The Alternative Investor

Trading Blog Wednesday, September 27, 2023

9/27/2023

BRIEF COMMENTS ON ALL MARKETS (3:30 pm EDT)

The broad stock market, gold, silver, and the U.S. Dollar Index seem to be on track with my predictions from yesterday (i.e. bearish, bearish, bearish, and bullish, respectively). Yesterday's analysis of crude oil's direction was a coin toss, but it looks like we may have missed a buying opportunity as crude prices soared up today to touch $94 (November contract chart) on news of tightening U.S. and global oil supplies. Yesterday's low was most likely the first sub-cycle correction in a new medium-term cycle in crude that started with the low of $77.32 on Aug. 24. This market is very bullish now. We may have to wait until next week for another correction back down and a possible buying opportunity. We'll stay on the sidelines of crude for now.

The broad stock market fell steeply this morning, but all three indices found support and are bouncing back as we near the closing bell. A modest bounce in equities now may give us an opportunity to sell the market short. We will watch for this as we remain on the sidelines for now.

Gold and silver prices are falling again today with gold breaking below its $1885 low from Aug. 21. This turns gold's medium-term cycle officially bearish. Silver hasn't yet broken below its $22.12 low from June 23, so it is still neutral but prices are most likely headed lower. We are still anticipating significant lows in both metals to buy maybe as early as next week, but especially around Oct. 11. We are out of both metals for now.

The U.S. Dollar Index has cleared resistance at 106 and seems to be headed higher. The only thing impeding the dollar now is another resistance line around 108 and possibly our next reversal zone coming up next week (Oct. 5 - 16). That reversal zone may also correspond to a significant bottom in the precious metals.

Trading Blog Tuesday, September 26, 2023

9/26/2023

MARKETS UPDATE (7:00 pm EDT)

All three of our broad stock market indices (DOW, S&P 500, NASDAQ) dropped sharply today, so it's pretty clear that the new medium-term cycles in these indices have turned bearish. If true, all three are headed lower, probably much lower, as they move down to their final cycle bottoms which aren't due for at least another two months. In the meantime, there is not much to curb this sell-off until we enter our next general reversal zone coming up at the end of next week (Oct. 5 - 16). I don't normally like to chase rallies or corrections that are already in progress, but any short-term bounce or relief rally over the next several days may be a good place to short sell this market as the trend has turned bearish and the current correction may be steep. If we don't get a bounce this week and this market continues to fall, we will wait for a significant sub-cycle low that will be due around the time of the upcoming reversal zone (Oct. 5 - 16). A likely bounce from there could give us a good shorting opportunity from the top of a modest rally. Unless something dramatically kicks this market back up soon, our trading strategy for equities is now bearish (i.e. selling short the tops of short-term rallies). We are on the sidelines of the broad stock market for now.

We're still not sure if gold started a new medium-term cycle on Aug. 21 (new cycle) or way back on June 29 (older cycle). But either way, it now looks like the cycle is turning bearish. Today's steep drop in prices suggests that gold could now drop below the Aug. 21 low of $1885. Even if that was the start of a new medium-term cycle, a break below there would turn the cycle bearish. The next major reversal zone for gold will be the upcoming general reversal zone that I mentioned for the broad stock market (Oct. 5 - 16), There is also a strong potential "pivot point" for gold Oct. 10-12 and Oct. 12-16 inside this reversal zone. We may see a significant bottom form in those time frames. If gold prices drop between $1855 and $1780, especially in that reversal zone, we will probably be looking to buy because we are expecting a strong rally in gold in October-November. For now, we remain on the sidelines of gold.

Silver prices also dropped strongly today. In last week's blog on silver I wrote:

"This [medium-term] cycle is old and its final bottom is due anytime between now and early October. Last week's low at $22.33 was a bit early but may have been the final low. If it was, silver could be very bullish now; however, as with gold, there is a potential "pivot point" for silver this week (Wed. - Fri.) inside the reversal zone for precious metals, so we could see a high followed by another downturn in price."

