All Star Market Timing

Folks,

Market Observations for the Week:   The 13-Day Fibonacci step out from the 10/3 DJIA high falls on Tuesday and it could be a high or low. Our bias: the rally from 10/11 looks like a 4th wave bounce to us on the hourly chart. We need to see more of a “panic signature” in the $TRIN and $VIX early Tuesday to get us to trade a sharp snapback rally in the SPY – $TRIN > 2.5 and $VIX > 30 . We are expecting intense volatility into December. We are still amazed at the “complacency” in some of our indicators – a 20% decline in the SPX could come very quickly.

10/15/18 (Commentary for Monday)  The rally from Thursday looks like a 4th wave bounce to us and that implies that we need a 5th wave down to test SPX 2700 before a more substantial corrective rally – we may see that on Tuesday. If Tuesday does come in as a high, that could be a shorting opportunity – we’ll see what tomorrow’s tape brings. Our Option Premium Ratio is testing 5-yr highs and the 52-wk new high list has been in single digits for three days – this implies a sharp snapback rally soon in an ongoing downtrend. We believe that the 2016-2018 bull phase has come to an end and a correction of that 1100 SPX points move could be 600-800 points – this would signal a growth slowdown in the US economy into the spring – Q3 earnings guidance could validate this idea. The DJIA made a new all-time high on 10/3 and ended a broadening top formation by several major indices. We now believe that we could see a 20% SPX correction by early December or at least a test of SPX 2435, the February low. In the short term, we may see a “pattern completion” target of SPX 2700 by early Tuesday – but we may not get it. We have harped on declining financial liquidity for months here and believe that this is setting us up for a volatile ride into yearend for global markets. The strongest US economy that we have monitored/traded was in Q3 of 1987 where GDP growth was in the 5-6% – this did not inoculate stocks against the Crash of 1987 because the US govt 30-yr rate was spiking from 8-10% – this rapid spike in rates caused a chaotic re-pricing of US financial markets – we could POSSIBLY see a SIMILAR THEME going into year end. We believe that crude oil has made highs for the year – a 5th wave down below $70.5 on the hourly would confirm that idea. Gold has started a 3rd wave rally from the Dec 2015 bear market lows – a sharp, short-covering rally should propel gold above $1300 by November, especially if the Fed softens its rate-hike posture in the FOMC minutes on Wednesday. The USD declined in 5-waves on the hourly and is bouncing correctively – this is bearish but bullish for the PM sector.

   ·Big Picture on Stocks (UPDATED) –  The SPX broke down in an EW 3rd wave down on the daily chart after the passing of the 10/8-10/9 New Moon Timing Window. We believe that the SPX is correcting the 1100 SPX rally from 2/8/16 and the SPX could decline 600-800 points by December. In the short-term, we could see a sharp snapback rally if the SPX makes a divergent test of SPX 2700 on Tuesday.

   ·Big Picture on PMs (UPDATED) –   We believe that gold has started a 3rd wave higher on the daily chart from the Dec 2015 bear market lows. It took a global stock market panic to give gold a breakout above $1221 – we’re looking for a sharp, short-covering rally and a quick move over $1300 by November.

• Stocks – If we get a divergent test of SPX 2700 early Tuesday, we will try some QQQ calls for a quick snapback rally. Look for the panic signatures of $VIX > 30 and $TRIN > 2.5 for a trade set up. If Tuesday comes in as a high, we may look to short near the end of the day.
  
• Gold – It took a stock market panic to give gold a breakout above $1221 but a sharp, short-covering rally should take it from here and give us a quick run over $1300 by November. We are looking to buy dips. The language of the FOMC minutes on Wednesday should be a catalyst.
  
• Silver – We’re looking for silver to test $15 this week – buy dips for an imminent, short-covering rally.
  
• Crude Oil – Our bias is that we have seen the high for the year for crude oil – a 5th wave down below $70.50 on the hourly would confirm this.
  
• Bonds – Bonds have rallied in 5-waves on the hourly and then just a 3-wave sideways correction – we’re looking for more rally on Tuesday.
  
• Dollar Index – The USD gave us 5-waves down on the hourly chart – the market is betting that the Fed will be forced to slow down its rate-hiking campaign.
  

TURNING POINT DAY

The turn window for this week is 10/15-10/16.