Folks,
Market Observations for the Week: For the last two trades, the SPX sold off early only to rally into the close. A weakening USD helped both the SPX and PM sector rally back into the close. 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 Our short-term bias is for more rally into early next week before the Fed Day. Crude oil rallied to test its R2-resistance pivot at $82 but then corrected for the rest of the day. Gold sold off early, but did not follow the SPX higher into the close which is a concern. However, gold is trying to rally back on Thursday night. The USD made an undercut low pre-market and bounced back higher during the day.
1/26/23 (Commentary for Thursday) Good earnings or not, traders are starting to chase tech stocks higher again and the SPX looks capable of testing resistance at 4100 into early next week. 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". into the close. The market rallied on the strong economic reports that came out pre-market today and money flowed into the chip stocks. Traders interpreted the strong economic numbers as more supporting to their "soft economic landing narrative". 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 made an undercut low to 101.50 but bounced higher. 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 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 – The SPX opened weak but rallied into a new rally high at 4061.57 into the close. We sold our AAPL near the open.
Gold – Gold pulled back to test Tuesday's low at $1917 before rebounding, but it underperformed the SPX going into the close.
Silver – SILJ is leading silver higher here which is bullish.
Bonds - Bonds have given us 5-waves down on the hourly chart and the bounce from Monday still looks corrective.
Crude Oil – Crude oil fell off on a big build in inventories but is still tracing out a "cup and handle pattern" on the hourly chart - bullish for a rally.
Dollar Index – The USD made at undercut low at 101.50 before rebounding.
TURNING POINT DAY
The turn window for this week is 1/24.
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