As I discussed last week (see Thursday's blog), the broad stock market is very ambiguous right now and is giving us many mixed signals. Even though last week's correction was modest, it may have been enough to temporarily unwind the overbought market, and we could see a rally now. On the other hand, it is still possible for equities to continue lower this week for a deeper correction into the very strong reversal zone coming up in the last two weeks of this month. Right now we don't know if that reversal zone will be a high to sell short or a low to buy. This week's price movements up or down should tell us that. Still on the sidelines of this market.
There is some divisiveness now among analysts that I follow concerning the short-term direction of the precious metals. I mentioned last Thursday that rising gold and silver prices were challenging our short positions but that cycle and timing patterns were strongly suggesting a deeper cycle low over the next three weeks. That is still the case, but after looking over the data this weekend, I can see that one could also make an argument for the medium-term cycles of gold and silver bottoming on March 27 and April 1, respectively. If those lows ($1,208 in gold and $14.85 in silver) were the cycle bottoms, we could see strong rallying now. Gold prices are now back up to where we sold short, but silver is still a good distance below the entry price of our short trade. Lets put a stop loss for our gold short position on a close over $1,260 and for our short position in silver on a close over $15.70. Both metals could be very volatile next week with price surges both up and down. We will take profits in our gold short position if prices fall and approach or move below $1,200 and take profits in our silver short on any dips close to or below $15. Holding my short position in gold and silver for now.