Folks,
Market Observations for the Week: Money flowed to "economic recovery stocks" today and the SPX got to with 12 points of the all-time high at 3393 – in fact, we may have made an important high near our 8/7-8/10 high-energy turn window. Late in the day, we sold off hard into the close and if we trace out 5-waves down on the E-mini hourly overnight, we could register an important short-term high. The XLF (financial stocks), XLE (oil stocks) and the XLI (industrial stocks) were strong today after the NDX rolled over early, but they too sold off into the close. Gold and silver sold off hard after news of a Russian COVID-19 – gold is down nearly $200 from last week's high overnight. The USD rallied impulsively Tuesday and is testing 94 overnight - this has pressured the PM sector even more.
8/11/20 (Commentary for Tuesday) Once again money flowed to the economic recovery stocks as banks, oils and industrials all opened strong. The SPX got within 12 points of the all-time high at 3393 as money once again flowed from momentum tech stocks to cyclical value plays (oil stocks, bank stocks, and industrial stocks). However, the NQ futures have declined in 5-waves on the hourly chart from last week's high and if the E-mini declines in 5-waves into Wednesday, we will have confirmation of a short-term top in the stock market. We need to watch the pre-market action early Wednesday on the E-mini – taking out 3319 will confirm a sell signal. Crude oil finished an EW a-b-c correction on the hourly chart on Friday and may be coiling for another run up to test $43.5. The big-cap oils, XOM and CVX, made double bottoms on 7/31 and are rotating into a leadership position. Gold stocks led gold down in the current correction from last week – we got a fierce C-Wave down in gold today that ran a lot of trading stops – we missed the short sale late yesterday. The USD continues to rally impulsively and we are testing 94 overnight – more pressure on the PM sector.
Big Picture on Stocks (UPDATED) – The SPX price action from the high of January 2018 to the low of March 2020 was a large Running B-Wave correction in Elliott Wave parlance – we are currently in a final 5th wave higher that should end the bull market from March 2009 and reach 3500+. Both the DJIA and the DJTA took out their June highs and that argues for the SPX to test the all-time high at 3393 soon.
Big Picture on PMs (UPDATED) – Gold started a correction from the all-time high at $2089.2 last week and the break below "the symmetry correction target at $1996" argued for the hard fall that we got late in the day. The gold stocks led the correction and should be watched for a reversal signature this week.
- Stocks –The SPX spiked to 3381 as the oils stocks (XOM and CVX) and industrials (CAT) rallied hard into the afternoon before a sell off into the close. WARNING – if the E-mini gives us a 5-wave decline on the hourly chart into early Wednesday(an undercut of 3319), this will give us a SELL SIGNAL in our work and have us raising cash.
- Gold – Gold is giving us a fierce correction from the all-time high Thursday at 2089.2 – gold is down nearly $200 from last week's all-time high. We're watching the GDX for a possible reversal signal on Wednesday/Thursday.
- Silver – Silver tested $30 last week and then made a B-Wave test of that high at $29.55 on Monday. On Tuesday, we got a fierce C-Wave down that is giving us a >15% pullback so far.
- Bonds – Bonds continue to fall impulsively and that is boosting long rates which helped bank stocks today.
- Crude Oil - Crude oil finished an EW a-b-c correction on Friday and is coiling for a test of $43.5 by Friday – we prefer trading XOM and CVX here.
- Dollar Index – The USD continues to rally impulsively and is testing 94 overnight.
TURNING POINT DAY
The turn window for this week is 8/10.