post-Fed.
- Dollar Index – The USD made lows for the week at 107.6 after Powell’s speech but then rebounded to close Friday near 108.8.
TURNING POINT DAY
The turn window for this week is 8/29 which is the tail end of the New Moon Timing Window and the 13-day Fibonacci step out from 8/16.
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