Folks,
Market Observations for the Week: The SPX ended its 3-day advance today as the 10-yr US rate rallied and pressured tech stocks. Rising crude oil prices continued to boost XOM and CVX. 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. The flight to quality in tech stocks like MSFT and NVDA remains suspicious to us.
3/28/23 (Commentary for Tuesday) Rising US rates pressured tech stocks down and ended the 3-day SPX advance. Bounces in oil favorites XOM and CVX and helped market breath expand beyond the banking sector as crude oil remained firm. 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 $64 we like buying pullbacks below $70 if seen. We currently hold 70% cash, 10% VXX 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 more market chop that ended the 3-day rally and 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 rallied into today's Comex gold expiration and the GDX tested historic resistance at 32.32.
Silver – Silver stocks are leading silver higher.
Crude Oil – Crude oil held $73 - the XLE confirmed an important low.
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
.
Comments