Folks,
Market Observations for the Week: The SPX opened down on Monday, and we are cognizant that when declining into a monthly option expiration, the SPX tends to make a low by the following Tuesday and reverse higher. The cycle that was due to bottom on Friday extended into Monday. The E-mini made a low early Monday but the SPX did not which was a case of bullish divergence. Bitcoin made a multi-week low at 18195 early Monday and then reversed higher leading the SPX. Bitcoin is holding up overnight Monday which is a positive tell for the SPX early Tuesday. Crude oil continued down to $81.73 and perhaps finally finished a “Running B-Wave” correction which would be bullish for Tuesday. Gold appears to be doing a corrective bounce and so could retest $1661 soon. As the 30-yr fixed rate mortgage holds near 14-yr highs at 6.42%, the USD continued to correct above its S1 support pivot at 109.31.
9/19/22 (Commentary for Monday) After the bearish SPX close on quad-witching Friday below 3900, the E-mini made a low early Monday but the SPX did not for a case of bullish divergence. The SPX and NDX both gave us Negative Volume Reversal days on Thursday which was bearish leading into quad-witching Friday. The SPX cycle low we expected to land on Friday extended into early Monday. Bitcoin traded at 18195 early Monday before reversing and leading the SPX higher into the close. Bitcoin is holding up Monday evening which is a bullish tell for the SPX early Tuesday. Crude oil tagged $81.73 early today and may have finally finished a bullish “Running B-Wave correction” early Monday. After the 10-yr US rate tagged 3.5% early Monday, gold was able to bounce into the close and test $1689 – higher nominal rates are still a problem for gold. The USD remains in correction mode but is still holding above 109.3 overnight Monday. Our current holdings are ~80% cash and ~20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) – We closed below SPX 3900 on Friday and that looked like trouble for the SPX. However, the E-mini made an undercut low early Monday but the SPX did not for a case of bullish divergence. 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) – The 10-yr US rate spiked near 3.5% early Monday and gold got pressured down to tag $1668 before reversing again to close above key support at $1675. Central bankers are loading up on gold this year as global physical inventories continue to decline but higher nominal US rates can still pressure the PM sector down.
- Stocks – The E-mini made lower lows early Monday but the SPX did not and we may have seen a turn higher in our 9/19-9/20 turn window – how we trade on Tuesday will tell us.
- Gold – Gold tagged $1668 early Monday before reversing higher above key support at $1675.
- Silver – Silver tagged its lower VWAP at $19.23 early Monday before reversing higher to test $19.60 overnight.
- Crude Oil – Crude oil may have finally finished a “Running B-Wave correction” at $81.73 early Monday before tagging $85.62 overnight.
- Dollar Index – The USD is in correction mode but holding above 109.3 overnight Monday.
TURNING POINT DAY
The turn window for this week is 9/19-9/20.
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