Folks,
Market Observations for the Week: The SPX continued its end of quarter blow off and only the financials were down as a group. The VIX which rallied for most of the day is warning us that the party is almost over. Even though we came close to a 90% advancing day yesterday, the majority of the NDX 100 rally has come from Big Tech - AAPL, MSFT, NVDA, META, and GOOGL. We believe that the bank failures are suggestive of a weaker economy and weaker stock market in Q2 2023 - a break below SPX 3200 is possible. In our view the SPX has now started to price in a "harder economic landing" and we continue to remain cautious and raise our cash levels - there will be a much better opportunity to buy the SPX in May/June based on our cycle count. One special trade that we are working involves a non-leveraged scale-in trade for UNG - we added a position in UNG today with nat gas < $2.0 and will add more at nat gas ~$1.77 ....seasonals are at a low here and should pick up into June/July.
3/30/23 (Commentary for Thursday) The end of quarter rally in stocks continued today as the price action continued to pull in money. Crude oil prices firmed around $75 and favorites XOM and CVX continued to rally. We have turned cautious and started raising more cash - our cycle work is calling the SPX below 3000 by May/June and we plan to take advantage then. We still contend that the SPX 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 bank failures argue for a hard landing. Our Bear Market Time Window target in Q2 from the 20-yr cycle could take us below SPX 3000. 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 should be bullish for crude oil at some point – after tagging $75 we like buying pullbacks to $70 if seen. We currently hold 67% cash, 10% VXX, 3% UNG and 20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) The latest black swan of bank failures could drive the 20-yr cycle to new bear market lows below 3000. 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.
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 could peak in March. 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 one more time into Q2 2023.
Stocks – We view today's action as an "end of quarter blow off" that is ending. We are looking for the SPX to undercut 3800 in April. However, the tape is very news driven and things could still chop around.
Gold – Gold poked above $2000 again as traders bought large amounts of GLD calls. Sentiment is extremely bullish for gold here.
Silver – Silver stocks are leading silver higher as traders hope for a run to $30.
Crude Oil – Crude oil firmed at $75 - new money is coming .back to the oil sector.
Dollar Index – The USD gave us a shallow 3-wave pullback and looks to go higher.
TURNING POINT DAY
The turn window for this week is the 3/26-3/27
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