The Alternative Investor

Trading Blog Monday (late night), September 26, 2022

9/26/2022

**IMPORTANT UPDATES FOR ALL MARKETS** (11:30 pm EDST)

The DOW's medium-term cycle has officially turned bearish because this index has now broken below its 29,653 low from June 17, which was the start of the cycle. This does not bode well for the broad stock market as it could mean that the trend will be down for at least another 15 months, and possibly even two years (which would tie in with our prediction of a major crash bottoming around 2024).

Shorter-term, we note that although the DOW has broken below the start of its medium-term cycle, the S&P 500 and NASDAQ have not (yet). These latter two indices are now VERY close to their mid-June cycle bottoms (3,637 in the S&P 500 and 10,565 in the NASDAQ). If those bottoms hold, we'll have a bullish divergence signal in the center of our current strong reversal zone, and that would mean this market could suddenly turn back up. Because it is late in all three medium-term cycles, we could see the current cycles end here and see new ones start. That could give us at least a short-term (probably weak) rally before the downtrend resumes. If we get that, we will try to sell short near the top of any rally. But if the S&P 500 and NASDAQ do break below their mid-June lows, it will be "look-out below!" as the overall bearish tend could trigger a major sell-off with all three indices moving to their final medium-term cycle bottoms at much lower levels.

Longer-term, we can safely say that it is highly unlikely these indices will approach, let alone exceed, their all-time highs from Nov. 2021 (NASDAQ) or January 2022 (DOW and S&P 500) anytime soon. In other words. a major long-term downward correction in the broad stock market is probably now well underway and will likely continue into 2023 - 2024 (with periodic short-term rallies along the way) before reaching its final bottom. Our general trading strategy now should be to sell short at the top of any temporary rallies. We are staying on the sidelines of this market for now.

Like the broad stock market, gold's current medium-term cycle (which started on July 21 at $1681) has turned bearish as prices are now well below that start. Unlike the DOW, it's a little too early for this current cycle to make a final bottom. Nevertheless, we are in a reversal zone and there are several short-term signals suggesting a temporary sub-cycle low this week. I think the best trading strategy now is to wait for a short-term rally and try to sell short at its top. As with the broad stock market, it seems like we are not going to get another strong rally to challenge this year's highs near $2000. It looks like we are well into the final correction in a long-term 23-year cycle in gold that should bottom around 2023 - 2024, possibly as low as $1000. Long-term investors might want to wait until that final bottom is in as it will be an excellent spot to buy - literally a "golden opportunity" to get in at the start of a new 23-year cycle. We are still on the sidelines of gold.

Silver's medium-term cycle is a little more ambiguous than gold's, but it is also looking bearish right now. It would take a close below $17.59 to confirm the cycle as bearish. In the meantime, both metal prices could bounce up this week, especially as we are in a reversal zone and there is a bullish divergence between gold and silver (gold has made a new monthly low but silver has not). Any short-term rally in silver that stays bellow $20 might give us a good opportunity to sell short. We will watch prices carefully this week as we remain on the sidelines of silver for now.

The recent strong hawkish stance taken by the Federal Reserve to bring down inflation has propelled the U.S. Dollar Index to new heights. The greenback is now approaching 115, and it is getting close to its 121 high from 2001. It looks like the U.S. dollar is bypassing its normal 15-16 year cycle. I refer the reader to my posts from April 9 and April 27 this year describing the two long-term cycles in the U.S.dollar. Let me quote from my April 27 post here:

"...there's also the possibility that the greenback is not following a normal 15-16 year cycle and is instead following a "political cycle" related to which political party is currently in the U.S. White House. The dollar tends to rise during a Democrat administration, and indeed, it has been rising sharply since Jan. 2021. It's still possible an older "normal" cycle is in place and is ready to fall......however, if this index breaks clearly above $104 and continues to rise, we may have to assume the political cycle is taking over, and we will have to relabel the cycle as a younger, bullish one."

The U.S. Dollar Index is now well above 104, so it looks like the dollar is following the political cycle and is not falling to the final bottom of a 15-16 year cycle. The U.S. dollar should, in fact, be quite bullish now into 2025 with an upside potential that could challenge the 121 high from 2001. Needless to say, this is not good news for gold and silver prices, but it does support our current bearish view of the precious metals. It is also supporting my view that investors may be favoring the U.S. dollar as the best safe haven investment during a stock market crash - just like they did in 2008-2009. Sure, inflation is high and the greenback's value has been diminished, but in a basket of current global currencies, it's probably the "least rotten apple" in the bunch.

