Folks,
Market Observations for the Week The SPX rallied for a second day and we could get more rally into Friday's New Moon – a X-mas rally. Larry Williams, who has done extensive seasonal work on December market seasonality, argues that tomorrow would be a good time to buy for the holiday rally. A .382 retracement of the SPX decline from 12/13 would target SPX 3925. The SPX made an important double top on 12/13 (in our 12/13-12/14 turn window) and started a big move down (led by large Dark Pool volume on the 12/14 Fed Day). We view the SPX high on 12/13 as an Intermediate Cycle High(ICH) and we got an EW 5-waves down to SPX 3795 early Tuesday into our 12/20 turn window. The USD continues be back test its downtrend line after the spike higher in the Yen – this has boosted the PM sector. We still recommend 80% cash and 20% in physical gold/silver/platinum, but we do have a modest trading position in gold and silver stocks going into the 12/23-12/26 New Moon Timing Window.
12/21/22 (Commentary for Wednesday) The SPX did give us an EW 5-waves down to 3795 into early Tuesday and we started a retracement rally that could carry as far as the New Moon on Friday and reach 3925-3952 or so. In our work, the Tuesday after a monthly option expiration is a "turning point day" and we did see a reversal higher early Tuesday that continued into today. Our short-term bias is to buy early weakness on Thursday for a bounce into Friday's New Moon. Jim Cramer also argued from Larry William's work that a X-mas rally could start on Thursday – we need to watch this closely because some cycles argue for more stock weakness into Friday. Crude oil tested $78.5 today but still looks corrective to us but there is still a chance for a spike higher into the New Moon on Friday. Gold continued its test of the $1836 high and the GDX continued its outperformance. We have not seen a SPX capitulation or a VIX blow off so far in 2022 but do believe that lower lows are due in Q1 2023 for the stock market. The USD continues to back test its downtrend line today after the spike up in the Yen Monday evening – how the USD trades on Thursday will be very important.
Big Picture on Stocks (UPDATED) – From the 12/13 4100 high, the SPX gave us an EW 5-waves down on the hourly chart into early Tuesday at 3795 which is a SELL SIGNAL. The SPX could still give us a 20%-50% correction by Q1 2023 – down to SPX 2400 – as the 20-yr stock cycle low bottoms and the US economy slows into a recession. The 13-month Fibonacci step out from the 1/4/22 SPX high and the 55-wk Fibonacci step out have us looking to February for an important low. We favor a high percentage of cash for capital preservation.
Big Picture on PMs (UPDATED) – We need to change our short-term bias on the GDX to bullish – the 5-waves down into Monday's close was the end of a "Running B-Wave" correction and we are now rallying into the 12/23 New Moon. We still expect gold stocks to test their COVID lows by Fed/March 2023 as the 8-yr gold cycle and the 20-yr stock market cycle converge on the downside. Central bankers are loading up on gold this year and global physical inventories continue to decline but higher nominal US rates could still pressure the PM sector down into Jan/Feb.
Stocks – Our bias is that the SPX started the next bear leg down after double-testing 4100 on the 12/13 open and ending 5-waves down at SPX 3795 early Tuesday – on our turn window. We expect a retracement rally to 3925-3955 by Friday's New Moon.
Gold – Gold continues to coil under the $1836 high from 12/13 – we could see a spike higher into the 12/23 New Moon.
Silver – Silver continues to hold up near its recent high of $24.52 and could also spike higher into Friday's New Moon.
Bonds – Bonds are giving us a 3-wave corrective bounce from Monday evening.
Crude Oil – Crude oil tested $78.5 on Wednesday and could spike higher into the 12/23 New Moon.
Dollar Index – The USD continued to back test its downtrend line today – how we trade on Thursday will be crucial for gold and the SPX.
TURNING POINT DAY
The turn windows for this week are 12/20 and 12/23, the New Moon.
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