It is getting VERY late in the current medium-term cycles of the broad stock market (DOW, S&P 500, NASDAQ). This current cycle is very bullish and continues pushing to new highs. On Monday, all three indices made new weekly highs, but only the DOW and S&P 500 made new all-time highs. The NASDAQ is still below its all-time high of 16,212 from Nov. 2021, but not by much (Monday's high got to 16,080 before closing just below 16,000). This means our bearish divergence signal is holding (for now).
All three indices fell sharply on Tuesday giving the impression that a significant correction was starting, but they snapped back up Wednesday and today, so the rally may not be over yet. Monday's highs were inside a weak reversal zone, so if those highs hold, we could still be headed down to a final medium-term cycle bottom into our next strong reversal zone coming up next week (Feb, 19 - 29). That is our ideal scenario. But if this market continues to rally and breaks above Monday's highs (they are close - especially the DOW and S&P 500), then we may get a final "blow-off" top instead of a bottom in this next reversal zone. In that situation we would almost surely see a final steep correction from the top down to a final medium-term cycle bottom in all three market indices - probably in the first half of March.
For now, we continue to stay on the sidelines as we wait for that bottom (a good buy spot) either in the next 2 weeks or a little later. We are still looking around 37,000 in the DOW and 4,700 in the S&P 500 as good targets for a final bottom. If the market pushes a lot higher into next week, however, we may have to raise those targets a bit.
Both gold and silver made new weekly and yearly lows on Wednesday. As with the broad stock market, It is also late in the medium-term cycles of both these metals, so it's possible those lows were the final medium-term cycle bottoms. The only problem is that Wednesday was not inside any reversal zone, and we like to see significant bottoms or tops in a (preferably) strong reversal zone. Next week we enter two strong reversal zones, one specifically for precious metals (Feb. 21 - 29), and one general reversal zone (Feb. 19 - 29). Let's wait to see if gold and silver can push lower into those time frames. If they rally instead, those reversals could put a curb on the rally and possibly turn it down early. We will watch this closely next week as we would like to buy into the start of any new medium-term cycle. We remain on the sidelines of gold and silver for now.
In last Wednesday's blog on crude oil I wrote:
"We are still not certain if crude oil began a new medium-term cycle with its low of $68.28 (March contract chart) on Dec. 13 or if crude is near the end of an older medium-term cycle that started back on Oct. 5 at $76.93. If it's an older cycle, then it is bearish and prices will go lower and soon (within the next four weeks) form a final bottom below $68.28. But if crude started a new cycle on Dec. 13, it most likely completed its first sub-cycle corrective dip with Monday's $71.41 low and is now starting a rally that will soon test the $80 level."
We are still not certain which medium-term cycle is correct, but because prices have been closing above both the 15-day and 45-day moving averages, I am favoring the idea of a new medium-term cycle starting Dec. 13. If that's the case, prices should continue to rise to test the $80 level soon, but we note that we are about to enter a strong general reversal zone next week, and that could out a damper on any rally. A new high in this reversal time frame could become a top followed by another significant sub-cycle correction, and that might give us a good spot to buy. We will watch for this. If the old medium-term cycle is still in place (Oct. 5 starting point) then we don't expect prices to exceed $80 (or even $79.29), and they should fall back below $70 fairly soon. I don't think this will happen, but we can't rule it out until prices start closing above $80. We are still on the sidelines of crude.