Well, silver did make a high on Friday's pivot point and it has fallen strongly from there. I think it's likely silver is still completing an older medium-term cycle and prices will move lower into next week's reversal zone. We will look for a low to buy in that time frame (Oct. 5 - 16) as it should be the end of the current medium-term cycle and the start of a new one. As with gold, there is a strong potential "pivot point" for silver Oct. 10-12, so we will pay close attention and look for a bottom on those days. We are on the sidelines of silver for now.

Not surprisingly, the U.S. Dollar Index has been rising (gold and silver usually move opposite the dollar) with this most likely due to the somewhat hawkish tone of last week's Fed statement which proposed a reduction in interest rate cuts for next year. The greenback usually gives a "thumbs up" to tight monetary policy as it perceives the Fed's hawkishness as being fiscally responsible. Interestingly, the dollar seems to be breaking above a strong resistance line around 106. Because there are no reversal zones until next week, the greenback could continue to push higher - especially if it can close above 106. If this happens, it will put more downward pressure on precious metal prices, which is what we are expecting to see.

Crude oil is a bit tricky to call right now. In last Wednesday's blog on crude I wrote:

"A correction may now be underway, but will it be a steep correction to the final bottom of an old medium-term cycle that started with the $64.58 low way back on May 4? Or will it be a modest sub-cycle correction in a new medium-term cycle that started with the low of $77.59 on Aug. 24? In the older cycle labeling, any correction would be steep and could last for 2-5 weeks with a low down to $83 or lower. A correction in a newer cycle would probably last just 3-8 days and only get down to $87 - $88."

The correction from the Sept. 19 high of $92.43 (Nov. contract chart) is now 5 days old. Today (the 5th day) a new low was made at $88.19 just below the 15-day moving average before prices snapped back up to close above $90. Today's low could easily be a significant sub-cycle low in a new medium-term cycle ready to rally some more. But there are no reversal zones now, and prices could also just as easily fall lower, maybe a lot lower into next week's general reversal zone for a final bottom in an older medium-term cycle. Let's stay on the sidelines for now and see how prices move over the next few days. If we do miss a good sub-cycle buy spot this week, we can wait for next week's reversal zone to curb any rally and possibly turn prices down for another buying opportunity.

Trading Blog Monday, September 25, 2023

9/25/2023

IMPORTANT UPDATE ON THE BROAD STOCK MARKET (4:00 pm EDT)

In last Wednesday's blog following the end of the FOMC meeting and Jerome Powell's press conference, I noted that equity markets did not appreciate the hawkish news of a planned decrease in interest rate cuts for next year:

"Equity markets did not seem to like this slightly hawkish news. The broad stock market rallied into the afternoon but fell sharply after 2:00 pm and closed with significant losses. Will this market recover from today's news of fewer upcoming rate cuts? Probably, but markets are nervous right now, and even small things could trigger a major sell-off."

Well, markets WERE nervous, and they didn't recover. They continued to fall on Thursday and Friday and they fell some more today. Not only are equities falling, but all three of our broad stock market indices (DOW, S&P 500, NASDAQ) have now fallen below the start of their current (new) medium-term cycles - a potentially very bearish development.

Most likely the DOW started a new medium-term cycle on Aug. 25 at 34,029. Today it got down to 33,780. The S&P 500 and NASDAQ both started new medium-term cycles a little earlier - on Aug.18 - at 4,366 and 13,162, respectively. Today the S&P 500 got to 4,302 and the NASDAQ went down to 13,132. We are technically out of any reversal zones, and the next one is not coming up until Oct. 5 - 16. This means this market has time to fall some more before it takes on any upward momentum from a reversal (unless it turns up sharply NOW).

If the labeling of these cycles is correct, then the DOW and S&P 500 have turned bearish (they are significantly below the start of their cycles). The NASDAQ has likely turned bearish as well, although today's low could be a "double-bottom" to the Aug. 18 low. This means all three indices could be headed down for many more weeks, if not months.
Let's see if these indices continue to fall over the next few days. If they do, we will be looking to that next reversal zone (Oct. 5 - 16) as a likely spot for a corrective low to form. Then we will want to sell short the top of any modest rally from there as this market should continue to fall, possibly steeply, into the end of the year. Unless this market can turn back up this week, it looks like we will have to give up the idea of another rally to challenge the all-time highs and will have to accept that equities are resuming a longer-term correction to very deep lows with the possibility of a major "crash" to a 90 year cycle low over the next year or two. I will be commenting on this situation in more detail as it unfolds.

