Folks,
Market Observations for the Week: The E-mini and the DJIA futures made all-time highs overnight but then sold off quickly after the market open. If the SPX and NDX make undercut lows early Tuesday, we will have EW 5-waves down on the hourly chart and a sell signal for those indices. The VIX cycle bottomed on Friday and chances are it could be a steep rise with all the VIX shorting that transpired the past few weeks. IT IS TIME TO GET DEFENSIVE. The SPX needs a pullback to rebalance sentiment, but with the risks to the Phase 1 trade deal with China, and the weakening economic numbers there is potential for an important top here. How we trade early this week will be critical for several markets.
12/02/19 (Commentary for Monday) We think that the SPX and the NDX made important highs last week and the VIX made an important low. The stock market needs to rebalance sentiment and it might do a lot more than that. With the VIX cycle bottoming last Friday, the market appears to have started the 5-8% correction that we have discussed in recent weeks. It is time to get defensive and raise cash. The SPX is now 200 points higher than where it was in mid-October when Trump first announced a done deal with Phase 1 – a failure to finalize the deal this month could take us back quickly to SPX 2950. It appears that the Phase 1 China trade deal has already been factored into stocks thirty times or so and the SPY, NDX and IWM are stretched well above their 200-day MA lines – Chinese anger at Trump's signing of the Congressional statement of support for Hong Kong could jeopardize the Phase 1 trade deal. In the last few weeks, we have seen irrational exuberance grip stocks like AAPL, MSFT, and DIS and are still looking for a 5-8% SPX correction to re-balance sentiment into early December. We believe that the SPX will be higher by May 2020, but the next two weeks could give us a much-needed correction. Gold tested $1459 early Friday before reversing higher in a big-range day – the bullion banks broke gold down below $1460 and then loaded up on gold stocks – in our work, we need to see gold close above the 100-day MA around $1485 to get a buy signal. The USD is falling impulsively and could be leading the SPX down which could be bullish for the PM sector.
- Big Picture on Stocks (UPDATED) – The SPX made a new high into the 11/25-11/27 New Moon Timing Window last week. An EW 5-waves down on the hourly chart for the SPX would suggest that a short-term high was made last week.
- Big Picture on PMs (UPDATED) – We may have seen an important swing low on the 11/12 Full Moon at gold $1446. We retested that low at $1453.9 on 11/25 which was the 55-day Fibonacci step out from 10/1 and the 13-day Fibonacci step out from 11/12. We believe that a sizable bounce in the PMs is close at hand.
- Stocks – The SPX made its all-time high on Wednesday and an undercut low early Tuesday will give us 5-waves down on the hourly chart and a sell signal.
- Gold – Friday was a Big Range Day for gold, and we peaked at $1473 before pulling back into early Monday. We need to close above the 100-day MA around $1485 to get a buy signal.
- Silver – Silver took out Friday's low early Monday but at least the SIL (silver stocks) are leading the PM complex higher.
- Bonds – Bonds finished 5-waves up into Wednesday and is pulling back in an EW a-b-c correction into – we are close to a big move higher.
- Crude Oil – After testing $55.50 on Friday ahead of this week's OPEC meeting, crude oil gave us a corrective bounce.
- Dollar Index – The USD is sub-dividing down impulsively and is leading the SPX lower.
TURNING POINT DAY
The turn window for this week is 12/2 and 12/6 – the NFP jobs report.