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Trading Blog Thursday (evening), January 30, 2014

1/30/2014

BRIEF SILVER, GOLD, and CRUDE OIL UPDATE (8:00 pm EST)

Two of my recent blogs on silver stated:

"...gold and silver could be volatile this week (1/27) so prices could be making significant moves up or down, or both."

"...I have been avoiding buying silver as it seems more vulnerable to a deeper short-term correction. '' (1/28),

This correction seems to be happening now as silver prices dropped significantly today with the spot price nearly touching $19 and closing around $19.20. This is right at the price level I suggested yesterday as an ideal buy spot. During today's drop, however, a major bearish signal appeared in the silver charts making directional momentum now 100% bearish for this metal. While we still could see a bottom form over the next several trading days (possibly below $19), I am going to continue to exercise caution here and avoid any buying until momentum shifts back to at least partially bullish. Gold did not fall as much today and closed around $1245. Silver is now making a new multi- week low while gold is not, so we could be seeing a case of intermarket bullish divergence here which supports the argument for a strong reversal (this would be invalidated if gold starts to fall below $1200). Still on the sidelines of both silver and gold and waiting to buy.

Crude oil prices have been rising into this week's reversal zone and have so far remained below $100. This could be an ideal time to sell this market short, but, in a situation similar to that described above for silver, a strong bullish signal appeared in the crude oil charts today which makes the directional momentum for crude now mixed bullish and bearish (it had been 100% bearish). This makes me uncomfortable with any short selling for the moment. This market could be turning bullish. As I've mentioned in recent blogs, the cycle picture for crude oil is also a bit unclear, so it is best to remain on the sidelines for now. Currently out of this market.

Trading Blog Wednesday (night), January 29, 2014

1/29/2014

MARKETS UPDATE (11:30 pm EST)

Well, it looks like the Federal Reserve is exercising its recently acquired hawkish wings as it decided today to "stay the course" with its plans to decrease (taper) Treasury bond purchasing by $10 billion a month. After a two day meeting, the decision to continue QE tapering was unanimous among the FOMC's 10 voting members. According to some Washington insiders, the Fed is trying to appear strong in its policies and did not want to give the impression this week that it was backpedaling on its tapering plans just to rescue a falling stock market. In a vain attempt to calm the markets, the Fed reiterated its intention to keep interest rates low (higher interest rates being a major investor fear associated with tapering). While many analysts are expecting the Fed to continue decreasing bond purchases by $10 billion every month for the rest of the year, some are speculating that when Janet Yellen takes over as Fed chairwoman next week (today was Ben Bernanke's last day as the central bank's chairman), Federal Reserve policy could change. The Fed has repeatedly stated that tapering is dependent on the state of the economy, and the labor market in particular, and can be stopped at any time if economic data does not support it. Ms. Yellen is frequently characterized as being dovish and favoring easy money policies, but we will have to wait and see how true this is. If she is a dove, we may see the Fed crank up the printing presses for more QE before the year is over.

The broad stock market did not react well to the news of a continuing QE taper. The DOW dropped over 200 points immediately following the Fed's announcement and closed the day with a 190 point loss. Many on Wall Street had been expecting the Fed to maintain the status quo on tapering, so this "bad news" was likely already heavily factored into the markets. The increasing turmoil in global emerging markets over the last few weeks is another influence thought by some analysts to be a major factor contributing to market pessimism today. In terms of cycle timing, we are now in a time zone when the likelihood of a major market reversal is high (this could extend into the first week of February) so this falling market could bottom soon and turn bullish. There is support for the DOW now around 15,600 so I don't expect this index to go far below that level before forming some sort of bottom. If today's steep drop turns out to be just a knee-jerk reaction to the Fed announcement, the bottom could already be in. We took profits on our short positions yesterday (or today if you read my post this morning) and are now waiting for signs of a bottom to the current correction. Despite the big drop in the markets today, directional momentum remains mixed bullish and bearish in the DOW, S&P 500 and NASDAQ indices, so we should watch now for any bullish changes in momentum that could indicate the start of a major reversal and the beginning of a new cycle in the market. I should point out here that stock markets in general (in the U,S. and globally) are very jittery and unstable right now so we need to keep in mind that there is always the possibility of panic selling being triggered by some seemingly minor event (such as today's Fed announcement). A clear break of support levels and a bearish change in momentum in the three indices mentioned above would be signs of this happening, and should this occur we would reenter our short positions. We are out of this market for now and watching for a bottom to the current correction.

Gold and silver prices did not react very strongly to the Fed's announcement today and short-term technical signals for the two metals are still looking bearish. I am still looking to buy any short-term correction now in both gold and silver. An ideal buy spot for gold would be around $1220 and for silver around $1920. On the sidelines of gold and silver for now.

