HAPPY HOLIDAYS TO ALL!
Folks,
Market Observations for the Week Did a X-mas rally start at SPX 3764 on Thursday? The 21-day Fibonacci step out came in on 12/22 and we formed a low. The SPX pulled back into the 12/22-12/23 New Moon Timing Window on Thursday and reversed higher. We could continue this rally early Tuesday. However, our TRIN-5 indicator did print a SELL SIGNAL at 3.90 on Friday and that has correlated with sell offs in this bear market year. Gold broke its 10-dma on Thursday and its uptrend – this is a short-term sell signal going into yearend. We still recommend 80% cash and 20% in physical gold/silver/platinum.
12/26/22 (Commentary for Monday) A lot of traders bought the idea of a X-mas rally when we tested SPX 3764 on Thursday. To us it’s a 50-50 proposition. Our indicators are split for trading on 12/27 so we prefer to sit on our hands. The TRIN-5 gave us a SPX SELL SIGNAL on the close of Friday. Notable hedge fund manager, David Tepper, chided traders for fighting the Fed's rate hike strategy and admitted to being short the stock market. However, it is also possible that the SPX selling ended with the "Jupiter square Uranus aspect" on 12/23. 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 held up into Friday after back testing its down trend line – how the USD trades on Tuesday will be very important.
Big Picture on Stocks (UPDATED) The SPX could still give us a 20%-50% correction by Q2 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 turn. We favor a high percentage of cash for capital preservation.
Big Picture on PMs (UPDATED) – We still expect gold stocks to test their COVID lows sometime in 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 – Did the SPX finish 5-waves down at 3764 on Thursday and start a holiday rally. Well, with a TRIN-5 SELL SIGNAL on Friday, we remain cautious for Tuesday and our sitting on our hands.
Gold – Gold bounced into Friday but remains on a SELL SIGNAL.
Silver – Silver pulled back into Friday's New Moon and bounced.
Bonds – Bonds broke down out of its "bear flag" on Friday.
Crude Oil – Crude oil tested $80.50 on Friday’s New Moon.
Dollar Index – After back testing its downtrend line into Thursday, the USD bounced and held up into Friday’s close – how we trade on Tuesday will be crucial for gold and the SPX.
TURNING POINT DAY
The turn window for this week is 12/27.
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