All Star Market Timing

Folks,

Market Observations for the Week:   The SPX gave us a mild consolidation day today after the FOMC minutes which showed the Fed resolute in its plans to raise rates. Overall though, our current bias remains that the market has entered a bear market phase and that a another leg down is possible into 11/27 after the recovery rally phase ends – BUT WE ARE NOT SET IN STONE. It is possible that the price action from the late 1/26 high to the 10/29 low was a large Wave 4 correction and stocks may melt up into year end. We need to be agile here and vigilant about the bond market action which has the potential to drive stocks lower in the next few weeks.

11/08/18 (Commentary for Thursday)  We got just a mild consolidation day in the SPX today after the fierce rally up to SPX 2813.89 – the 61.8% retracement on Wednesday. The New Moon today really accelerated the rally on Wednesday and we may have seen the high for the week. Overall, our bias remains that we started a B-Wave bounce on 10/29 that can hold up until 11/12-11/13 before falling in a C-Wave down that could test SPX 2532 by 11/27. All three major averages (The SPX, NDX and RUT) had two 10% corrections this year (Feb and Oct) and this correlates with a high chance of a recession going into 2019 or at least a growth slowdown. We believe that the next leg down could be driven by a break out in global long rates (up to 3.5% on the US Ten Year Bond) that could happen soon. We suspect that there could be a crisis in the European banking system (Deutshe Bank?) that could force the Fed's hand with an emergency rate cut or liquidity injection (QE). After the recovery rally ends around 11/12-11/13, we are looking for the next possible leg up in the US Ten Year to 3.5% and that could lead the next leg down in stocks into late November. We believe that the October stock decline is signaling a growth slowdown in the US economy that could last into Q2 2019 while input costs appear to be rising across the board – a stagflationary economy may be at hand which should favor the PM complex. 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. We expect late November to bring more volatility to global markets and weakening US economic numbers that could result in the Fed pausing on raising rates. In fact, the Fed may have to react to a global financial panic with an emergency rate cut (ala Greenspan in Oct 1998) or a liquidity injection (QE). 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 and into the Spring – in our opinion, the one-two punch of Fed rate hikes and Quantitative Tightening (QT) is too much for the global markets to digest at one time. Crude oil continues to sub-divide down – projections to $49 are now being made. Gold stocks finished a 5-wave rally from 11/1 into Monday's 55-day Fibonacci step out from the 9/11 – we got a decline into the close after the FOMC minutes. How we trade early Friday is key to the short-term trend for the PM sector – it is do or die for gold here – a failure to reverse higher early Friday may have us shorting gold. The USD is rallying to test 97 and the Euro looks like it is breaking down – how we trade early Friday is key.

• Big Picture on Stocks (UPDATED) -  We believe that the SPX is correcting the 1100 SPX rally from 2/8/16 and the SPX could decline 600-800 points by late November with some SHARP RETRACEMENT RALLIES along the way. In the short-term, we expect a tradable low early Wednesday after the elections and a rally to test SPX 2820 by 11/12-11/13.
• Big Picture on PMs (UPDATED) -   Gold stocks finished a 5-wave rally pattern from 11/1 on the hourly chart on the 55-day Fibonacci step out from 9/11 – just a corrective decline the 11/7 New Moon and 11/8 FOMC minutes would be bullish.

• Stocks – Today was a mild consolidation day for the SPX after the huge rally on Wednesday.  The rally into the New Moon on Wednesday could have marked a high for the week. We're expecting the relief rally to hold up into 11/12-11/13 before a C-Wave down into 11/27 but WE ARE NOT SET IN STONE. It would take a breakout in the 10-yr US bond rate to spark another stock sell off – we'll see.  
• Gold - The GDX finished a 5-wave rally from 11/1 into Monday's 55-day Fibonacci step out from 9/11 – we may have seen an EW a-b-c pattern completion today after the FOMC minutes. We need to see a reversal higher early Friday in GDX to remain short-term bullish.
• Silver – Silver completed a wave 2 pattern on the daily chart on 11/1 and reversed up strong – we just got a 3-wave pullback into today's close on the hourly. We are looking for a reversal higher early Friday.
• Crude Oil – Crude oil continues to sub-divide down – and bringing down inflationary expectations – the gold/crude oil ratio is breaking out and supports a rally in gold.
• Bonds – Bonds finished 5-waves down on the hourly chart and got a 3-wave bounce into Wednesday that is being retraced – are we seeing a double top in US Ten year bond rates at 3.25% or a potential break out to 3.5% that could kick off another selling wave in stocks?.
• Dollar Index – The USD rallied hard after the FOMC minutes and looks like it wants to break above 97 – this is pressuring the PM sector.

TURNING POINT DAY

The turn window for this week is 11/6-11/7, which includes the New Moon Timing Window.