Trading Blog Tuesday, January 28, 2014

1/28/2014

BROAD STOCK MARKET and GOLD TRADE ALERT (2:00 pm EST)

I was intending to wait until the end of the week before making any major trading decisions as Thursday-Friday is the ideal timing point in this week's reversal zone for markets to turn. The FOMC meeting that started today and ends tomorrow, however, has me concerned that we could see an early shift in the markets as they react to possible changes in the Fed's policy on QE tapering. Recent negative jobs data and a steeply falling stock market may give the Fed an excuse to backpedal on the tapering plan it announced in December and at least temporarily continue its regular bond purchasing. Such a decision could excite the stock market and reverse the current downturn. Even if the Fed decides to move forward with its tapering program, the markets may turn up soon after the announcement anyway as last week's steep fall has more than likely already taken into account taper fears. The results of the FOMC meeting will be announced tomorrow afternoon.

We have good profits in our short positions in the broad stock market since we entered them at the start of the downturn on Jan.17. While the market could fall further, it has reached my original target zone and cycle patterns indicate that we are at or near the end of this market's current cycle. It therefore looks like a good time to cover these shorts and take profits. If the broad stock market is in a more severe correction mode, this will become obvious when directional momentum switches to 100% bearish (it is currently mixed bearish and bullish), and we could re-establish our short positions if that happens. I am taking profits and unloading (covering) my short positions in the broad stock market today.

Gold and silver are starting to look short-term bearish. Gold has encountered some resistance at the $1280 price level and looks like it could react back down short-term. Silver looks even more bearish (short-term) at the moment.
I have been holding a long position in gold but have been avoiding buying silver as it seems more vulnerable to a deeper short-term correction. We may be seeing this correction now. If the Fed does decide to slow down tapering at the FOMC meeting, this could temporarily push down precious metal prices. It makes sense, therefore, to sell our gold positions now and wait to buy back later, possibly at a better price. Gold prices today are just above the point where we bought them on Jan.14, so we can sell them here with no loss. Selling all gold long positions today.

As mentioned above, the FOMC meeting concludes tomorrow afternoon so markets will likely not react until then (if they do react). Any traders who miss this alert today will more than likely have time tomorrow morning to make any appropriate trades before the Fed speaks.

Trading Blog Monday (early AM), January 27, 2014

1/27/2014

MARKETS UPDATE (5:30 am EST)

Last week we saw steep falls not only in the U.S. stock market, but in many global markets as well. This demonstrates just how skittish and volatile global economies are these days. Bullish optimism can quickly turn to bearish fear at the drop of a hat. In the U.S. some of that fear may be coming from apprehension about next week's Federal Open Markets Committee (FOMC) meeting when the Fed decides if the reduction of its bond purchasing program (QE tapering) will continue into February. In December the Fed announced it would begin this tapering by reducing bond purchases by $10 billion a month starting in January and continuing each month until the program expires at the end of the year. Fed Chairman Ben Bernanke, however, has pointed out that this plan is not set in stone and that the Fed can stop the tapering process at any time if economic data indicates a weakening economy. Recent negative economic data (e.g. the disappointing December labor market report) may have some investors worried (or hopeful) that the Fed will change its mind about tapering. The stock market dislikes uncertainty, so we may see more losses as we head into the middle of this week when the FOMC meeting is scheduled.

From a technical, cycle and timing standpoint, the middle to end of this week is also when the likelihood of market reversals can be high. We could therefore see this steep correction in the broad stock market bottom out and start to turn back up. My original target for the correction was the 15,800 area in the DOW, and we are just about there now. There is also support around 15,600, so the market may bottom there by the middle or end of the week. We will have to wait and see how low it will go. Our short positions are doing very well, but we may want to take profits some time next week if it looks like the correction has run its course. Holding short positions in the broad stock market for now.

As I mentioned in my last blog, gold and silver could be volatile this week so prices could be making significant moves up or down, or both. We are currently holding a long position in gold and still waiting for a stronger signal to buy silver. If these metals move lower into the end of the week with silver staying above $19 and gold above $1200, it will be a good set up for a strong rally and probably a good point to go long in silver. On the other hand, a rally into Friday could indicate an imminent deeper correction and we would probably want to take profits in our gold longs and stand aside. There are technical signals supporting both scenarios now.

Directional momentum continues to be strongly bearish in crude oil charts, but the cycle picture is a little unclear at the moment so I am currently on the sidelines of this market. If prices rise into the end of this week and remain below $99, we may have another good opportunity to sell the market short.

