Folks,
Market Observations for the Week: For the third day in a row the SPX stalled below the February all-time high at 3393 – bulls say that we are just coiling for a powerful move higher and bears point out that market breadth is waning. Either way, Friday may give us a resolution to the near-term trend. Gold and silver rebounded hard and may have finished a quick, sharp 3-wave correction late Tuesday – how we trade on Friday will determine the short-term trend. 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.
8/13/20 (Commentary for Thursday) The SPX has failed for three days in a row to take out the all-time high at 3393 – the bulls say that we are coiling for a strong move higher and the bears argue that the market breath is declining, especially in the NDX. How we trade on Friday should resolve the direction of the short-term trend. The NDX was up 2% on Wednesday 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 rallied back in just 3-waves into Thursday – this is also bearish unless we take out the NDX high from last week at 11276.3. Crude oil is tracing out a wedge here – a break higher is still possible. The financials (XLF) and oil stocks (XLE) both underperformed today, but the SPX still held up – the trade on Friday should bring more clarity on the short-term trend. Gold and silver rallied back hard on Thursday and we may have seen a correction low late Tuesday. The USD finished a 5-wave rally to 93.7 before a corrective pullback into Thursday – 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 – For three days, the SPX tested the February all-time high at 3393 and failed to get above it – the trade on Friday should resolve the short-term trend. We are hedged for a break up or break down. The NYSE advance/decline line is still climbing higher and that is bullish.
- Gold – Gold rallied back hard on Thursday after a $200 rout on Tuesday – we may have seen a correction low. We’re watching the GDX for a possible reversal signal higher on Friday.
- 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 are near 5-waves down on the hourly chart and could get a bounce on Friday.
- Crude Oil – Crude oil is forming a wedge on the hourly chart that looks to break higher.
- Dollar Index – The USD rallied in 5-waves to 93.7 and then pulled back correctively into Thursday – extreme negative sentiment argues for more rally.
TURNING POINT DAY
The turn window for this week is 8/10.
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