Crude oil prices have been falling sharply since my last update on this commodity, not surprisingly in sync with plummeting equity markets. On Sept. 14th I outlined 3 possible scenarios for crude:

" 1) Last week's deep low at $81.20 (Oct. contract chart) on Sept. 8 could be the start of a new medium-term cycle (and possibly a longer-term cycle as well). This labeling would mean that crude is very bullish now and should rally strongly. Prices need to start closing above $95 and especially $97 to confirm this bullish labeling.

2) Crude could be nearing the end of a much older medium-term cycle that is due to bottom by next week at prices at or below last week's low ($81.20). In this labeling, that final bottom would be a good spot to go long.

3) Crude may have started a new medium-term cycle with the low of $85.37 on Aug. 16. This labeling is the most bearish because prices have already gone below the start of the cycle. In this view, prices would be in a downtrend for many more weeks and would be going much lower. "

Well, crude has broken and closed below the Sept. 8 low ($80.89 - we switch now to the November contract chart) which means Scenario 1 is negated. Scenario 2 is still possible, but the final low should have been in last week. Prices dropped lower today (Monday), although it is still in the window of a reversal zone for crude (which ends tomorrow). If prices rally strongly from here, Scenario 2 could be viable and a new medium-term cycle could be starting. Our least likely Scenario 3 is starting to look very possible now. In this scenario prices are heading lower for many more weeks before it hits the current medium-term cycle bottom. Even if scenario 2 is correct and a new cycle is starting, that cycle would probably be bearish too. That's because it is starting lower than the bottom of the previous medium-term cycle ($89.74 way back on April 11) which means it could turn down sharply after a brief rally and go much lower.

The bottom line here is that scenario 2 and 3 are both possible and both are bearish. We may get a short-term bounce in prices this week, however, as we are in two reversal zones, but any subsequent rally will probably be modest and soon turn back down. We will remain on the sidelines of crude oil for now.

Trading Blog Wednesday, September 21, 2022

9/21/2022

COMMENT ON THE FOMC MEETING (5:00 pm EDST)

Today the Fed raised interest rates 0.75 percentage points as expected. The DOW was up a bit until the 2:00 announcement of the rate hike, and then it suddenly dropped several hundred points. Jerome Powell's press conference following the announcement at first seemed to alleviate market fears, and the DOW surged back up over 400 points into the 3:00 hour. But as it became clear that Mr. Powell was holding strong to hawkish policy, the DOW plummeted again to close the day with a 522 point loss.

It seems that Mr. Powell could have softened his hawkish rhetoric to avoid a market sell-off, but he did not. This is not looking good for equities as this market is very nervous and vulnerable to panic selling right now. Our cycle analysis has also shown that this market's current trend is looking bearish. Our bullish divergence signal from yesterday was negated today as the NASDAQ made a new weekly low. Nevertheless, we are now at the center of a strong general reversal zone. A bottom could still form this week or early next and be followed by some sort of rally, although that rally may now be short and weak. The alternative to a reversal would be a major panic and breakdown in equity markets. That scenario is starting to look possible. Let's stay on the sidelines and wait to see if today's sell-off continues over the next few days or if the market can regain its confidence by the end of the week.

The Fed's hawkish rhetoric was good for the U.S. Dollar Index as it boosted the greenback to a new 20 year high - breaking and closing above its recent 110.79 high. Gold and silver prices also rose a bit today, perhaps demonstrating that investors will flee to both the U.S. dollar AND the precious metals if they fear a sell-off in equities. I suspect, however, that if we have a major sell-off, most investors would turn to the greenback as a safe-haven - just as they did during the 2008 -2009 crash.

Trading Blog Tuesday, September 20, 2022

9/20/2022

BRIEF COMMENT ON THIS WEEK'S FOMC MEETING AND THE BROAD STOCK MARKET (3:00 pm EDST)

We have yet another FOMC meeting coming up this week - today and tomorrow - with Fed Chairman Jerome Powell expected to give a major press conference on Wednesday at 2:00 pm (EDST) outlining his monetary policy. Wall Street investors are very jittery about this meeting as Mr. Powell is expected to raise interest rates another three-quarters of a point, and some analysts speculate it may even be a full percentage point. Fears are high that the Fed is going "full throttle" in its efforts to curb inflation - something that hasn't been done since the early 1980s. If Mr. Powell's rhetoric on Wednesday is too hawkish, it could trigger a major sell-off in equity markets. On the other hand, since the market has been falling and is falling today in anticipation of the meeting, we might see a case of "sell the rumor, buy the news" where the markets factor in the fear of a rate hike before it happens and then rally on the actual news. We shall see how this plays out on Wednesday afternoon.