We remain on the sidelines of the broad stock market for now.

Trading Blog Wednesday (evening), September 20, 2023

9/20/2023

COMMENT ON THE FED MEETING and MARKETS UPDATE (8:30 pm EDT)

As expected, the Fed left interest rates unchanged at the conclusion of today's FOMC meeting, but the Fed's statement released at 2:00 pm as well as Fed Chairman Jerome Powell's subsequent press conference gave more information about where interest rates are going into 2024. Although Fed officials expect one more rate increase this year, they see rate CUTS starting next year, but not as many as they had previously suggested - they are now predicting only two quarter point cuts in 2024. Equity markets did not seem to like this slightly hawkish news. The broad stock market rallied into the afternoon but fell sharply after 2:00 pm and closed with significant losses. Will this market recover from today's news of fewer upcoming rate cuts? Probably, but markets are nervous right now, and even small things could trigger a major sell-off. We'll remain on the sidelines as we wait and see how prices move into the end of the week. We may look to buy if at least one of our market indices (DOW, S&P 500, NASDAQ) can stay above its August low.

Hawkish rhetoric from the Fed usually boosts the U.S. Dollar Index, and today the greenback rallied back up from its three day decline. This put a damper on gold and silver prices which rallied early in the day, but then fell sharply to close with small losses. We were expecting a reversal in precious metal prices, so let's see if this downturn gains any legs over the next few days. We are still on the sidelines of both gold and silver.

Crude oil prices made yet another new high yesterday, touching $93.74 (Oct. contract chart) before falling back to close at $91.20. That high was in this week's reversal zone, and prices are falling some more today. A correction may now be underway, but will it be a steep correction to the final bottom of an old medium-term cycle that started with the $64.58 low way back on May 4? Or will it be a modest sub-cycle correction in a new medium-term cycle that started with the low of $77.59 on Aug. 24? In the older cycle labeling, any correction would be steep and could last for 2-5 weeks with a low down to $83 or lower. A correction in a newer cycle would probably last just 3-8 days and only get down to $87 - $88. Let's stay on the sidelines and wait to see where prices go into Friday. We may be looking for a spot to buy.

Trading Blog Tuesday (late night), September 19, 2023

9/19/2023

GOLD and SILVER UPDATE (11:30 pm EDT)

It's still not clear if gold started a new medium-term cycle with its low of $1885 on Aug. 21 or if it is still completing an older cycle that started on June 29 at $1894. I'm starting to favor the older cycle labeling. If it's correct, the cycle is bearish (because it has already gone below its starting point) and should be headed down to its final bottom over the next several weeks with a target price below $1885.

Last Thursday gold made an isolated low early in a reversal zone specifically for the precious metals (Sept. 13 - 21). Prices have been rising from there; however, today is a strong potential "pivot point" for gold, and we are still in that reversal zone. A high and reversal back down could be imminent, but If prices don't turn down and instead continue to rally past this week (especially if they break above $1950), then we will have to go with the younger cycle labeling (a new cycle starting on Aug. 21). Either way, we are anticipating a significant low to buy sometime over the next three weeks as there are strong bullish signals for gold coming up in October.

Even if the current medium-term cycle in gold is bearish, the longer-term 23 year cycle could still be bullish (i.e. if a new one started on Sept. 28, 2022 at $1616) , and that means gold prices could soon challenge and exceed the all-time high of $2070. But if prices continue to decline and start moving below $1750, we may have to assume an older longer-term (23 year) cycle is still in place and moving to its final bottom near $1000 sometime next year. (See Gold Updates on the Home Page).

I realize these cycles are a bit confusing right now. The bottom line is that we won't be certain that a new long-term cycle in gold has started until prices break above $2070. Until that happens, we are trading shorter-term cycles, and we are expecting one of these to give us a significant low over the next few weeks to buy for a strong rally into November. For now, we remain on the sidelines of gold.

