Folks,
Market Observations for the Week: More banking fears from First Republic knocked the market down pre-market and we ended the session with a big down day. However, positive earnings from MSFT and GOOGL could rebound the market early Wednesday. The SPX has given us the 100 point SPX correction that we anticipated and since the Tuesday after a monthly option expiration is a turning point in our work, we are looking for a rebound rally early Wednesday. With the renewed banking fears the markets were hit with a deflationary tone and most commodities like gold, crude oil and wheat were hit. Gold opened the day by testing Monday's low near $1985 and then bouncing into the close - we are still looking for more corrective action going into the May 2-3 Fed meeting. Even with rates down, the USD rallied to test 101.9 and this did pressure gold early.
4/25/23 (Commentary for Tuesday) The 100 point SPX correction from last week did hit our target and we could see a rebound start early Wednesday. After coiling for three days, the VIX and VXX had a sustained rally day after the renewed banking fears. We found the market too difficult to short here in advance of key Big Tech earnings and so just focused on scaling into more wheat (WEAT). Gold and silver rebounded from an undercut low and bounced into the close - with the universal bullishness for the PM sector, we could see more corrective action going into the May 2-3 Fed meeting. Our cycle work is calling the SPX below 3500 by late June but the bulls are still in control in the short term. We still contend that the SPX market rally from October 13 is a Bear Market Rally that could make new lows in late Q2 2023 - we are not in the "this is a new bull market camp" - the bank failures argue for a hard economic landing as banks panic and tighten lending standards. Our Bear Market Time Window target in Q2 from the 20-yr cycle could take us for a test of SPX 3500 by late June. 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 – crude oil gave us just a corrective pullback to $77 in Friday's New Moon Timing Window which should give us a bounce. Our current positions are 10% natural gas and wheat, 70% cash and 20% physical gold, silver and platinum.
Big Picture on Stocks (UPDATED) The latest black swan of bank failures could drive the 20-yr cycle to a test of SPX 3500 by June. The SPX could still give us a 20%-50% correction in 2023 as the 20-yr stock cycle low bottoms and the US economy slows into a recession.
Big Picture on PMs (UPDATED) – Gold gave us an all-time high monthly and end-of-quarter price in March - this is a Sign of Strength - if gold can hold above $1900 going into the May 3 Fed statement, we could see another test of the highs. 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 late Q2 2023.
Stocks – The SPX has given us a 100 point correction so far but Big Tech earnings this week will determine the extent of the correction. Market breadth has been deteriorating but the bulls are still in control. The SPX did make a low on today's turning point day and we are looking for a rebound early Wednesday.
Gold – Everybody seems bullish on gold here and that concerns us and the 3-wave bounce into the New Moon argues for more corrective action this week but holding above $1900 into the May 2-3 will be bullish for post-Fed gains.
Silver – Silver stocks are trying to lead silver lower - more corrective action is possible this week.
Crude Oil – Crude oil corrected to $77 last week into Friday's New Moon - we are looking for a rebound in the coming week.
Dollar Index – The USD found support near 100 last week and tested 101.9 on Tuesday.
TURNING POINT DAY
The turn window for this week is 4/24-4/25.
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