Our recent analysis of the broad stock market is showing a bearish trend, so equities do look vulnerable to a sell-off right now. Will this Fed meeting be "the straw that breaks the camel's back"? It might be. On the bullish side, we are getting a case of bullish divergence today as the DOW and S&P 500 make new weekly lows without the NASDAQ. (That will be negated if the NASDAQ drops below 11,317.) We are happy to be on the sidelines of this market now and will stay there - at least until Friday when we will be better able to analyze the impact of the Fed's meeting.

Trading Blog Monday (evening), September 19, 2022

9/19/2022

MARKETS UPDATE (9:30 pm EDST)

The bullish divergence signal we had in the broad stock market for most of last week came to an end on Friday as all three stock market indices (DOW, S&P 500 and NASDAQ) plunged and broke below their Sept. 6-7 lows from the previous week. This could be a significant bearish development as those Sept. 6-7 lows most likely represented a significant medium-term sub-cycle bottom. Breaching them could mean the current cycle is turning bearish and headed much lower. There are some short-term technical signals and a strong reversal zone this week and next, however, that might turn this market back up for at least a few more weeks. No index made a new low today, and all three closed in positive territory. If last week's lows hold, we could see a rally now to challenge last week's highs. Even if these indices break below last week's lows, they might still make a significant bottom this week or next that could be the start of a significant rally - as long as the lows don't fall below the start of the current medium-term cycles (i.e. 29,653 from June 17 in the DOW and 3,637 from June 17 in the S&P 500). Any break below those mid-June lows would be a VERY bearish development.

The bottom line here is that we are waiting to see if there is at least one more bullish rally over the next several weeks that could at least challenge last week's highs, and maybe even the highs from mid-August. (It is highly unlikely at this point that any of these indices will challenge their all time highs - from January 2022 and November 2021 - within the current medium-term cycle.) If we get any significant rally, we will be looking to sell short at the top. For now, we remain on the sidelines of the broad stock market.

In my last blog on gold I wrote:

"Gold started its current medium-term cycle (and probably a longer-term 16-month cycle as well) with its low of $1681 on July 21. It essentially made a double-bottom to this low at $1689 on Sept. 1. If this labeling is correct, this market should be very bullish now and ready to rally strongly.... We don't want to see prices start to close below $1681 as that would suggest that the short-term trend is turning bearish."

Well, prices have now broken below $1681 (they went to $16.54 on Friday) which suggests that the current medium-term cycle is turning bearish - if our labeling is correct. If that low at $16.54 was instead the start of a new medium-term cycle (this would mean the previous cycle was distorted), the market could be bullish and could rally now. Supporting that idea is the fact that this low happened in a reversal zone specifically for precious metals (that ends tomorrow), and it was in a general reversal zone that will last through this week. We are also getting a strong intermarket bullish divergence signal to silver because silver prices are staying well above their Sept. lows while gold has broken well below its Sept. lows. The precious metals are thus giving us mixed signals.

Silver's current medium-term cycle likely began on July 14 with its low at $18.15, but like gold, there is another possible labeling that could be a distortion of the normal cycle. A new medium-term cycle could have started on Sept.1 with silver's low at $17.59. If that's the case, silver could be bullish and rally strongly from here. For the bullish labeling to be correct, prices have to start breaking and closing above $20. If the cycle did begin on July 14, silver is bearish as prices have gone below that start.

Both metals are tricky to call right now. If silver can break that $20 level (it is close), we may consider a long position. Gold prices need to rally a bit more to look even slightly bullish; they need to break and close at least above last week's high of $1734. We will remain on the sidelines of both metals for now, as this market's labeling and short-term trend is not clear.

