To rally or not to rally. That has been the question for the broad stock market for most of the week as equity markets have surged up and down in roller coaster fashion. Today may be decisive, however, as the DOW is making a new high for the week and is again breaking above the important 16,100 level. This supports the idea that the Jan. 20 low was the start of a new medium-term cycle and that we will now see a rally into the first or second week of February. As long as directional momentum remains bearish in this market we will be looking to sell short the top of that rally as a severe correction could follow. We can start looking for that high towards the end of next week. Still out of the broad stock market.
Gold and silver may have made significant highs on Wednesday, especially as gold penetrated the lower part of our target range for a top ($1127 - $1147) before reversing down. We are not yet in our next reversal zone (which begins next Wednesday), but the current cycle structure indicates the possibility of a sharp, quick drop in precious metal prices right now. This means that our reversal zone (next Wednesday into the second week of February) could correspond to a low instead of a high. If so, we will look for a buy spot. Otherwise, we will watch for gold to push higher into that $1127 - $1147 range over the next week or two for a top to sell short. Technical signals suggest that precious metals could continue to be very volatile all next week so we need to be cautious in our trading. Still on the sidelines of gold and silver.
Any traders who were able to go long in crude oil on Tuesday (I missed my entry price as it happened on the overnight market here in the U.S.) may wish to take some profits now as the price has already risen to my original $34 - $35 target area where there is some resistance. Directional momentum in crude is still nearly 100% bearish so this rally could be short-term. Out of crude oil for now.