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Trading Blog Tuesday, January 31, 2023

1/31/2023

SILVER TRADE ALERT (3:00 pm EST)

Today both silver and gold prices dropped steeply in the morning but snapped back quickly and are now closing the day in the upper part of their day's ranges. Furthermore, gold made a new weekly low but silver did not. This gives us a very strong bullish divergence signal, and it is happening inside our new reversal zone specifically for these metals (Jan. 30 - Feb. 7).

We were expecting a sub-cycle correction in gold to test the 15-day moving average and to be completed by Friday. Today's low in gold did that. Today's low in silver - $23.01 - seems to be a "double-bottom" to last week's low at $22.82, which could have been the final medium-term cycle bottom for silver (which was due last week). Based on all this, I am going to cover (unload) my short position in silver today with a small profit. (We are out of gold, but any traders with short positions in gold should also cover them.) It is probably a good idea to be out of silver this week as tomorrow's FOMC announcements and press conference could create volatility in all the markets, and silver tends to be a very volatile commodity.

If silver prices do drop further, we will look to buy the cycle bottom which is due (overdue) this week inside the current reversal zone (if it didn't happen last week). If a new medium-term cycle in silver has started, prices could be very bullish now.

Trading Blog Monday, January 30, 2023

1/30/2023

CRUDE OIL UPDATE (3:30 pm EST)

I am re-posting my comments on crude oil from last Tuesday here because all of it still applies:

"The medium-term cycle labeling for crude oil is still not clear, but there are two likely possibilities at this point in time:

1) Crude started a new medium-term cycle with its low of Sept. 28 at $73.28 (March contract chart). This scenario is bearish because prices have already fallen well below the start of the cycle (crude fell to $70.56 on Dec. 9), and the rally from Dec. 9 should turn back down soon with prices falling below $70.56 to the final cycle bottom due anytime now by March 4.

2) Crude started a new medium-term cycle on Dec. 9 at $70.56. This scenario could be bullish or bearish, depending on whether or not prices can stay above $70.56. Prices seem to have overcome resistance at $80 and are holding above there. The next steps in a bullish cycle would be to clear $85, and then $90. If bearish, however, prices will not clear these hurdles before turning down again and breaking below $70.

We are now also looking for the end of a longer-term 3-year cycle in crude which is due anytime now, but ideally around March 7 (or maybe near Feb. 4). If we get new lows then, it may be a very good spot to buy."

Well, crude prices managed to hold above $80 (March contract chart) for most of last week, but today they are falling steeply. If this is an older medium-term cycle (scenario 1 above), prices will continue down to a final cycle bottom due anytime by March 4 and probably below $70. If this is a younger cycle (scenario 2 above), however, prices may find support at or a little below the 45-day moving average (crude is testing that today) and then resume its rally from its first sub-cycle low. Right now, it looks like it could go either way, so we will remain on the sidelines until the cycle labeling becomes more clear.

Trading Blog Sunday (late night), January 29, 2023

1/27/2023

UPDATE ON THE BROAD STOCK MARKET and PRECIOUS METALS (11:00 pm EST)

Next week we see another FOMC meeting (it ends Wednesday, Feb. 1 at 2:00 pm EST), and it is expected that the Fed will almost certainly raise interest rates another quarter point. There is now investor optimism on Wall Street because of a recent ease in inflation, and there are hopes that the Fed will take this as a sign to hold back interest rate hiking. But many analysts see the Fed trying to curb this enthusiasm, and they predict that the Fed will attempt to do this with more hawkish rhetoric after next week's meeting along with the quarter point rate hike. If that happens, it could turn the broad stock market down. However, if fear of this happening pushes the market down Monday, Tuesday, and Wednesday morning, we might see a case of "sell the rumor, buy the news" with equities snapping back after the official Fed announcement at 2 PM and the subsequent press conference. Whatever happens, we may steer clear of any trading until a day or two after the Fed meeting when we can better determine if any reaction to the Fed is going to be serious.

