Folks,
Market Observations for the Week: We’re still expecting a SPX trading bounce to start early Tuesday. Bitcoin is tagging 20295 overnight Monday and that is a bullish tell for the SPX early Tuesday. Two back-to-back days of huge total option volume suggest a SPX rally to start early Tuesday. Crude oil needs one more undercut low below $76.25 before it gets a rebound. Gold could also get an undercut low below $1627.7 before a rally.
9/26/22 (Commentary for Monday) The SPX looks ready to follow the lead of Bitcoin overnight (+20000) and stage an oversold rally early Tuesday. The 52-wk New Low list is testing levels not seen since mid-June. At this point we continue to stay in cash and watch the action as the SPX tests 3636. The bond market looks overextended to the downside here and could give us a relief rally by Tuesday. Bitcoin is spiking above 20000 overnight Monday and is trying to lead the way for the SPX early Tuesday. Crude oil could give us one more undercut low below $76.25 before its oversold rally starts on Tuesday. Gold could also undercut $1627.7 before reversing higher early Tuesday. We are ~80% cash and ~20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) – The SPX undercut its uptrend line from the Covid low below 3800 on Fed Day and continued to decline into Monday – however, a rebound rally is due early Tuesday. 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 to 3.90% Monday and that kept the downward pressure on gold to $1627.7. We expect gold stocks to test their Covid lows by March 2023. 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 SPX is continuing its test of the 6/16 low at 3636 but we expect a rebound rally to start early Tuesday. With the put/call ratio spiking to 1.36 on Friday, we are looking for a tradable low on Mon/Tues.
- Gold – Gold is getting hammered by rising rates and the rising USD – we are looking for a rebound rally to start early Tuesday.
- Silver – We may be seeing a pattern completion in silver overnight Monday and are looking for a rally early Tuesday.
- Crude Oil – Looking for crude oil to undercut $76.25 early Tuesday and then get an oversold bounce.
- Dollar Index – The USD is consolidating around 114 overnight Monday and is pressuring the PM sector.
TURNING POINT DAY
The turn window for this week is 9/26-9/27.
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