Trading Blog Thursday. January 23, 2014

1/23/2014

MARKETS UPDATE (2:45 pm EST)

It is looking like the correction that I've been anticipating in the broad stock market may be finally kicking in. At the time of this writing the DOW has lost over 200 points and a major bearish momentum signal has appeared in the chart of this index. As I have been stating in recent blogs, we are near the end of a significant cycle in this index (as well as in the S&P 500 and NASDAQ indices) so it is a normal time for this correction to occur. Such a correction could bring the DOW towards the 15,800 area or lower, and this could happen quickly with the bottom occurring ideally around Jan. 31st (the next major time zone for a market reversal). One note of caution here is that the NASDAQ's directional momentum is still 100% bullish. This divergence from the DOW and S&P 500 (which are both mixed bullish and bearish now) could be indicating an underlying strength in the broad stock market that minimizes any correction, or it may simply be reflecting a longer-term bullishness in the market that will resume after a steep short-term correction is over. We have been short in the broad stock market since last Friday. Maintaining short positions here.

Gold and silver are rallying today and many gold and silver stock indices are looking quite bullish, which is a good sign for the precious metals sector in general. An ideal bullish technical pattern may be setting up now which could see gold and silver prices drop back from today's prices towards $1220 in gold and $19.20 in silver by the end of this month. If this happens and those lower prices hold, it will be a good point to go long in silver (and also gold if not long already) as a very strong rally could follow. An alternate scenario would be for these metals to continue rallying from here. There are some technical signals that indicate precious metal prices could be volatile over the next week. It is important now to keep in mind that the overall long-term picture for gold and silver is still very bullish, and we are simply waiting for confirmation that the long-term cycle bottoms are in for these metals. Those bottoms may already have occurred, but we can't be certain until both metals break through several upper resistance levels, and this may take them a few more months to do. If gold does go lower, I don't expect it to get below the $1000 - $1100 area. We are currently long in gold, but out of silver for now.

Crude oil prices continued to rise today. We were stopped out of our short positions yesterday as crude prices surged on news of Syrian civil war tensions. There is considerable resistance for crude in the $97 - $99 area so we may see prices leveling off somewhere in this range over the next week or two. Should this resistance hold into the end of next week (with momentum remaining bearish), we may have another good opportunity to sell short. Of course, with so much tension and the potential for conflicts in the Middle East, going short in crude oil can have an extra risk factor now. The cycle picture for crude is looking a little unclear at the moment so I am going to stay on the sidelines of this market at least until the end of next week. At that time I will assess the trading situation and risk factors. Out of this market for now.

Trading Blog Wednesday, January 22, 2014

1/22/2014

CRUDE OIL TRADE ALERT (1:30 pm EST)

My stop loss zone for short positions in crude oil has been breached today with crude prices surging towards $97 in a move likely being triggered by the unresolved Syrian civil war conflict making it to the news once again. Traders may recall how last summer saw oil prices soar to over $104 as the Syrian crisis (and the possibility of U.S. intervention) heated up. I have mentioned many times on this site how conflicts in the Middle East are a "wild card" factor when trading oil. While this may be just a temporary surge, we are now out of a normal time zone for a reversal in this market, and the next one is coming up in the last days of January. Prices could rally into the end of next week before any significant downturn begins. There are a few technical indicators supporting this short-term bullishness (even though directional momentum remains strongly bearish). For these reasons I consider it prudent to cover all short positions in crude oil now and wait to see how prices move into next week. Prices are settling around $96.60 at the time of this writing so we are only $1- $2 away from our original entry point. Covering short positions in crude oil today and out of this market for now.

Trading Blog Tuesday, January 21, 2014

1/21/2014

MARKETS UPDATE (7:30 pm EST)

The broad stock market continues to look "toppy" while the DOW remains below its Dec. 31st all-time high of 16,588. The S&P 500 and the NASDAQ did break to new yearly highs last week, so this case of intermarket bearish divergence persists. We move out of a likely timing zone for a reversal in this market tomorrow, so if the market is going to turn down it should do so now. Today's 44 point drop in the DOW may be the start of this correction. As I stated last week, the stop loss for our short positions here will be when the DOW breaks clearly above that 16,588 high. Cycle studies indicate that this market's current cycle is nearing completion and could form a bottom anytime now. From a technical standpoint, a good time for this bottom would be close to Jan. 31. However, If the DOW does break to new highs and continues to rally, then the end of this month could instead correspond to a top in the market from which a correction begins. We will have to wait and see how this plays out. Presently maintaining a short position in this market.

