We are at an important level in the equity markets. Based on its inflection point we expect a pullback. However, the markets are always right, and we are clearly at a crossing point. We will go either much higher from here – not supported by the projected high – or we will go down from here.
For example, the S&P, which reached this morning our target of 4236 – needs to hold at its current level, or we will move another leg higher – with a next upside target of 4258. However, as seen last week, once the sellers take over, we see an acceleration, and the S&P can move within an hour 60-80 handles lower.
That is the reason that GMTT focuses on selling the rallies/bounces and not buying the dips. Usually, it is the other way round. This time it is different. We see that there are more sellers than buyers and that most of the smart money is not buying at current inflated equity prices.
Then we have Jerome Powel that said that part of the market is a bit frothy and GMTT rings the alarm bells that the market is overdue a healthy correction. It is time to scramble for protection! We are long the VIX, Gold, and Siler, and add the US Bonds once they reach their given short-term upside target. We want to give the market until the Wednesday to see if it comes with more buying power and if the unrealistic market optimism comes to a hold. Life inside a stock market bubble is great until someone takes out a pin!
The metals are flying higher too, for Gold, Silver, and Platinum that is in line with our technical outlook, but Copper price that hit an all-time-High is due for a correction. This applies in general for the overall Commodities Bull Run – which went higher than our technical market outlook. In fact, looking at Lumber to the extreme, and Coffee, Wheat, Corn and Soybeans to a lesser extreme, we expect that someone will take out that pin….
While the future is never certain we can look back at the past. Every time – without fail – at projected market tops we did it followed by a correction. Sometimes the timing can be off by a few weeks, but the direction is correct.
So, to summarize, we think that the markets are in inflation mode and it is a matter on someone to take out pin.
Gold – which has been for decades the best protection for a falling stock market – is moving higher. Another indication that the smart money is agreeing with our view that we reached a crossroad which can go either way.
However, based on technical, and logics we are due a healthy correction.
Have a successful week!
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