Silver's medium-term cycle started with the low of $22.19 on June 23. From there silver has made two peaks - one at $25.26 on July 20, and a second one at $24.98 on Aug. 30. That second high was just below the first one which likely turns this cycle bearish. This cycle is old and its final bottom is due anytime between now and early October. Last week's low at $22.33 was a bit early but may have been the final low. If it was, silver could be very bullish now; however, as with gold, there is a potential "pivot point" for silver this week (Wed. - Fri.) inside the reversal zone for precious metals, so we could see a high followed by another downturn in price. Let's stay on the sidelines of silver for now until we are more certain the final medium-term cycle bottom is in.

Trading Blog Monday, September 18, 2023

9/18/2023

COMMENT ON THIS WEEK'S FOMC MEETING (5:00 pm EDT)

We have yet another FOMC meeting this week (Tuesday and Wednesday) where the Fed will decide on interest rate policy now and going forward. Most analysts expect rates to remain unchanged this month, but there is some debate about whether or not the Fed will raise rates one more time this year - either in November or December. Economists and investors will also be scrutinizing this week's meeting for information about next year's policy plans. Many expect the Fed to start cutting rates at some point in 2024, but the question is how soon and by how much. With this kind of uncertainty about the future, the equity markets can be very volatile and prone to panic sell-offs as well as bullish bursts of irrational exuberance.

The Fed will conclude its meeting on Wednesday with a statement at 2:00 pm EDT most likely followed by a press conference with Fed Chairman Jerome Powell. Our current general reversal zone ends on Thursday (but we will allow it to extend into Friday). We will have to wait and see if the Fed's statement and/or Mr. Powell's rhetoric will trigger any major moves in the broad stock market. All three of our market indices (DOW, S&P 500, NASDAQ) made isolated highs last Thursday near the center of our reversal zone and have been falling from there. But if the Fed's rhetoric is dovish this week, we could see this market turn back up and a buying opportunity present itself. On the other hand, severely hawkish comments might trigger more selling.

It's significant to note here that once we pass through this week's reversal zone, there are no major reversal zones until November for any of our markets (except crude oil - near Halloween - Oct. 31). This suggests that any trend (up or down) established after this week will likely continue unabated for at least 5 weeks.
(UPDATE 9/19/23 - There are actually two general reversal zones in October - but they are weak ones - Oct. 5 -16, and Oct. 25 - Nov. 1. These could offer some resistance to any trend, but would probably not correspond to any long-term reversals.)

Trading Blog Friday (night), September 15, 2023

9/15/2023

MARKETS UPDATE (9:00 pm EDT)

We are now near the mid-point of our current general reversal zone for all markets (Sept. 13 - 21), and the direction of the broad stock market is still not clear. Our three indices (DOW, S&P 500, NASDAQ) have been indecisive and relatively flat this week. All three indices made new highs for the week yesterday and are dropping sharply today to new lows (for this week). This COULD be the start of a significant reversal, but it will take several more down days to confirm that. Alternatively, there is still time for these indices to push back up to new highs inside this reversal zone.

The big question now is whether or not these indices started new medium-term cycles on Aug. 25 (DOW at 34,029) and Aug.18 (S&P 500 and NASDAQ at 4,336 and 13,162, respectively). If they did, we don't expect those starting lows to be taken out. But it's still possible one or more index is still completing an older medium-term cycle and could make a new final (older) cycle low shortly - possibly next week inside the current reversal zone. We would like to buy near the start of any new cycle, but until we get past this reversal zone, we can't be certain where that's going to be. Ideally, we would like to see one (or two) of these indices break their Aug. low(s) next week, but not all three. That would give us a strong bullish divergence in the reversal zone and encourage us to buy for another short-term but potentially strong rally. We note, however, that after THAT rally, we are looking for a steep correction into Nov. - Jan., so we will not worry so much if we miss a good buy spot. It will probably be more important to focus on selling short the top of this next rally. For now, we remain on the sidelines of this market.

Sept. 13 - 21 is also a reversal zone specifically for gold and silver. Both metals made new and deep lows for the week yesterday and are rallying strongly from those lows today. Could this be a significant sub-cycle low in gold? Maybe - especially if gold is in a new medium-term cycle that began with the low of $1885 on Aug. 21. But today's surge in gold found resistance at the 15-day moving average, and this reversal zone lasts all through next week. I suspect prices could turn down again and make a new low. I am going to stay on the sidelines of gold for now.

