dinsdag 4 juli 2017

Tuesday Market Observations

# We hit our SPX 2450 target on 6/19 and then started a consolidation that could yield a 5-10% decline into mid-July, for a rally back into August highs. Several longer cycles appear to be heading for a "nested" bottom mid August. Any pull back could be short and nasty...

# The DJIA and DJTA both made new intra-day highs today (into the 7/2-7/3 turn window) and that bodes well for higher highs later this year. However, once again the SPX and NDX had a "gap-up opening" that was reversed hard. This is a bifurcated market and there is a chance for some follow through on Wednesda. Volatility has increased and holiday trading conditions could exaggerate moves, but the market breadth remains strong indicating ample liquidity is available for higher highs in some indices.
# On Monday, we may have witnessed a Wave iii of 3 of C breakdown for the QQQ which argues for more downside volatility in tech stocks by 7/5. The QQQ has a target of 134.78, the 100-day MA. There was intense rotation out of technology stocks last week and into the bank stocks which makes sense as global 10-yr rates have backed up. This rotation continued Monday. Even if this proves to be just a mild consolidation for technology stocks, we are still vulnerable to a normal bull market correction of 10% going into mid-July. After the June-July correction (a sideways 4th wave?) runs its course, we're expecting a SPX high for the year around August 20 (+/-3 trading days) with a minimum target of SPX 2480.
# Gold undercut the 6/26 low and we now expect a test of the $1214 this week. The GDX took out the 21.80 low on Monday, but the pattern still looks like an EW a-b-c-d-e triangle that is close to completion.
# Crude oil appears to have made an important low at $42.
# Bonds are close to finishing an EW a-b-c decline on the hourly chart. We should see a bounce by Wednesday.
# The USD continued to bounce Monday (looks corrective) and this continued to pressure gold....