Folks,
Market Observations for the Week: The SPX and NDX did power higher on Monday in the New Moon Timing Window and the SPX did close above its down trendline. However, the Tuesday after a monthly expiration is a turn window in our work and we expect a SPX correction to start tomorrow and the pattern of this pullback will enlighten us. The SPX gave us an EW 5-wave advance from the important 12/22 low today and just a 3-wave pullback to 1/25, the 34-day Fibonacci step out from 12/22, would be ideal for a reversal higher. Crude oil traced out a "cup and handle" pattern going into the New Moon - we could see bullish action on Tuesday. Silver pulled back early but retraced into the close while gold and gold stocks held up pretty well - we expect more pullback in gold going into Comex gold expiration on 1/24-1/25. The key chart here is still the USD and we are looking for an important low early this week.
1/23/23 (Commentary for Monday) The SPX and the NDX continued their rallies on Monday and the SPX may have finished an EW 5-wave rally from 12/22 and closed above its downtrend line from 1/4/22. On Tuesday, just a 3-wave SPX correction into 1/25, the 34-day Fibonacci step out from 12/22, would be a bullish setup to go higher. Uranus turned DIRECT on 1/22 and that added to the upside volatility on Monday. This week is a big earnings week and should also be a market catalyst. The SPX rallied into our 1/24 turn window and should be bearish for a pullback on Tuesday. The US economic data came in weaker across the board last week and threatened the "soft economic landing" idea that traders have clung to recently - can stock earnings reports this week turn this narrative around? 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. 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 - just a 3-wave pullback into 1/25 would be bullish for more rally into the 2/1 Fed Minutes. 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 late January/early February 2023 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 – Powered by Uranus turning DIRECT on 1/22, the SPX rallied hard Monday in the New Moon Timing Window. However, the Tuesday after a monthly expiration is a turn window and we expect a SPX pullback to start Tuesday.
Gold – We could see more gold correction into Comex gold option expiration on 1/24-1/25.
Silver – Silver tried to lead the PM sector down today, but we saw some retracement into the close. We are expecting more correction into 1/24-1/25.
Bonds - Bonds have given us 5-waves down on the hourly chart.
Crude Oil – Crude oil is tracing out a "cup and handle pattern" on the hourly chart - bullish for early in the week.
Dollar Index – Looking for the USD to make an undercut low on Tuesday.
TURNING POINT DAY
The turn window for this week is 1/24.
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