Yesterday's $22.33 low in silver could be a final medium-term cycle bottom. It's actually a 'double-bottom" to the mid-point sub-cycle low ($22.31 on Aug. 21). We note that neither of these lows broke below the start of the cycle ($22.19 on June 23), so the cycle didn't technically turn bearish (yet), but it certainly isn't bullish. As with gold, however, I think it's possible for prices to push lower into next week. If silver does this and breaks its Aug. low without gold doing the same, we could have a strong bullish divergence signal and possibly a good place to buy both metals. Let's stay on the sidelines of silver for now.

Crude oil prices continued edging higher today and broke above $91 (Oct. contract chart). We are now approaching the center of our general reversal zone, so a top and some sort of correction could be very imminent. As I stated in Tuesday's blog:

"...we can now confirm that crude started a new longer-term 3 year cycle with its deep "double-bottom" lows of $64.42 on March 20 and $64.58 on May 4. This means crude prices should be bullish for many more months. Shorter-term, it looks like a new medium-term cycle in crude started with the low of $77.59 on Aug. 24, but there's a small chance that we are still in an older medium-term cycle that started on May 4. Either way, a top and a corrective downturn seems imminent. If this IS an older cycle, the correction could be steep and take prices down to the 45-day moving average (now around $81). That would be an ideal place to buy, but I don't think it will happen. It's more likely this is a younger, new cycle that started on Aug. 24 and that any correction now will be modest - especially as this market seems very bullish right now"

All of this still applies as we wait for a corrective dip and a good place to buy. We are currently on the sidelines of crude oil.

Trading Blog Tuesday, September 12, 2023

9/12/2023

CRUDE OIL UPDATE (2:30 pm EDT)

Crude oil prices broke to a new high ($89.37, Oct. contract chart) today just one day out of its reversal zone (Sept.1 - 11). With a round number resistance at $90, crude could certainly turn down from here. But if the top doesn't happen today, we enter a general reversal zone for all markets tomorrow (Sept. 13 - 21), and a top could happen anytime inside this window.

As I've mentioned in previous blogs, we can now confirm that crude started a new longer-term 3 year cycle with its deep "double-bottom" lows of $64.42 on March 20 and $64.58 on May 4. This means crude prices should be bullish for many more months. Shorter-term, it looks like a new medium-term cycle in crude started with the low of $77.59 on Aug. 24, but there's a small chance that we are still in an older medium-term cycle that started on May 4. Either way, a top and a corrective downturn seems imminent. If this IS an older cycle, the correction could be steep and take prices down to the 45-day moving average (now around $81). That would be an ideal place to buy, but I don't think it will happen. It's more likely this is a younger, new cycle that started on Aug. 24 and that any correction now will be modest - especially as this market seems very bullish right now. We will remain on the sidelines as we wait for a corrective low to buy - possibly inside the new reversal zone this week or next.

Trading Blog Monday (evening), September 11, 2023

9/11/2023

GOLD, SILVER and CRUDE OIL UPDATES (7:00 pm EDT)

Gold prices fell last week and closed below both the 15-day and 45-day moving averages. Today prices are up a bit, but they seem to be encountering resistance at the 15-day moving average. Last Tuesday I wrote:

"Gold rallied from a significant low ($1885) it made on Aug. 21, but we still don't know if that low was the start of a new medium-term cycle or if it was the mid-point sub-cycle correction of an older medium-term cycle that started on June 29 (at $1894). If the latter, the cycle has turned bearish (as it has broken below its starting point) and prices should be headed well below $1885 as the cycle moves to its final bottom."

All of this still applies, and a new reversal zone for the precious metals starts this Wednesday (Sept. 13 - 22). Right now it looks like prices could go either way (up or down), but resistance at those moving averages tends to suggest more downside. On the other hand, the U.S. Dollar Index may have made a significant peak last Thursday and could be in the process of a significant downward correction. If that's the case, it could give some upward momentum to both gold and silver. With all of that said, I think the rally from the Aug. 21 low seems to be rolling over, so I am going to go with the idea that this is an older cycle with prices headed below $1885.