Our longer-term view of gold is similar to that of the broad stock market. As I wrote in last Tuesday's blog:

"...the final top to a long-term 23 year cycle in gold most likely happened in Aug. 2020 at $2070 (see Gold Update on the Homepage). This means we will want to reverse any long positions and short sell at the top of any strong rally now to ride down a steep corrective drop to the final 23 year cycle bottom that is due around 2023 - 2024. That correction could go down to $1000.] "

Last Wednesday I presented three possible scenarios for crude oil :

"There are three possible ways to label the current medium-term cycle in crude oil right now:

1) Last week's deep low at $81.20 (Oct. contract chart) on Sept. 8 could be the start of a new medium-term cycle (and possibly a longer-term cycle as well). This labeling would mean that crude is very bullish now and should rally strongly. Prices need to start closing above $95 and especially $97 to confirm this bullish labeling.

2) Crude could be nearing the end of a much older medium-term cycle that is due to bottom by next week at prices at or below last week's low ($81.20). In this labeling, that final bottom would be a good spot to go long.

3) Crude may have started a new medium-term cycle with the low of $85.37 on Aug. 16. This labeling is the most bearish because prices have already gone below the start of the cycle. In this view, prices would be in a downtrend for many more weeks and would be going much lower."

Nothing has changed. Today prices plunged dramatically to $82.10 but then snapped right back to close at $85.73 (Oct. contract chart). We note that we are now approaching the center of a reversal zone specifically for crude (Sept.16 - 26), so some sort of bottom could be forming this week. We will watch for it. In the meantime we will remain on the sidelines of this market.

Trading Blog Wednesday (night), September 14, 2022

9/14/2022

UPDATE ON CRUDE OIL and the BROAD STOCK MARKET (10:30 pm EDST)

There are three possible ways to label the current medium-term cycle in crude oil right now:

1) Last week's deep low at $81.20 (Oct. contract chart) on Sept. 8 could be the start of a new medium-term cycle (and possibly a longer-term cycle as well). This labeling would mean that crude is very bullish now and should rally strongly. Prices need to start closing above $95 and especially $97 to confirm this bullish labeling.

2) Crude could be nearing the end of a much older medium-term cycle that is due to bottom by next week at prices at or below last week's low ($81.20). In this labeling, that final bottom would be a good spot to go long.

3) Crude may have started a new medium-term cycle with the low of $85.37 on Aug. 16. This labeling is the most bearish because prices have already gone below the start of the cycle. In this view, prices would be in a downtrend for many more weeks and would be going much lower.

At the moment, scenario one is the most likely, scenario two is less likely, and scenario three is the least likely. We note that there is another reversal zone specifically for crude coming up next week (Sept. 16 - 26), so that would be a good time for an older cycle (scenario 2) to bottom. A break and close below $81.20 would negate scenario 1, but a close above $97 would affirm it. These can be our "lines in the sand" to determine our trading strategy. The longer-term trend in crude is bullish now. If prices can hold above that low at $81.20, it's possible they could go as high $155 by the end of the year. Let's remain on the sidelines of crude for now.

Today the broad stock market halted its steep plunge from yesterday, and the DOW and S&P 500 closed slightly up. But is the sell-off over? It could be over because the DOW went slightly below its low from last week but the S&P 500 and NASDAQ did not, and all three closed in the upper third of their day's range. This is a strong bullish divergence signal that could signal more rallying. To start looking bullish, however, these indices will have to rise above their highs from Monday. If all three start falling below last week's lows, the market would be turning bearish. We will remain on the sidelines of the broad stock market for now.

Trading Blog Tuesday (late night), September 13, 2022

9/13/2022

MARKETS UPDATE (11:30 pm EDST)

To simplify our analysis of the broad stock market, I am from this point on going to focus mainly on the DOW and S&P 500. I may, however, mention the NASDAQ in trading suggestions as it generally moves in tandem with the other two indices.

The DOW's current medium-term cycle began with its low of 29,653 on June 16. The S&P 500 started its current medium-term cycle on June 17 with its low of 3,637. Both cycles rallied strongly and made significant sub-cycle tops on Aug. 16 (the DOW at 34,281 and the S&P 500 at 4,325). They both then corrected down sharply to significant sub-cycle bottoms last week (the DOW got to 31,048 and the S&P 500 reached 3,887), The subsequent sharp rally from those lows was looking quite bullish - until today. Investors were rattled after data released today showed that inflation had not moderated over the last month - dashing hopes that the Fed might slow its pace of interest rate increases at next week's FOMC meeting.

