Folks,
Market Observations for the Week: The SPX gave us another big rally day and its 5th wave on the hourly chart continues to sub-divide higher. The futures held up pretty well after key earnings from AAPL, AMZN and GOOGL and the market could be poised to rally more after tomorrow's NFP jobs report. However, our Option Premium Ratio indicator has given us a major sell signal like on 8/15/22 and it is possible that we could be topping out by Monday. 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 S1-pivot support at $75 and bounced - we may be starting a rally into the 2/3-2/6 Full Moon Timing Window. Gold topped out at $1975.2 and started a pullback into the 12/5 Full Moon. The USD may have made a important low at 100.8 and is reversing higher.
2/02/23 (Commentary for Thursday) The SPX continued to extend its rally from Tuesday as we approach Friday's NFP jobs report. The futures held up well after key earnings from AAPL, AMZN and GOOGL however, our Option Premium Ratio indicator gave us a major sell signal like on 8/15/22 which argues for an important top by Monday. We still contend 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". Our Bear Market Time Window target is the first half of February which included 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 made a low at 100.8 on Wednesday night and is bouncing which is pressuring the PM sector. 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 first 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 continued to extend its rally from Wednesday. However, our Option Premium Ratio gave us a major sell signal like it did on 8/15/22 and argues for a major top by Monday.
Gold – Gold started a pullback into the 2/5 Full Moon after the USD made a low at 100.8.
Silver – Silver tested resistance at $24.75 before pulling back on the stronger USD.
Bonds - Bonds tested 132 before starting a sideways consolidation.
Crude Oil – Crude oil pulled back to test its Si-pivot support at $75 before rebounding.
Dollar Index – The USD made a low at 100.8 and is rebounding.
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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