Folks,
Market Observations for the Week: The SPX opened down early Tuesday but then ramped up into the close. Our short-term take is that the SPX made a high on Friday at 4094 and today was a B-Wave test at 4077. We are now looking for at least a C-Wave down after the Fed minutes that could take us down below SPX 4000. Our Fed bias is that Powell may try to come down hard on the SPX rally after signs of excess are showing up in some meme and tech stocks again. Our intermediate-term bias is that the SPX rally from 10/13 is a Bear Market Rally and our Time Window target is the first week of February where we have a Fed Day on Wednesday and a NFP jobs report on Friday. We also have key earnings from AAPL and AMZN on Thursday this week. Our price target for this Bear Market rally is the 50% retracement area around 4150 or the 61.8% retracement around 4300. The NDX has been leading the market higher and has outperformed both the SPX and DJIA -investors have moved from the industrial stocks back to chasing technology stocks again like AAPL Crude oil is testing $79.26 overnight Tuesday. Gold is coiling around $1943 Tuesday evening. The USD is pulling back to test 102 Tuesday night which is supporting gold.
1/31/23 (Commentary for Tuesday) The short-term SPX pattern argues for a C-Wave down that could undercut 4000 on Wednesday/Thursday. We still believe that the market rally from October 13 is a Bear Market Rally that will make new lows in Q2 2023 - we are not in the "this is a new bull market camp". The market rallied on the weaker than expected ECI (Employee Cost Index) which the Fed watches closely. However, our Bear Market Time Window target is the first week of February which includes a Fed Day on Wednesday and a NFP jobs report on Friday. Our short-term bias is for more SPX seasonal retracement into Wednesday/Thursday that could undercut 4000. We did not see a SPX capitulation or a VIX blow off in 2022 but do believe that lower SPX lows are due in Q2 of 2023 for the stock market. The China reopening after its Covid lockdown is bullish for crude oil – we like buying pullbacks below $70 if seen. The USD is pulling back to test 102 Tuesday night which is supporting gold. We currently hold 70% cash, 10% uranium stocks and 20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) The SPX rallied in an EW 5-wave pattern from 12/22 into 1/23 - the 3-wave pullback into 1/25 was bullish for more rally into Fed Week. However, the SPX could still give us a 20%-50% correction by Q2 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 the first week of February for an important turn - this should be a trading high for the SPX. We favor a high percentage of cash for capital preservation.
Big Picture on PMs (UPDATED) – We consider the rally from 10/13/22 as a bear market rally in gold, silver and the PM stocks that should peak in late January/early February. We still expect gold stocks to test their COVID lows sometime in Q2 of 2023 as the 8-yr gold cycle and the 20-yr stock market cycle converge on the downside. Central bankers loaded up on gold last year and global physical inventories continue to decline but higher nominal US rates could still pressure the PM sector down into Q2 2023.
Stocks – The SPX opened Tuesday weak, but then rallied into the close to make a B-Wave test of the 1/27 high at 4094. We should now see a C-Wave down to undercut 4000 into Wednesday/Thursday.
Gold – Gold is coiling sideways around $1943 on Tuesday night as the USD weakens.
Silver – Silver is coiling around $23.80 Tuesday night.
Bonds - Bonds may have finished an EW a-b-c correction into Friday on the hourly chart.
Crude Oil – Crude oil pulled back to test its S1-pivot support at $76 before rebounding to test its Person's pivot at $78.75.
Dollar Index – The USD is pulling back to test 102 Tuesday evening.
TURNING POINT DAY
The turn windows for this week are the 2/1 Fed Day and the NFP jobs report on 2/3.
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