Our current cycle analysis of equity markets is also pointing to a possible sell-off next week. Last week the DOW never exceeded its high from the previous week while the S&P 500 and NASDAQ both did so early in the week. Also, the NASDAQ exceeded it's Dec.13 high, but the DOW and S&P 500 remained below their Dec. 13 highs (although the S&P 500 is close). Thus we enter this week with two bearish divergence signals, and all three indices are ripe for a final medium-term cycle top. Although we left a fairly strong reversal zone Friday, there is another weaker one that runs from Jan. 30 - Feb.7 which could also correlate with a top. Of course, we need to keep in mind that reversal zones sometimes correlate with break-outs (or break-downs) instead of reversals, although this is not very common. The bottom line here is that next week could be a volatile one for the broad stock market. We remain on the sidelines for now.

We are expecting gold to make an imminent sub-cycle correction to a low between its 45-day and 15-day moving averages (right now that would be between $1843 and $1918), and that low should be in by the end of this week. Silver should be making its final medium-term cycle low now between $20 and $22. Next week is the center of a reversal zone specifically for precious metals (Jan. 30 - Feb. 7), so that would be a good time to see both lows. There's a chance that silver completed its cycle bottom with last Monday's low at $22.81, but I think it is more likely to go lower this week. We are still on the sidelines gold and holding our short position in silver for now.

Trading Blog Tuesday (night), January 24, 2023

1/24/2023

MARKETS UPDATE (10:00 pm EST)

The broad stock market is starting this week with an upswing. After last week's "roller-coaster" dip on Thursday, all three indices (DOW, S&P 500, NASDAQ) are rising sharply. The S&P 500 and NASDAQ are breaking to new weekly highs, but the DOW is lagging behind and is considerably below its high from last week (34,342). This, of course, gives us an intermarket bearish divergence signal which means a reversal back down could be imminent. But there are other bullish technical signals (e.g. all three indices closed back above their 45-day and 15-day moving averages today) that lead me to believe this rally could continue, and the DOW may break that 34,342 high. If it can do that, the Dec. 13 high is not far away (for all three indices), and breaking above those highs would mean the medium-term cycle is still bullish. Although we are still in a reversal zone through Friday and the market is rising to new highs (making an imminent top possible), last week's lows on Thursday were centered on a strong pivot point in this reversal, so that could have been a significant low from which a strong rally can follow. Let's see how bullish this market can be into the end of this week. If we get more bearish divergence signals, we may consider going short. But if all three indices can break their Dec. 13 highs, we may just wait for this medium-term cycle to end and then buy the bottom and start of a new one for another challenge to the all-time highs. We are remaining on the sidelines for now.

Today gold prices edged higher and made a new weekly high while silver did not. Thus our bearish divergence signal between these metals is persisting and reinforcing our idea that silver is headed lower to its final medium-term cycle bottom. That bottom is technically due this week, and we would like to see prices in the $20 - $22 range. If we get that, we will cover and take profits in our current short position in silver. Gold is most likely due for a sub-cycle corrective low anytime from now to Feb. 3. That means the high will probably be this week or early next week. Today's high at $1941 could have been it, but there's still time for it to push higher. If the correction down is not too severe, we may look to buy for another short-term rally before the fall to the final medium-term cycle bottom. (We may buy silver as well if we get that cycle bottom this week). For now, we remain short in silver and on the sidelines of gold.

The U.S. Dollar Index may be forming a baseline around 102. We are now in the center of a reversal zone specifically for currencies (Jan. 18 - 27), so a bottom and reversal back up in the dollar could be imminent. Last week's low at 101.53 could have been it already, but the greenback could make a lower low this week before reversing. A rise in the U.S. dollar now could push gold and silver prices down into our cycle and sub-cycle lows. We will watch for that this week.

The medium-term cycle labeling for crude oil is still not clear, but there are two likely possibilities at this point in time:

1) Crude started a new medium-term cycle with its low of Sept. 28 at $73.28 (March contract chart). This scenario is bearish because prices have already fallen well below the start of the cycle (crude fell to $70.56 on Dec. 9), and the rally from Dec. 9 should turn back down soon with prices falling below $70.56 to the final cycle bottom due anytime now by March 4.

2) Crude started a new medium-term cycle on Dec. 9 at $70.56. This scenario could be bullish or bearish, depending on whether or not prices can stay above $70.56. Prices seem to have overcome resistance at $80 and are holding above there. The next steps in a bullish cycle would be to clear $85, and then $90. If bearish, however, prices will not clear these hurdles before turning down again and breaking below $70.