Crude oil rose today and broke just over $95 but then closed just below that price. As I mentioned in my last blog, there is now resistance in the $95 - $96 area, and this serves as a good stop loss zone for our current short position in this market. Momentum remains strongly bearish, but we need to see prices start to fall now or there is a risk of further rallying into the end of the month (the next strong reversal zone). Holding a short position in this market.

Gold and silver prices fell today but they may be setting up for a strong bounce from the $1220 area in gold and the $19 area in silver by the end of the month. If that scenario unfolds, it will be a good point to go long in silver. I am already long in gold. A good stop loss zone for gold would be from $1180 - $1200. Currently long in gold but out of silver.

Trading Blog Friday, January 17, 2014

1/17/2014

BROAD STOCK MARKET AND CRUDE OIL TRADE ALERT (2:15 pm EST)

It is looking like a good time to sell short the broad stock market. The DOW, S&P 500 and NASDAQ indices are rising into the center of this week's reversal zone, and while the S&P 500 and NASDAQ are making new yearly highs, the DOW so far has not. This is a classic case of intermarket bearish divergence. There is a good risk/reward ratio here as the stop loss will be if and when the DOW clearly breaks above its all-time Dec. 31st high around 16,590, which is only about 100 points away from the current price. If the market turns down now the correction will probably be short-term, but it could be substantial, possibly bringing the DOW into the 15,800 area or lower. I am going to go short in the broad stock market today.

Crude oil prices have also moved into an ideal position to short sell. Prices are rising steeply into this week's reversal zone and are now encountering resistance in the $95 area. Today's prices nearly touched $95 but then fell sharply back and are closing near the lower end of the day's range, which is bearish behavior. Directional momentum remains nearly 100% bearish indicating the potential for a substantial correction. A good stop loss here would be a clear break above the $95 -$96 area. Going short in crude oil today.

Gold and silver have rebounded after falling a bit earlier in the week and are closing near their weekly highs, which is positive. We need to see more rallying soon, though, to avert the danger of prices falling to new lows. I am currently long in gold but am still being cautious and holding back on buying silver for now.

Trading Blog Wednesday, January 15, 2014

1/15/2014

MARKETS UPDATE (2:15 pm EST)

Weak labor force numbers in last Friday's jobs report for December triggered a pessimistic mood on Wall Street, and the DOW gave up nearly 200 points on Monday. It is recovering sharply from that plunge, however, and is now approaching its all-time high of Dec. 31 at 16,588. The S&P 500 and NASDAQ indices are already making new highs for the year and exceeding their Dec. 31 peaks. If the DOW remains below its all-time high, this will be a strong case of intermarket bearish divergence suggesting a major reversal to the downside now. Also favoring this idea is the fact that the market is rising strongly into the center of this week's reversal zone. Working against the idea of a strong reversal is the fact that while strong bearish signals appeared in the S&P 500 and NASDAQ indices on Monday, directional momentum in these indices is now switching back to 100% bullish. The surge in the broad stock market today seems related to reports of stronger than expected retail sales, so this effect may be short-lived. My strategy here will be to wait and see if the DOW can break clearly above its Dec. 31st high. If it doesn't, I will still consider selling this market short. Still on the sidelines.

Crude oil prices also surged up today in response to positive retail sales numbers as well as what is expected to be a decline in U.S. crude inventories to be reported later in the week. This sharp rise in crude is pushing us quickly into an ideal short-selling price range from $94 -$96, and the price is rising into a reversal zone that could extend into early next week. I will now watch for a short-term trade signal to sell this market short (assuming momentum remains bearish). On the sidelines for now.

Gold and silver prices are down a bit today, but this may be a good directional move into this week's reversal zone which could turn the market back up. Recent bullish momentum signals appearing in the charts of both metals as well as in the charts of the major gold and silver mining company stock indices remain intact. I am long in gold right now but I am holding back buying silver for the moment as there is still a possibility here of prices turning down and making a deeper bottom, and in such a scenario silver's loss could be substantial. I am being very cautious with gold as well, and I have a watchful eye on any nearby support zones as possible stop-loss points if short-term trade signals warrant this. There is currently support in the $1220 -$1230 area. Holding long positions in gold but out of silver.

Trading Blog Tuesday, January 14, 2014

1/14/2014

GOLD TRADE ALERT (8:45 pm EST)

It is looking like a good time to start buying gold. All charts in the precious metals sector (stock indices, ETFs, and the metals themselves) are flashing strong bullish signals. Even if gold corrects down a bit more, it doesn't look like it will get very far before encountering heavy resistance and likely turning back up. A good stop loss point here would be around $1180. There is now strong support at the $1200 level. I am waiting a bit to buy silver as it is more volatile than gold and any stop loss points right now would be too far below the current price. Going long in gold now.

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