Folks,
Market Observations for the Week: Money flowed back into tech today as financials were sold at the open and the oil stocks treaded water for most of the day, however, the SPX got enough juice from tech stocks to again test the all-time high at 3393. The SPX got off to a positive start as the E-mini futures held above the key 3319 overnight leaving just a 3-wave correction from yesterday’s selloff. However, two days in a row the SPX failed to make a new all-time high above 3393 and we were looking for a high early this week – so we are cautious here. Gold and silver rebounded pre-market and may have finished a quick, sharp 3-wave decline. After 5-waves higher to test 93.87, the USD pulled back correctively into Thursday – the DSI futures sentiment service has the USD at only 10% bullish which argues for more rally.
8/12/20 (Commentary for Wednesday) The SPX has failed for two days in a row to take out the all-time high at 3393 – this is bearish because the market breath is declining, especially in the NDX. The NDX was up 2% but the declining volume was > 40% of total volume, something that we have not seen since 3/21/00 and 3/31/00 – this is another reason to turn cautious here. The NDX declined in 5-waves on the hourly chart from last week’s high and is rallying back in just 3-waves – this is also bearish. Crude oil may be topping out here – another caution sign. The XLE underperformed today when the SPX tested highs – another sign of weakness. Gold and silver rallied back hard in the pre-market on Wednesday and we may have seen a correction low. The USD finished a 5-wave rally to 93.7 before a corrective pullback in – extreme bearish sentiment in the USD argues for more rally.
Big Picture on Stocks (UPDATED) – The SPX price action from the high of January 2018 to the low of March 2020 was a large Running B-Wave correction in Elliott Wave parlance – we are currently in a final 5th wave higher that should end the bull market from March 2009 and reach 3500+. Both the DJIA and the DJTA took out their June highs and that argues for the SPX to test the all-time high at 3393 this week.
Big Picture on PMs (UPDATED) – Gold started a correction from the all-time high at $2089.2 last week and the break below “the symmetry correction target at $1996” argued for the hard fall that turned into a $200 route. The gold stocks led the correction and should be watched for a reversal signature this week.
- Stocks – On back-to-back days the SPX tested the February all-time high at 3393 and failed to get above it – this may be a double top forming and the NDX declined in 5-waves on the hourly chart last week and rallied in in just 3-waves – this is bearish.
- Gold – Gold rallied back in the pre-market from a $200 rout – we may have made a correction low. We’re watching the GDX for a possible reversal signal on Thursday.
- Silver – Silver tested $30 last week and then made a B-Wave test of that high at $29.55 on Monday. On Tuesday, we got a fierce C-Wave down that gave us a quick 20% decline. We may have made a correction low.
- Bonds – Bonds continue to fall impulsively and that is boosting long rates which helped bank stocks today.
- Crude Oil – Crude oil may be rolling over here and the rally in oil stocks may be over.
- Dollar Index – The USD rallied in 5-waves to 93.7 and then pulled back correctively – extreme negative sentiment argues for more rally.
TURNING POINT DAY
The turn window for this week is 8/10.
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