We are now also looking for the end of a longer-term 3-year cycle in crude which is due anytime now, but ideally around March 7 (or maybe near Feb. 4). If we get new lows then, it may be a very good spot to buy.

Because the crude cycle is not clear right now, we will remain on the sidelines until we see a more definitive trend up or down.

Trading Blog Friday (evening), January 20, 2023

1/20/2023

MARKETS UPDATE (10:30 pm EST)

The broad stock market was a bit of a roller coaster ride this week. The DOW was the most bearish, peaking with a new weekly high on Monday and then falling dramatically into Thursday, but then staging a strong bounce back up today. The S&P 500 and NASDAQ peaked with new weekly highs a little later towards the middle of the week but then also plunged on Thursday and rebounded strongly today (Friday). The DOW broke below both its 15-day and 45-day moving average and closed the week below both (bearish). The S&P 500 also breached its 15 and 45-day moving averages, but it closed the week back above both (bullish). The NASDAQ only breached its 45-day moving average and also closed the week above it (more bullish).

So we are getting mixed bullish and bearish signals here, and there's still a chance these indices could rise next week to challenge or exceed their Dec. 13 highs. If all three break and close above those highs, the current trend would be confirmed as bullish, and we would probably wait for a significant corrective dip to buy. But if only one or two (or none) of these indices break those highs by the end of next week, it would be a bearish sign, and we may look to go short. Let's remain on the sidelines of the broad stock market for now.

Gold and silver also gave us some mixed signals this week. Both metals fell sharply early this week, but both have recovered much of that loss yesterday and today. Gold, in fact, made a new weekly high today, but silver did not, so our intermarket bearish divergence signal persists. Gold's next sub-cycle corrective low is due in two weeks (by Feb. 3), so it still has time to make a new high before falling. (That is, If the high wasn't today. If it wasn't, it will likely happen next week.) Silver, on the other hand, has its final medium-term cycle bottom due by the end of next week. This means its top is most likely in, and despite today's bounce, prices should continue to fall next week into our $20 - $22 range (we hope). We will continue to hold our short position in silver and maybe lower our stop loss now to a break above this week's high of $24.50.

Crude oil prices also bounced around quite a bit this week. The peak high on Wednesday at $82.38 exceeded the Jan. 3 high of $81.50, but today's close at $81.31 was still below that high. The medium-term cycle labeling for crude is still unclear, and we can't be sure if the cycle trend is bullish or bearish. We will remain on the sidelines of crude for now.

Trading Blog Tuesday, January 17, 2023

1/17/2023

MARKETS UPDATE (2:00 pm EST)

Our decision to short silver this morning seems to be a good one as both gold and silver prices are falling, but it is too early to tell for sure. We need to see both metals follow through to lower prices over the next several days to confirm that a significant correction is underway. If it is, we expect gold to get at least down to $1850 (possibly much lower) and silver into the $20 - $22 range. Let's hold our short position in silver and keep our stop loss at a close above $25 for now.

The broad stock market seems a bit shaky as we start a new trading week today following Monday's holiday. The DOW took a steep tumble this morning, but the S&P 500 and NASDAQ seem relatively stable. At the time of this writing (2:00 pm EST), those latter two indices have made new weekly highs, but the DOW has not (unless it can recover over the next two hours and do so). We may be getting a bearish divergence signal, and we are in a reversal zone and close to one of our potential "pivot points", so yes, the market could reverse now. But this reversal zone continues into the end of next week, and there are also some bullish technical signals right now that make me reluctant to sell short. If the DOW and S&P 500 can push higher and exceed their Dec. 13 highs (34,712 and 4,101, respectively) this week or next, it would confirm that the current medium-term cycle is still bullish with more rallying ahead. But if those highs can't be exceeded and the market turns back down now, we could be headed into a very deep correction. We will remain on the sidelines for now as we wait to see if today's tumble in the DOW is the start of a serious downturn or just a short corrective dip.

In last Wednesday's blog on crude oil I stated:

"...prices are now approaching the 45-day moving average. Any close above there, and then a close above $81.50 (the high of Jan. 30) would be a bullish sign and would suggest the low of Dec. 9 at $70.31 was a significant cycle or sub-cycle bottom."