We are now anticipating a significant low in gold due sometime between Sept. 22 and Oct. 13, and that low would ideally fall somewhere between $1850 and $1775. Because Sept. 22 is the last day of the upcoming reversal zone for the precious metals, we could see that low next week (Friday, the 22nd). But prices could also rise into the reversal zone and then turn back down to make a low later in the month or even early October. There are lots of possibilities here, and yes, things are a bit confusing at the moment. Let's stay on the sidelines for now and wait to see how gold prices move into our new reversal zone. Basically we are aiming to buy a low below $1850 that could happen in that Sept. 22 - Oct. 13 time frame.

While gold's cycle labeling is currently ambiguous, we are more certain of silver's medium-term cycle. Silver began a new medium-term cycle with its low of $22.12 on June 23. From there it rallied sharply to a high of $25.26 on Jul 20, and then it took a steep corrective drop back to $22.31 on Aug. 21. As I mentioned in my last blog, this sharp drop close to the start of the cycle is a bearish sign. Prices rebounded from that low but were not able to exceed the previous high (i.e. $25.26) - they barely touched $25 on Aug. 30, and they have been falling steeply from there into the present day. We are now close to the end of this medium-term cycle, and the trend is looking bearish. This means I expect the final low to break below the start of the cycle ($22.12). That final low could come as early as next week, or the correction could extend into October (even November). Silver's trend looks to be turning bearish, so if prices rally into our upcoming reversal zone for the precious metals (Sept. 13 - 22), we may look to sell short, possibly near resistance at the 15-day or 45-day moving averages (now both near $24). For now, we remain on the sidelines of silver. The final low of this medium-term cycle will determine whether or not the longer-term trend in silver (and possibly gold) has turned bearish.

Today crude oil made yet another new weekly high at $88.15 (Oct. contract chart). In last Tuesday's blog I wrote:

"It looks like crude oil may have started a new medium-term cycle with its low of $77.59 on Aug. 24 based on its steep rise from that low. But we are now in the center of another reversal zone specifically for crude (Sept.1 - Sept. 11)....Prices could edge a bit higher over the next several days, but a top and corrective drop seems imminent. If this is a new medium-term cycle, we would expect only a modest correction, but it's still possible the older cycle is in place. If it is, prices could drop lower and finally touch or break below the 45-day moving average to satisfy the requirement of an older medium-term cycle bottom. Either way, we are looking to buy the bottom of any correction as crude looks to be very bullish into the end of this year. Next week's general reversal zone (Sept. 13 - 21) would be a good place to look for a bottom."

All of this still applies. We note that today (Sept. 11) is technically the last day of crude's reversal zone, and the chart is looking very "toppy". A sharp fall from here wouldn't be unexpected. If that happens, and we get a low in our upcoming general reversal zone (Sept. 13 - 21), we may look for a spot to buy. On the other hand, if prices end up pushing higher into this same time frame, we will stand aside and wait to see what sort of correction follows. We are currently on the sidelines of crude oil,

Trading Blog Sunday (night), September 10, 2023

9/10/2023

BRIEF UPDATE ON THE BROAD STOCK MARKET (10:30 pm EDT)

In last Tuesday's blog on the broad stock market I wrote:

"We have been anticipating a final medium-term cycle bottom in all three of our market indices (DOW, S&P 500, NASDAQ). The lows of Aug. 25 in the DOW (34,029) and Aug. 18 in the S&P 500 and NASDAQ (4,336 and 13,162, respectively) may have already been the final bottoms (there was bullish divergence between the DOW and the other two indices), but if this market falls hard over the next several days, we could possibly get new lows. At the moment, this seems most possible in the DOW, but even that index would have to fall hard for a new low by Friday (the last day of our current reversal zone)."

Well, the DOW fell some more last Wednesday, but then it found support and rallied a bit into Friday. The S&P 500 and NASDAQ fell into Thursday, but then both rose a bit on Friday. The 15-day moving average seems to be offering some support to these indices, but if that fails we could still see this market fall into our new reversal zone coming up next week (Sept. 13 - 21). On the other hand, a rally into that time frame is still not out of the question. We'll just have to wait and see which one it will be. If one index (possibly the DOW) makes a new low in this new reversal zone without the other two (bullish divergence), we could see a good spot to buy, but for now we remain on the sidelines of this market.

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