Folks,
Market Observations for the Week: With a Option Premium Ratio SELL SIGNAL last week we are cautious this week and holding near %100 cash. However, with the New Moon going exact late Wednesday afternoon, there is still a chance that the SPX could take out the high at 4028.84 going into Wednesday or Friday on this holiday week. The SPY did give us a Positive Volume Reversal Day on Friday and the decline today was on much less volume than Friday. Also, our TRIN-5 indicator close > 6.00 which is very oversold and argues for higher SPX prices. This market is very treacherous to trade and we need to see an EW 5-waves down on the hourly chart before we think about a small short position. The weakness of crude oil and gold into Monday added to our concern of a strong deflationary wave hitting global asset markets soon Bitcoin has only rallied in 3-waves from its low last week and started breaking down again today. Crude oil tested our $75 target and then gave us a strong rebound to $80. Gold tested $1734 and bounced on Monday - we are bearish on the PM sector. bearish for the PM sector. The USD continued its rally which could target 109.
11/21/22 (Commentary for Monday) We have turned cautious on the stock market here despite the bullish seasonal for this week but continue to respect the ability of the SPX to rally above 4028.84 this week. A Positive Volume Reversal Day for the SPY on Friday and a TRIN-5 > 6.00 are positive indicators for the SPX to start this week and the New Moon Wednesday afternoon could hold the SPX and DJIA up into the holiday weekend. Still, the bearish price action in gold and crude oil into Monday and further contagion in the crypto currency sector is a WARNING FLAG to us about a possible DEFLATIONARY WAVE that could hit global stock markets into the Spring of 2023 - the combination of our dominant 20-yr stock cycles and 8-yr gold cycle argue for this. If the SPX takes out 4028.84 to the upside on Tuesday, this could be short-term bullish for the stock market. After a 3-wave bounce into Friday, Bitcoin appears to be rolling over again - an undercut low below 14925 is possible this week. Crude oil tested our target of $75 early Monday but then bounced quickly to $80 - the New Moon on Wednesday could give us a spike higher. Gold tested $1734 Monday before bouncing - the tape has turned negative against the PM sector. The USD continued to rally and targets 109 in the near term.
Big Picture on Stocks (UPDATED) – The SPX may have peaked on 11/15 at 4028.84 as we got an Option Premium SELL SIGNAL on 11/14. 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 – The DJIA took out Friday's high near the open but the Russell 2000, SPX and NDX failed to do so which is bearish. Still the New Moon on Wednesday could hold up the DJIA and SPX into the holiday weekend.
Gold – Gold tested $1734 and bounced on Monday which is bearish for the PM sector.
Silver – Silver gave us an EW 5-waves down on the hourly chart and a SELL SIGNAL on Monday.
Crude Oil – Crude oil tested our target of $75 and then bounced to $80.
Dollar Index – The USD continues to rally with a target of 109.
TURNING POINT DAY
The turn window for this week is 11/21.
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