All Star Market Timing

Folks,

Market Observations for the Week:   The SPX gave us just a corrective bounce to 2755 and then ended up taking out Monday's low in today's turn window. We are inclined to sell another rally to SPX 2750 early Wednesday. A lot of traders are eyeing the potential "inverse H&S pattern on the SPY" on the daily chart and may be looking to buy here. Our stock cycles are negative into 11/23 and then into 11/27 – we are looking for a washout into the last week of November and then the start of a fierce X-mas rally.  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.

11/13/18 (Commentary for Tuesday)  Crude oil tagged $55 on the weekly chart and may try to bounce early Wednesday but this decline is creating a big problem for oil stocks and those net long on oil derivatives. We see crude oil testing $50 by 11/27 and the SPX retesting 2600 at the minimum. Trump's comment about antitrust action against Big Tech roiled Big Tech. 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 by 11/23. 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 but the stagflationary setup we were looking for may be dissolving with weakening crude oil, copper, and grains. 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 12 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 gold is trading poorly – the GDX/GLD needs to rally hard Wednesday to prevent gold from slipping under $1200 and testing the summer/fall lows. Gold's flight to quality rallies are weak and a break under $1195 could imply a big move down to $1120. The USD has declined in 5-waves on the hourly chart and the Brexit deal being discussed today should bring volatility to the British Pound and the Euro.

• 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 2600 by 11/27.
• 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 Wednesday or gold could make a hard break below $1195. A trade deal with China or a softer tone from the Fed on raising rates could turn this market on a dime by 11/30.

• Stocks – We may are inclined to short a test of SPX 2750 early Wednesday – we are looking for a test of SPX 2600 by 11/27. 
• Gold – Gold stocks are leading gold down here and could tag GDX 17.50 soon – gold rallies are weak, taking out $1195 could see a big fall.
• 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 12 consecutive daily declines and test of weekly support at $55, crude oil is just bouncing sideways Tuesday night – $50 is our target by 11/27.
• Bonds – Bonds finished 5-waves down on the hourly chart and got a 3-wave bounce into Tuesday – 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 we got an EW 5-waves down on the hourly chart on the Brexit deal being discussed early Wednesday in May's cabinet.

TURNING POINT DAY

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