We are still on travel with limited access to the internet, so our reports will be brief.
Folks,
Market Observations for the Week: The SPX reversed higher, as we had predicted, in the 11/8-11/10 turn window. For this week, how we navigate the 34-day Fibonacci step out on 11/16 will be key. The explosive rally on Thursday was Wave 3 of C higher and may have found resistance at SPX 4000 on Friday. Just a 3-wave SPX correction into 11/16, the 34-day Fibonacci step out, would be a bullish setup for higher prices this week and perhaps a test of the 200-dms at SPX 4050. 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 lower lows to make in the intermediate term.
11/13/22 (Commentary for Sunday) The cooler than expected CPI report launched a massive short-covering rally on Thursday and gave us the biggest rally in the Nasdaq in years that continued into Friday. 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. The PPI inflation report on 11/15 will be a check on wholesale inflation and could give us a correction into the 11/16 turn window. For Monday, more concerns about the bailout of FTX could bring us back some on the SPX in a 4th wave correction. 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 ended the 3rd wave of C late Friday. After a 3-wave bounce on Bitcoin on Thursday, it appears to be rolling over for an undercut low below 14925 late Sunday. Crude oil continues to bounce into Sunday evening and is testing $90. Gold is testing $1776 Sunday night. The USD is correcting hard in a C-Wave down of an EW a-b-c correction.
Big Picture on Stocks (UPDATED) – The Thursday/Friday stock 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 rally continued on Friday and tested .618 resistance near 4000. A test of the 200-dma near SPX 4050 is expected this week.
Gold – Gold is testing $1776 Sunday evening and we have another Big Range Day on Monday.
Silver – Silver is doing a 3-wave correction that could test $21.38.
Crude Oil – Crude oil is testing $90 Sunday evening.
Dollar Index – The USD is coming down hard in a C-Wave that has more to go.
TURNING POINT DAY
The turn window for this week is 11/16 - the 34-day Fibonacci step out from the 10/13 low.
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