MARKETS UPDATE (8:45 pm EST)
Last Wednesday's FOMC meeting and the "dovish" tone of its policy statement gave a small boost to the broad stock market which kicked the DOW to a new record high of 16,978 on Friday (8 points above the previous June 9th high of 16,970). The DOW is slightly down from that high today and so far this rally seems a bit anemic. We are near the end of significant cycles in all three broad stock market indices (DOW, S&P 500, NASDAQ) so some sort of correction is imminent in these markets. The question is how big the correction will be. Right now directional momentum in these indices continues to be strongly bullish which suggests more rallying into July. If Friday's high was a double top to the June 9th high, however, the market could start falling now and take a moderate correction (perhaps to the 16,300 level). I still feel a more serious correction is coming in July (possibly from a rally to another new high following a moderate correction now). My main focus continues to be on shorting a new high in July, but we could still get a tradable dip and rally before then. Still on the sidelines.
After surging strongly last week the day after the FOMC meeting, gold and silver prices seem to be leveling off. As I mentioned in Friday's gold and silver update, it appears that precious metals could be "breaking out" and starting their new long-term uptrend. There are, however, several short-term technical indicators suggesting that prices could now back down a bit from this surge before continuing higher, and there is even the possibility of this surge being a "fake out" to be followed by new lows in gold and/or silver. This is why I am being cautiously bullish at the moment.
If gold and silver are going to move down again they should start doing so this week. If gold cannot get significantly above $1340, we may see a pullback to the $1290 area. Any dip that holds above $1280 would be a good spot to go long. There is still the possibility of gold and silver making new lows in July, and this would actually be the ideal setup for buying but, of course, financial markets don't always give us the ideal technical setup that we want (although sometimes they do). Gold prices need to clearly break through $1400 before we can be reasonably confident that the final long-term cycle bottom is in. Until that happens there is a possibility of gold moving back down to the $1100 area. I know this short-term speculating can be frustrating to traders, but calling the final bottom of a long-term cycle is never easy. It is important to keep in mind now that the medium and long-term technical picture for gold and silver is very bullish, and once the long-term cycle bottoms are in, both metals are set to rally very significantly for (at least) the next several years. Those bottoms may already be in, but if not, they should be in no later than late July or early August. For now, my short-term strategy is to watch for any dips that hold above the $1280 - $1290 area in gold to go long. On the sidelines of this market.
Relevant to the price movements of gold and silver is the U.S. Dollar Index (which usually moves in a direction opposite precious metal prices). The dollar has lost all of its gains from a surge earlier this month, but it seems to be finding some support above 80.20, and its directional momentum is still strongly bullish. If gold and silver are now "breaking out" then we would expect the dollar to be "breaking down". While this may be happening, the dollar's current bullish momentum makes this judgement premature and reinforces my cautiously bullish attitude towards gold and silver.
I have been staying on the sidelines of crude oil in part due to the current political crisis in Iraq which could continue to have a severe impact on crude prices and make this market very volatile. The cycle picture in crude charts has become clearer recently (we are in the first half of a new cycle that began on May 1) and directional momentum remains strongly bullish. I may consider going long on any significant corrections, but it is important to remember that increased price volatility due to the Iraq crisis can result in abrupt moves in both directions. Buying is not without risk (though probably less of a risk than short selling crude during an escalating crisis in the Middle East). Still on the sidelines here.
Last Wednesday's FOMC meeting and the "dovish" tone of its policy statement gave a small boost to the broad stock market which kicked the DOW to a new record high of 16,978 on Friday (8 points above the previous June 9th high of 16,970). The DOW is slightly down from that high today and so far this rally seems a bit anemic. We are near the end of significant cycles in all three broad stock market indices (DOW, S&P 500, NASDAQ) so some sort of correction is imminent in these markets. The question is how big the correction will be. Right now directional momentum in these indices continues to be strongly bullish which suggests more rallying into July. If Friday's high was a double top to the June 9th high, however, the market could start falling now and take a moderate correction (perhaps to the 16,300 level). I still feel a more serious correction is coming in July (possibly from a rally to another new high following a moderate correction now). My main focus continues to be on shorting a new high in July, but we could still get a tradable dip and rally before then. Still on the sidelines.
After surging strongly last week the day after the FOMC meeting, gold and silver prices seem to be leveling off. As I mentioned in Friday's gold and silver update, it appears that precious metals could be "breaking out" and starting their new long-term uptrend. There are, however, several short-term technical indicators suggesting that prices could now back down a bit from this surge before continuing higher, and there is even the possibility of this surge being a "fake out" to be followed by new lows in gold and/or silver. This is why I am being cautiously bullish at the moment.
If gold and silver are going to move down again they should start doing so this week. If gold cannot get significantly above $1340, we may see a pullback to the $1290 area. Any dip that holds above $1280 would be a good spot to go long. There is still the possibility of gold and silver making new lows in July, and this would actually be the ideal setup for buying but, of course, financial markets don't always give us the ideal technical setup that we want (although sometimes they do). Gold prices need to clearly break through $1400 before we can be reasonably confident that the final long-term cycle bottom is in. Until that happens there is a possibility of gold moving back down to the $1100 area. I know this short-term speculating can be frustrating to traders, but calling the final bottom of a long-term cycle is never easy. It is important to keep in mind now that the medium and long-term technical picture for gold and silver is very bullish, and once the long-term cycle bottoms are in, both metals are set to rally very significantly for (at least) the next several years. Those bottoms may already be in, but if not, they should be in no later than late July or early August. For now, my short-term strategy is to watch for any dips that hold above the $1280 - $1290 area in gold to go long. On the sidelines of this market.
Relevant to the price movements of gold and silver is the U.S. Dollar Index (which usually moves in a direction opposite precious metal prices). The dollar has lost all of its gains from a surge earlier this month, but it seems to be finding some support above 80.20, and its directional momentum is still strongly bullish. If gold and silver are now "breaking out" then we would expect the dollar to be "breaking down". While this may be happening, the dollar's current bullish momentum makes this judgement premature and reinforces my cautiously bullish attitude towards gold and silver.
I have been staying on the sidelines of crude oil in part due to the current political crisis in Iraq which could continue to have a severe impact on crude prices and make this market very volatile. The cycle picture in crude charts has become clearer recently (we are in the first half of a new cycle that began on May 1) and directional momentum remains strongly bullish. I may consider going long on any significant corrections, but it is important to remember that increased price volatility due to the Iraq crisis can result in abrupt moves in both directions. Buying is not without risk (though probably less of a risk than short selling crude during an escalating crisis in the Middle East). Still on the sidelines here.
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