Folks,
Market Observations for the Week: The SPX close above the 50-dma on Friday on a week of bullish action where the SPX made early lows in the session and managed to rally into the close. However, 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 next 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 Our short-term bias is for more SPX rally into Monday before the Fed Day. Crude oil declined to test its S2-support pivot at $79 and we are looking for a bounce into Monday. Gold tested $1952 early Friday and then pulled back to test its Person's pivot at $1935 before bouncing into the close - we are looking for strength into early Monday. the SPX higher into the close which is a concern. The USD made an undercut low last week at 101.50 on Thursday and is trying to rebound .
1/29/23 (Commentary for Sunday) 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 into early Monday. 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 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 rally into Monday before the 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 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 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 weak on Friday but rallied to test the 12/13 high at 4098. We sold our URA, UUUU and CCJ calls.
Gold – Gold tested $1952 early Friday and then pulled back to its Person's pivot before rallying to test its R1-resistance pivot at 1946 before the close.
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 reversing higher Sunday evening.
Dollar Index – The USD has rallied correctively from its 101.50 low last week and could make another undercut low into early next week.
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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