Folks,
Market Observations for the Week: The SPX tested 4028 and started a correction that should continue into tomorrow's turn window. Just a 3-wave SPX correction into 11/16-11/17, the 34-day Fibonacci step out, would be a bullish setup for higher prices and perhaps a test of the 200-dma at SPX 4050. We did get a powerful turn in the 11/8-11/10 turn window, but we still believe that this is just a bear market rally that has lower lows to make in the intermediate term.
11/15/22 (Commentary for Tuesday) The PPI inflation report came in lighter than anticipated and the SPX spiked to 4028 before starting a pullback. Just a 3-wave pullback into the 34-day step out on 11/16-11/17 would be a bullish setup for a test of the SPX 200-dma around 4050. Our EW interpretation of the rally from 10/13 is that we started a 3rd wave of C higher on Thursday of a large a-b-c bear market correction and we may have started a 4th of C corrective wave today. After a 3-wave bounce into Tuesday, Bitcoin appears ready to rollover - an undercut low below 14925 is likely by Friday. Crude oil bounced correctively to $87.50 but a H&S pattern on the hourly chart makes us cautious here - how the pattern resolves into Friday is key. Gold spiked to $1791 but then corrected sideways which is bullish. The USD may have finished a 3-wave correction to 105.34 today and we could be close to a reversal higher.
Big Picture on Stocks (UPDATED) – The SPX rally from Thursday 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 stock cycle low bottoms and the US economy slows into a recession. The 13-month Fibonacci step out from the 1/4/22 SPX 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 and global physical inventories continue to decline but higher nominal US rates could still pressure the PM sector down.
Stocks – On lighter than expected PPI numbers, the SPX tested new highs for the rally at 4028 before selling off into the close - the SPX may have started a 4th wave correction into the 11/16-11/17 turn window.
Gold – Gold tested $1791 on Tuesday before correcting sideways into the evening which looks bullish.
Silver – Silver tested $22.38 before pulling back late.
Crude Oil – Crude oil tested bounced to $87.50 but a possible H&S top on the hourly chart is keeping us cautious.
Dollar Index – The USD may have completed its 3-wave correction at 105.34 today.
TURNING POINT DAY
The turn window for this week is 11/16-11/17 - the 34-day Fibonacci step out from the 10/13 low.
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