Folks,
Market Observations for the Week: The SPX opened down early Wednesday but then ramped up into the close after Chairman Powell started his press conference. We were wrong about Chairman Powell - he did not try to appear as super hawkish or try to stamp out the "animal spirits" that have crept back into the market in January. The SPX did trace out an EW 5-wave rally from 1/19 that tested the 50% retrace at 4150. Our short-term take is that the SPX could now pull back into Friday's NFP report before another rally attempt to test 4150. Our intermediate-term bias is that the SPX rally from 10/13 is a Bear Market Rally and our Time Window target is now the first half of February. 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 (tested today) 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 tested its S2-pivot support at $76 on Wednesday before bouncing. Gold is spiked to $1970 after Powell's press conference. The USD is testing 100.8 overnight Wednesday which is supporting gold.
2/01/23 (Commentary for Wednesday) The short-term SPX pattern is for a pullback into Friday's NFP report before another rally attempt. 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 hard after the start of Powell's press conference as Powell did not appear earnest in reigning in the "animal spirits" driving the SPX higher. However, our Bear Market Time Window target is the first half of February which includes a Fed Day on Wednesday, AAPL and AMZN earnings on Thursday, and a NFP jobs report on Friday. 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 100.8 Wednesday 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 half 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 the second half of February. However, 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 Fed Day weak, but then rallied strong after the start of Chairman Powell's press conference to finish an EW 5-wave rally on the hourly chart and testing out first price target of 4150. We should now see a pullback into Friday's NFP jobs report before another rally attempt.
Gold – Gold broke higher after the start of Powell's press conference and tested $1972 - will we break out here?.
Silver – Silver broke out above $24 to test its R1-resistance pivot at $24.24.
Bonds - Bonds tested 132 before starting a sideways consolidation.
Crude Oil – Crude oil pulled back to test its S2-pivot support at $76 before rebounding Wednesday night to test its Person's pivot near $77.
Dollar Index – The USD is pulling back to test 100.8 on Wednesday 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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