We are still on travel with limited access to the internet, so our reports will be brief.
Folks,
Market Observations for the Week: We still embrace the 10/25-10/26 turn window, which has been circled on a calendar for some time, as an important turn window and it looks to be a TRADING HIGH. This is a triple-turning-point day in our work - the Tuesday after a monthly expiration, a New Moon and a solar eclipse. Wednesday's market close gave us a TRIN-5 SELL SIGNAL (3.70) which has ended bear market rallies this year. Yesterday was the 13-day step out from the 10/13 low and another turn day. The futures sold off after the earnings reports from AAPL and AMZN, but we have not seen a 5-waves down on the hourly E-mini overnight to give us a sell signal. Bitcoin remains above 20000 giving hope to the bulls. We are cautious here and prefer to be in mainly cash.
10/26/22 (Commentary for Thursday) We believe that the SPX is making an important trading high in the 10/25-10/26 turn window and we would be using this opportunity to sell long trading positions. We got a TRIN-5 SELL SIGNAL on Wednesday's close and this signal has ended multiple "bear market rallies" in 2022. With that said, and even with the negative reaction to the earnings reports from AAPL and AMZN Thursday night, we could still see another test of SPX 3900 into early next week. We believe in what Marty Zweig once said - "Do Not Fight The Fed" - and we believe that the Fed is going to have to work longer and harder than most traders and investors believe to reverse inflation down - despite what the Bank of Canada did Tuesday (a 50 basis-pt instead of a 75 basis-pt rate hike). With that said, the weak link in the global banking system is Europe which could be a flashpoint for global contagion and since Europe is the strongest American ally at this time, we believe that the Fed will have to act to contain a European banking crisis, and this could be the "pivot moment" that many traders are desperately looking for. These are treacherous markets, and we prefer to stay in 100% cash beyond our physical metals position. Bitcoin has closed above key resistance at 20000 on Wednesday and Thursday and that is encouraging to the bulls. The 10-yr US rate has only corrected in 3-waves on the hourly here and its trend is still higher which is a risk to the SPX and PM sector.
Big Picture on Stocks (UPDATED) – Longer term, the SPX could give us a 20%-50% correction by spring 2023 - down to SPX 2400 - as the 20-yr cycle low bottoms and the US economy slows to a recession. The 13-month Fibonacci step out from the 1/4/22 high and the 55-wk Fibonacci step out have us looking to early February for an important low. We favor a high percentage of cash for capital preservation.
Big Picture on PMs (UPDATED) – Gold continued to rally into Wednesday as the USD continued its correction. However, we still expect gold stocks to test their COVID lows by Fed/March 2023 as the 8-yr gold cycle and the 20-yr stock market cycle converge on the downside. 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 did continue its rally into our 10/25-10/26 turn window and tested 3900 and its 50-dma before fading into the close on Wednesday and getting a TRIN-5 SELL SIGNAL (3.70). Despite the afterhours futures selloff following the earnings from AAPL and AMZN, there is still a chance for a test of SPX 3900 going into early next week.
- Gold – Gold bottomed at $1621 on 10/21 - the 3-star critical reversal day and then reversed higher into the 10/25 New Moon/solar eclipse.
- Silver – Silver bullishly diverged on Friday when gold made a slight undercut low and then bounced into the 10/25 New Moon.
- Crude Oil – News of tight US oil inventories at the wholesale level has changed our view on crude oil which bottomed out near the New Moon - the OIH (oil service stocks) and XOM are trying to pull crude oil higher.
- Dollar Index – The USD has given us just a 3-wave correction into today - we could still test the recent highs at 114.
TURNING POINT DAY
The turn window for this week is 10/25-10/26.
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