Our concern now is whether or not today's sell-off will gain any legs. The DOW broke briefly slightly below last week's low but then closed just above it. The S&P 500 (and NASDAQ) did not breach last week's lows. If these indices break these lows tomorrow and continue down, it will be a bearish sign and will open up the possibility of the trend turning bearish and these indices falling below the start of their current medium-term cycles (the June 16-17 lows).

We are technically in a reversal zone from now through Oct. 6, so equity markets could be very volatile over the next three weeks. Sept. 23 -26 would be the center point of this reversal period (the "eye of the storm"), and that could turn out to be a major turning point (a top or bottom). If today's panic sell-off continues, we may see an early final bottom to these current medium-term cycles near that time. But if this market snaps back quickly from today's plunge, we could see the resumption of a strong rally into the end of September and the possibility of a new all-time high (or at least a break above those Aug. 16 highs). We will remain on the sidelines of the broad stock market for now.

The likelihood of more inflation and a strongly hawkish Fed today boosted the U.S. Dollar Index as it depressed gold and silver prices. Let's analyze the current medium-term cycles in both metals.

Gold started its current medium-term cycle (and probably a longer-term 16-month cycle as well) with its low of $1681 on July 21. It essentially made a double-bottom to this low at $1689 on Sept. 1. If this labeling is correct, this market should be very bullish now and ready to rally strongly. Prices have been rallying since Sept. 1, but most of that gain was lost with today's price dip, which held above $1700. We don't want to see prices start to close below $1681 as that would suggest that the short-term trend is turning bearish. If prices hold above $1681, we will think about going long for a potentially strong rally that might go to $1900 or even higher over the next month or two.
[We note here, however, that we don't expect any rally to exceed $2000. That's because the final top to a long-term 23 year cycle in gold most likely happened in Aug. 2020 at $2070 (see Gold Update on the Homepage). This means we will want to reverse any long positions and short sell at the top of any strong rally now to ride down a steep corrective drop to the final 23 year cycle bottom that is due around 2023 - 2024. That correction could go down to $1000.] For now, we are still on the sidelines of gold.

Silver likely started its current medium-term cycle with its July 14 low at $18.15. Unlike gold, silver prices have gone below the start of this cycle. This means the cycle has probably turned bearish and is headed lower towards its final bottom due many weeks from now. The other possibility is that silver started a new medium-term cycle (and possibly a longer-term cycle) with its Sept. 1 low at $17.58. If that's the case, silver could be very bullish and may have already started a long-term rally that could take prices as high as $30. A break and close above $20.85 would support this bullish view. If prices can't exceed $20.85 soon, however, we will have to go with the bearish scenario. Let's remain on the sidelines of silver for now.

I will analyze the crude oil market tomorrow.

Trading Blog Thursday, September 8, 2022

9/8/2022

MARKETS UPDATE (4:00 pm EDST)

We are seeing a bounce and reversal from Tuesday's lows in the broad stock market, but were those lows a significant sub-cycle bottom, and will this rally gain any legs? That is the important question. To be bullish, this rally should at least break and close above 32,000 in the DOW, 4,000 in the S&P 500 (it did that today), and 12,000 in the NASDAQ. Otherwise, this rally may be short-lived, and equities could roll over and continue their descent to lower levels. Let's remain on the sidelines of the broad stock market for now.

Gold and silver prices have been relatively flat so far this week (although silver is rallying a bit today). We still have a strong bullish divergence signal between these metals as silver broke below its mid-July low ($18.15) last week while gold has yet to breach its July low ($1681). Gold prices seem to be stabilizing with a possible "double-bottom" to that July low around $1700. This "double-bottom" and last week's low in silver ($17.59) may be significant cycle bottoms, but we need to see stronger rallying to confirm that. We also note that we enter a strong reversal zone specifically for the precious metals next week (Sept. 12 - 20). I would rather see a significant low in that time frame to consider going long in either metal. If instead prices rally strongly into next week, we would avoid buying and may even consider selling short at the top of a possible imminent correction. The cycle patterns in these two metals are still ambiguous, so we will remain on the sidelines of both gold and silver for now.

The U.S. Dollar Index is taking a breather today from its recent non-stop rally. I don't expect a major corrective drop in this index right now because there are no major reversal zones this week. But we might see a move down to the 15-day moving average (around 109), or even down to 108. That would help push up gold and silver prices, but if the dollar starts to rally again, the precious metals could fall lower.

