We are still on travel with limited access to the internet, so our reports will be brief.
Folks,
Market Observations for the Week: The CPI report came in cooler than expected this morning and the futures erupted higher pre-market. The excess bearishness that showed itself to us in elevated TRIN-5 levels, high closing TRIN levels, a yearly high CBOE equity put/call ratio of 1.30 on Tuesday, etc. expressed itself today in massive short-covering. The SPX could now rally for at least a test of the 200-dms at SPX 4050 by the Fibonacci 34-day step out from the 10/13 low by November 16. We did get a powerful turn in the 11/8-11/10 turn window, but we still believe that this is still a bear market rally that has more to run in time and lower lows to make.
11/10/22 (Commentary for Thursday) The cooler than expected CPI report launched a massive short-covering rally and gave us the biggest rally in the Nasdaq in years. A target for this rally could take us to test the 200-dma around SPX 4100 by the 34-day Fibonacci step out on 11/16. For tomorrow, more concerns about the bailout of FTX could bring us back some on the SPX but we expect more buying since the next inflation report (PPI report) won't be out until 11/15. Our EW interpretation of the rally from 10/13 is that we started a 3rd wave of C higher today of a large a-b-c bear market correction. Bitcoin gave us a 3-wave rally that tested 18000 before pulling back overnight and that could be a bearish tell for the SPX. Crude oil gave us a small corrective looking bounce today that didn't benefit much from the plunging USD. Gold exploded to $1760 today on falling rates and the hope of a "real Fed pivot" sooner than later. The USD came down hard today and and brought calls of an important top being made near 114. We expect big volatility tomorrow in the SPX and our bias is that traders will be buying the dips.
Big Picture on Stocks (UPDATED) – Today's rally does not change our bias that the market rally from 10/13 is just a "bear market" rally. 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 into 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) – 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 exploded on short-covering after the weaker-than-expected CPI report ran the bears that had been hovering around this market for the last week.
Gold – Gold found support for the third time near $1620 last week and today exploded to $1760. Closing far above $1730 resistance today was very bullish for gold.
Silver – Silver tested $22 today - just a corrective pullback after the CPI report would be bullish.
Crude Oil – Crude oil only gave us a small corrective bounce on the falling USD today and this looked bearish.
Dollar Index – The USD plunged today on the weaker than expected CPI report - have we seen the high in the USD for this cycle?
TURNING POINT DAY
The turn window for this week is 11/8-11/10, and this includes a Full Moon/lunar eclipse,
Comments