All Star Market Timing

Folks,

Market Observations for the Week:   The SPX declined hard Monday – just a corrective bounce early Tuesday may give us that test of SPX 2700. Our current bias remains that the market has entered a bear market and that another leg down is possible into 11/27 after the recovery rally phase ends (IT MAY HAVE ENDED LAST WEDNESDAY). Still, cycles argue that we need to climb above the 11/7 highs this week or risk retesting the SPX 2603 lows going into 11/27. We need to be agile here and vigilant about rising global long rates which has the potential to drive stocks lower in the next few weeks.

11/12/18 (Commentary for Monday)  A rising USD pressured global stock markets and several commodities – crude oil declined for its 11th consecutive day and silver was pressured into multi-month lows. We believe that history will record the current one-two punch action(raising rates and QT) from the Fed as a mistake – the Fed's balance sheet should have been shrunk more under Yellen in advance of the rate hikes. If the SPX fails to eclipse last week's highs this week, this could set us up for a retest of SPX 2603 the week after Thanksgiving. All three major averages (The SPX, NDX and RUT) had two 10% corrections this year (Feb and Oct) and this correlates with a high risk 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 this week – the US bond market was closed Monday in honor of Veteran's Day. 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) before the December FOMC meeting. 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 eventually 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 at the December meeting. 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). Crude oil has now declined eleven days in a row – the longest streak in 34 years – this could have a destabilizing impact on leveraged oil investments at global banks. Gold stocks are leading the PM complex down and silver made a new multi-month low today – the GDX/GLD needs to rally hard Tuesday to prevent gold from slipping under $1200 and testing the August lows. Just a corrective bounce on Tuesday will have us shorting gold. The USD made new highs > 97.5 but the daily and weekly charts are now 5-waves up – still a rally above 98 is still possible this week.

• 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 test of SPX 2700 in the 11/12-11/13 turn window.
• Big Picture on PMs (UPDATED) -   Silver made multi-month lows and the entire PM sector is on the defensive from a rising USD. The GDX/GLD ratio needs to rally hard Tuesday or gold could make a hard break below $1195.

• Stocks – We may see a test of SPX 2700 Tuesday before a bounce. 
• Gold - The PM sector is on the defensive from a strong USD – just a corrective bounce in gold early Tuesday should be shorted for test of the August lows.
• Silver – Silver took out the 9/11 low at $13.96 – pattern symmetry suggests $13.20 as a possible 5th wave target on the daily chart.
• Crude Oil – After eleven consecutive daily declines, crude oil is just bouncing sideways Monday night – more decline to come.
• Bonds – Bonds finished 5-waves down on the hourly chart and got a 3-wave bounce into Friday – 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 made highs for the year above 97.5 – but an EW 5-waves up on the daily says that we may be close to a top.

TURNING POINT DAY

The turn window for this week is 11/12-11/13.