In Tuesday's blog on crude oil I wrote:

"...prices rallied sharply in early trading today, but then fell back and lost all of their early gain near the end of the trading day. This is bearish behavior. Prices could now challenge or push lower than the Aug. 16 low of $85.37 (Oct. contract chart) to form a final medium-term cycle bottom."

Well, crude did push a LOT lower yesterday and today with prices getting as low as $81.20 (Oct. contract chart). This could mean that a final older medium-term cycle bottom is imminent. It could also mean that a new medium-term cycle began with the $85.37 low on Aug. 16 and is turning bearish. Even if an older cycle is bottoming here, the trend would still be bearish because prices are now below the start of the cycle ($90.48 on April 11).

There is a reversal zone specifically for crude coming up at the end of next week (Sept. 16 - 26) that overlaps with another general reversal zone for all markets. That would be a good time for a final cycle bottom in an older cycle (that is due now). But because the overall trend in this market seems to be turning bearish, we will be cautious about buying that bottom - especially if prices go much lower. We will stay on the sidelines of crude as we wait to see how prices move into the upcoming reversal zone.

Trading Blog Tuesday, September 6, 2022

9/6/2022

MARKETS UPDATE (3:30 pm EDST)

The broad stock market wavered a bit today - the first day after a long holiday week-end - but closed the day with losses. All three of our market indices (DOW, S&P 500, NASDAQ) made new weekly lows this morning, so we are not going to get a bullish divergence signal this week. Nevertheless, a significant sub-cycle bottom is due now and could be forming today or tomorrow. If this market continues to fall past Wednesday, however, it would likely indicate that a sub-cycle trough is being bypassed and the current medium-term cycle is turning bearish. That would be confirmed if these indices fall below their June 16 (NASDAQ) and June 17 (DOW and S&P 500) lows. Even if we get a reversal now, these indices have fallen low enough for us to question the bullishness of any subsequent rally. Let's stay on the sidelines of this market for now, or at least until we see more signs of a bottom and reversal back up.

Last week we had a bullish divergence signal between gold and silver. Both metals rallied in early trading today but then dropped back down to close with losses. Today and the next three days as well as early next week could see pivot points for gold and silver, so we may see one or two reversals in that time frame. We also enter a major reversal zone for these metals next Monday (Sept. 12 - 20). Thus this week and next could be a bit of a roller coaster ride in prices. If we get a significant bottom next week in either metal, it may be a good spot to buy. For now, we are staying on the sidelines as the cycle patterns in this market are still not clear.

The U.S. Dollar Index seems to be "breaking out" to a new 20 year high as it closed above 110 today. There are no major reversal zones for currencies until later this month, so this index may only be hampered by minor corrective dips over the next two weeks. A bullish dollar will usually depress gold and silver prices.

Like gold and silver, crude oil prices rallied sharply in early trading today, but then fell back and lost all of their early gain near the end of the trading day. This is bearish behavior. Prices could now challenge or push lower than the Aug. 16 low of $85.37 (Oct. contract chart) to form a final medium-term cycle bottom. As I wrote in last Thursday's blog on crude (referring to the $85.98 low that day):

"This could be a "double-bottom" to the Aug. 16 low, or it could go lower for a deeper bottom by Sept. 6 (next Tuesday). Let's wait until after Labor Day to see where the price is headed."

Well, here we are on Sept. 6, and today's low at $86.16 still hasn't broken $85.37, but crude looks like it could go lower. There's a major reversal zone specifically for crude coming up at the end of next week (Sept 16 -26). If prices don't stabilize and form a bottom this week, we may see the final bottom form in that reversal zone. Let's remain on the sidelines of crude for now.

Trading Blog Thursday (late night), September 1, 2022

9/1/2022

MARKETS UPDATE (11:30 pm EDST)

Our broad stock market indices (DOW, S&P 500, NASDAQ) are moving well below our target ranges for a sub-cycle bottom (32,000 - 33,000 for the DOW, 4,000 - 4,200 for the S&P 500. and 12,400 - 12,700 for the NASDAQ), but they are still well above the start of their medium-term cycles from June 16 (NASDAQ) and June 17 (DOW and S&P 500). Any sub-cycle low should be due this week. We are technically out of our reversal zone (it ended yesterday), but because we are moving into a major holiday week-end in the U.S. (Labor Day), I'm going to extend that reversal period into next Tuesday (the day after Labor Day). We may even see a bottom today as equity markets rebounded strongly from an early day slump. If we see just one or two of these indices (but not all three) make a new low early next week, that would be a bullish divergence signal that could lead to a reversal and rally. But if this correction goes down too far, the medium-term cycle could turn bearish. If that happens, we may not want to buy the low but instead wait for the top of what could be a modest rally to sell short. We are still on the sidelines of this market.