Well, prices have now closed above the 45-day moving average, but they still seem to be finding a lot of resistance at $80. Prices are rising sharply and they made a new weekly high today, but this is happening in a strong reversal zone at that $80 resistance line. A downturn could be imminent. I would still like to see prices fall back down to $70 or lower this week or next to confirm an older cycle bottom and give us a good spot to buy. But if prices continue to rally and close above $81.50, we may have to abandon that idea. Let's remain on the sidelines of this market for now.

Trading Blog Monday (evening), January 16, 2023

1/16/2023

SILVER TRADE ALERT (7:30 pm EST)

Today was a holiday in the U.S. (Martin Luther King Jr. Day), so the markets were closed. Nevertheless, the precious metals market was trading outside the U.S. as gold prices rose to a new weekly high of $1927. Silver rose too, but could not exceed its $24.52 high from Jan. 3. Thus our intermarket bearish divergence signal from last week continues this week (until that high is broken). Gold's high is now a steep crest in a strong reversal zone, and a steep drop to a sub-cycle corrective bottom could happen by the end of this week. But a not so steep and more moderate correction could also be imminent with a bottom expected anytime between now and Feb. 3.

With silver, however, a final medium-term cycle bottom is due by Jan. 28, and that should be a very steep corrective drop from either the high of Jan. 3 ($24.52) or a higher high this week or next. Unless sliver starts to close above $25, my guess is that the high is in and the corrective drop is imminent. Our target for the drop is still $20 - $22. Today seems to be a good spot to sell short for that final correction to the cycle bottom. I am going to enter a short position in silver for tomorrow's market open. (Traders could also short gold, but gold's sub-cycle correction may be more moderate and not as profitable.) Our initial stop loss for this trade would be a close above $25.

Trading Blog Wednesday (evening), January 11, 2023

1/10/2023

MARKETS UPDATE (9:00 pm EST)

After re-analyzing this month's reversal zones, it has become obvious to me that there is a lot of overlapping with several potential pivot points for reversals, so I am going to go with the idea that the entire period from Jan. 9 - Jan. 27 is a potential window for one or more significant market reversals with potential pivot points around Jan.10, Jan. 12 -13, Jan. 18, and Jan. 20. These would apply to the broad stock market as well as to all other markets. With this in mind, let's examine the cycles of the individual markets.

We can now confirm that the broad stock market made a significant sub-cycle bottom on Dec. 22 in the DOW and S&P 500, and on Dec. 28 in the NASDAQ. Those sub-cycle lows were about halfway through the medium-term cycles of these indices as they now rally from those lows to new sub-cycle highs. If the cycles are still bullish, all three indices will now rise to exceed their recent highs from Dec. 13 (that would be 34,712 in the DOW, 4,101 in the S&P 500, and 11,567 in the NASDAQ). But if the cycles are turning bearish, that won't happen (at least not for all three indices - maybe just the DOW), and this market and these indices will soon turn down again to make their final cycle bottoms at or below the Oct. 13 lows that began their cycles. All three indices are making new weekly highs this week, and all three have now broken through their 45-day moving averages, so this cycle looks bullish (so far). But we still need to see a break through those Dec. 13 highs to confirm this. That might be difficult with a potential "pivot point" for a reversal coming up Thursday-Friday and two more next week (Jan. 18 and 20). We will be on the lookout this week and next for a bearish divergence signal where one or two, but not all three, indices exceed their highs from Dec. 13. If that happens, it may be a good place to sell short. If all three exceed their Dec. 13 highs, it would be a bullish sign, and we may just wait for a corrective low to buy. For now, let's remain on the sidelines of this market.

We are still waiting for gold to take a significant sub-cycle correction. A potential deep correction is due this week or next down to a target range around $1660 - $1770, but we could also get a milder correction due next week through Feb. 4 with a target price between the 15-day and 45-day moving averages (right now that's between $1839 and $1797). The correction could start soon as we have several potential "pivot point" reversals this week and next that could give us a top AND bottom. Any sub-cycle low could be a good spot to buy. Let's stay on the sidelines until we see one.

