Folks,
Market Observations for the Week: The SPX opened down Monday but then tried a rally that failed. Seasonality for a Fed Week usually involves a SPX pullback into the Wednesday Fed Day. Our 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 $77.52 overnight Monday. Gold tested $1952 early Friday and then pulled back again to test its S1-support pivot at $1935 on Monday night. Like the SPX, gold is giving us a seasonal pullback into the Wednesday Fed Day while the GDX gives us an EW a-b-c correction. The USD is bouncing to 102.31 on Monday night which is pressuring the PM sector down.
1/30/23 (Commentary for Monday) Led by the NDX, the SPX rallied to close above its diagonal resistance and its 50-dma and looks capable of testing resistance at 4100 sometime this week if the SPX can navigate Fed Day okay. 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 strong economic reports that came out pre-market last week and money flowed into the chip stocks. 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's Fed Day. 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 bounced higher to 102.31 Monday night which is pressuring 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 Monday weak, then tried to bounce, and then declined into the close in what looks like a seasonal pattern for Fed Week.
Gold – Gold tested $1952 early Friday and again pulled back to test $1935 Monday evening.
Silver – Silver tested its S2-support pivot before rallying out and testing $23.73 Sunday night.
Bonds - Bonds may have finished an EW a-b-c correction into Friday on the hourly chart.
Crude Oil – Crude oil fell on Friday to test its S2-pivot support at $79 and is now testing $77.52 Monday evening.
Dollar Index – The USD has rallied correctively from its 101.50 low last week and is testing 102.31 Monday 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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