Gold and silver prices have been falling this week. If these are new medium-term cycles that started on July 21 (gold) and July 14 (silver), then they are turning bearish. Another possibility is that both metals are completing older cycles and are making their final bottoms now (with gold possibly making a double-bottom to its July 21 low). We have a bullish divergence signal now as silver has broken below it's July 14 low ($18.15) but gold is still just above its July 21 low ($1681), but that could be negated tomorrow if gold breaks a bit lower. We are cautious about buying now, and we will remain on the sidelines until we can be more certain of the current cycle pattern.

The U.S. Dollar Index today made a new 18 year high nearly touching 110. We are only one day out of a reversal zone specifically for currencies (Aug.23 - 31), so this could be another top, with a reversal to follow. If so, that would give a boost to precious metal prices. If the dollar "breaks out" instead and moves above 110, gold and silver could continue to fall.

Crude oil prices continued to plummet today. We had been watching for the possibility of crude making a final medium-term cycle bottom between Aug. 18 - Sept. 6, but last week's rally was making me think this wouldn't happen and that the low of Aug. 16 ($85.37 - Oct. contract chart) was the end of the medium-term cycle and start of a new one. But that low is now being challenged by today's drop to $85.98. This could be a "double-bottom" to the Aug. 16 low, or it could lower for a deeper bottom by Sept. 6 (next Tuesday). Let's wait until after Labor Day to see where the price is headed. In the meantime, we remain of the sidelines of crude.

Trading Blog Monday, August 29, 2022

8/29/2022

MARKETS UPDATE (5:30 pm EDST)

The broad stock market moved down in today's early morning trading, then it rallied into the afternoon, but it finished the day back down. This demonstrates a nervous and indecisive market. Our sub-cycle corrective bottom is due this week, and our current reversal zone ends this Wednesday. We need to see this market turn up soon to confirm our view that equities will give us another significant rally into September (that may or may not make new all-time highs). The DOW and S&P 500 are approaching the lower end of our target ranges for a sub-cycle bottom (32,000 - 33,000 for the DOW, 4,000 - 4,200 for the S&P 500. and 12,400 - 12,700 for the NASDAQ), but the NASDAQ has fallen well below its target range. Because all three indices made new lows today, we will not get an intermarket bullish divergence signal this week (which we like to see at cycle and sub-cycle bottoms). We would like to see more signs of a sub-cycle bottom to buy by Wednesday, but if the DOW and S&P 500 also break below their target ranges, and these indices continue to fall past Wednesday, we will refrain from buying and will have to prepare for this medium-term cycle turning bearish. We are still on the sidelines of the broad stock market.

Gold and silver both made new weekly lows today, so the only way we will get a bullish divergence signal in this market this week is if silver moves below the start of its current medium term cycle (i.e. below its $18.15 low from July 14) without gold doing the same. Silver is close to doing that. Gold prices seem to be stabilizing around $1735 which is a comfortable distance from its medium-term cycle's starting point ($1681 on July 21). If this week's early general reversal zone (ending Wednesday) does not turn prices up, there is another short-term potential "turning point" for the precious metals on Thursday and Friday. We note that gold is still below its 15-day moving average. We need to see prices close above there soon to confirm this medium-term cycle is still bullish. Silver can also stay bullish as long as it doesn't break and close below its $18.15 low. We are now out of both metals, but we will watch carefully this week for potential buy spots in both gold and silver. We are currently on the sidelines of both metals,

The U.S. Dollar Index made a new high at 109.48 today, and that could be a double-top to its high from July 14 (109.29). This high is happening in the center of a reversal zone specifically for currencies (Aug. 23 - 31), so there's a good chance we could see a reversal back down now. If that happens, it would support a rally in the precious metals.

After Friday's corrective dip, crude oil prices rallied back strongly today, breaking above $95 and closing at $97.01 (October contract chart). While it's still possible for prices to make a new low by Sept. 6 (today's high is in the center of our general reversal zone), it seems more likely that the Aug. 16 low at $85.37 was the end of an old medium-term cycle and the start of a new one. If that's the case, we will wait for the next sub-cycle correction for a potential spot to buy. We are still on the sidelines of crude.

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