Folks,
Market Observations for the Week: The SPX was a coiled spring going into Friday’s NFP jobs report and had built up quite a bit of energy. The lower wage inflation number from the NFP jobs report sparked the SPX to a test of its 200-dma. For this week, we are expecting big volatility – the SPX could hold up into Mon/Tues before correcting into Thur/Fri. The CPI inflation report on 1/12 will be closely watched and a market catalyst. Overall, our short-term bias is for the SPX to continue its bear market rally into late Jan/early Feb before its next leg down in April 2023. Likewise, we believe that gold could extend its bear market rally into late January/early February before heading down to test its 2022 lows by April 2023. Our longer term bias past late January is that the USD is close to an important low and that the USD and US rates could reverse up together to pressure the SPX and gold below their 2022 lows. We believe that commodities are still in a bull market and that commodity stocks will be outperformers in 2023. With China re-opening from its Covid lockdown, we like crude oil on dips to $65-$70. We have allocated small amounts of our cash hoard into our favorite sectors: 1) uranium stocks, 2) gold and silver stocks, and 3) etherium for a swing position. We plan to be exiting these positions by late January/early February when we expect a resumption of the bear market in stocks. For this week, we expect a lot of volatility - the SPX will make a short-term high on 1/9-1/10 and then a short-term low on 1/12-1/13. After early February, we are looking for a resumption of the SPX bear market which should continue down into April and undercut 3000. We are looking for downside action in gold and silver on Tuesday as the USD retraces its steep decline into Monday.
1/08/23 (Commentary for Sunday) The SPX tagged 3950.57 before rolling over into the close as the market anticipated Powell's potentially hawkish comments from Sweden at 9:00 AM EDT. On Tuesday, a rebounding USD could bring more pullback in the SPX into Thursday's CPI report. If the QQQ breaks under 260, we will turn bearish, but our current bias is for an upside break out that could run up into early February. The SPX could make a trading low on 1/12-1/13 on the CPI report before turning up again. The SPX low on 12/22 at 3764 could have been an important low. The fact that the generals (AAPL and TSLA) were bloodied into last week is a sign that we are getting a tradable rally here. We did not see a SPX capitulation or a VIX blow off in 2022 but do believe that lower lows are due in Q2 of 2023 for the stock market - despite our bullishness for January. If the QQQ can stay above 260 into the 1/12-1/13 turn window, this will be bullish for a rally extension. With China reopening after its Covid lockdown, that is bullish for crude oil and natural gas – we like buying pullbacks to $70 in crude oil. We are looking for the USD to retrace its decline on Tuesday. We currently hold 70% cash, 10% uranium stocks and 20% in physical gold/silver/platinum.
Big Picture on Stocks (UPDATED) The continued liquidation of TSLA and AAPL into January argues that we will get a tradable rally in January - if the QQQ can hold above 260. However, 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. The 13-month Fibonacci step out from the 1/4/22 SPX high and the 55-wk Fibonacci step out have us looking to early February 2023 for an important turn - this could be a trading high for the SPX. We favor a high percentage of cash for capital preservation.
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 should peak in late January/early February. 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 are loading up on gold this year and global physical inventories continue to decline but higher nominal US rates could still pressure the PM sector down into Q2 2023.
Stocks – The SPX pulled back into the NFP jobs report and into the 1/6-1/9 turn window which included a Full Moon and the midpoint of Mercury retrograde and reversed higher to test its 200-dma. We could see higher highs on 1/9-1/10 before a retrace to the 1/12-1/13 turn window that includes the CPI inflation report.
Gold – Gold pulled back to test its S2 pivot at $1829 on Thursday and then reversed up hard after the NFP jobs report and tested $1875 late Friday and Sunday evening. A rebounding USD could give us a pullback on Monday.
Silver – Silver pulled back into the 1/6-1/9 turn window and then reversed hard up into the Full Moon on Friday as the USD fell - we could form a short-term high on Monday.
Bonds - Bonds reversed up after the weaker than expected wage gains in the NFP jobs report and rallied hard on Friday.
Crude Oil – Crude oil went sideways into Friday’s Full Moon - a break below $70 by Moon will have us looking to buy back CVX.
Dollar Index – The USD is coiling sideways before the NFP jobs report.
TURNING POINT DAY
The turn windows for this week are 1/9-1/10 and 1/12-1/13.