Folks,
Market Observations for the Week: The SPX continued a 3-wave correction into Wednesday as more bad news in the crypto world was released and the earnings update from Target was poorly received. 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 4050-4080. 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.
11/16/22 (Commentary for Wednesday) The retails sales report came in at the hottest number in eight months but a poor earnings update from Target again revealed increasing pressure on the US consumer. 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 4050-4080. 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 on Tuesday. After a 3-wave bounce into Wednesday, Bitcoin appears ready to rollover - an undercut low below 14925 is likely by Friday. The contagion in the crypto world could be more far-reaching than thought. Crude oil may be succumbing bearishly to a H&S pattern on the hourly chart makes us cautious here - how the pattern resolves into Friday is key. Gold spiked to $1791 on Tuesday but then corrected sideways into Wednesday 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 11/10 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 – Retail sales came in at the strongest number in eight months but bad earnings from Target hit the retail sector of the market and the SPX continued to trace out a 3-wave correction - our bias is that the SPX is working a 4th wave correction into the 11/16-11/17 turn window that could reverse higher in a 5th wave to test SPX 200-dma near 4050-4080.
Gold – Gold tested $1791 on Tuesday before correcting sideways into Wednesday which looks bullish.
Silver – Silver tested $22.38 early Tuesday before pulling in 3-waves into Wednesday.
Crude Oil – Crude oil just bounced correctively on news of Russian missiles hitting Poland and the short-term trend looks bearish.
Dollar Index – The USD may have completed its 3-wave correction at 105.34 early Monday.
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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