Unlike gold, silver has not make a new weekly high this week and its price price has been falling. This gives us a bearish divergence signal between the two metals and supports the idea of a correction in both. With silver, we are expecting a correction to the final bottom of its current medium-term cycle due next week or the week after. Ideally, this could be near Jan. 18 or Jan. 20 with a target price around $20 - $22. We will watch for that as a potential buy spot. We remain on the sidelines of silver for now.

The medium-term cycle in crude oil is still unclear, and there several possibilities for an old or new cycle. Nevertheless, we are in a reversal zone with several possible pivot points that could be relevant to significant reversals in crude prices. Crude has been rising sharply this week and prices are now approaching the 45-day moving average. Any close above there, and then a close above $81.50 (the high of Jan. 30) would be a bullish sign and would suggest the low of Dec. 9 at $70.31 was a significant cycle or sub-cycle bottom. If that happens, it could be a signal to buy. An alternative (and not unlikely) scenario would see prices turning back down and breaking below that $70.31 low. That would be my preferred scenario with a price target for a cycle bottom around $61 - $65 which would also be a good spot to buy - especially if it happens this week or next - as it would likely be the final bottom of a medium-term cycle as well as a longer-term 3 year cycle. Let's stay on the sidelines of crude for now.

Trading Blog Friday (night), January 6, 2023

1/6/2023

MARKETS UPDATE (10:00 pm EST)

The deadline for making a significant sub-cycle low in the broad stock market was this week. Our three market indices (DOW, S&P 500, and NASDAQ) did not make new lows this week. Unless these indices can fall steeply to new lows early next week, we may have to assume that significant sub-cycle lows happened for the DOW and S&P 500 on Dec. 22 (at 32,573 and 3,764, respectively) and for the NASDAQ on Dec. 28 (at 10,207). Today's sharp rally supports this idea, but to confirm it we need to see all three indices close back above their 45-day moving averages. The DOW did that today, but the S&P 500 and NASDAQ did not (the S&P 500 is close).

Our plan was to buy near a sub-cycle low for a potentially steep (but short-term) rally into the new year. The problem now is that if those lows happened on Dec.22 and 28 and we continue to rally into next week, we could be making new highs inside our new strong reversal zone (Jan. 5 - 13), and that could mean that another top and downturn is imminent. That would put a damper on any plans to go long, even if the S&P 500 and NASDAQ manage to close above their 45-day moving averages. So unless this market plunges to new lows early next week, we are going to hold off buying for now. (We may even consider selling short if it looks like a significant high is forming over the next week or two). We remain on the sidelines of the broad stock market for now.

Gold prices pushed to a new weekly high ($1866) today. Silver also rallied but remained well below its high from Tuesday ($24.52). In yesterday's blog I wrote:

"We are expecting a sharp sub-cycle correction in gold's medium-term cycle and a sharp correction to the final bottom of the medium-term cycle in silver - both very soon. Gold's sub-cycle corrective low is due anytime now by Jan. 21. Silver's bottom is due anytime by Jan. 28. The Jan. 5-13 reversal zone would be a good time frame for these bottoms...A good target for a corrective drop from today's high in gold would be around $1766. We're still looking at $21 - $22 as a good target for silver's cycle bottom. Even if these metals push a bit higher into the reversal zone, we could have two reversals - a top and a bottom - in the same time frame."

All of this still applies, so we will remain on the sidelines of both metals as we wait to see if prices can move down into those target areas next week.

After falling steeply this week and breaking support at $75, crude oil prices seem to be taking a break with a "relief rally" yesterday and today with prices rising back to test $75 (which is now resistance). If that resistance holds, we could easily see crude turning back down to test or break below $70. If that happens in next week's reversal zone, it might be a good place buy. The medium-term cycle labeling of this market is still a little unclear, but that could change soon - especially if we see a new low (below $70) next week. Let's remain on the sidelines of crude for now.

Trading Blog Wednesday, January 4, 2023

1/4/2023

1ST MARKETS UPDATE 2023 ! (9:00 pm EST)

As we begin the new year we can identify our first strong general reversal zone coming up tomorrow (Jan. 5-13), and a second (weaker) one Jan. 17-26. A significant sub-cycle low in the broad stock market is due this week, unless it already happened with last Wednesday's 10,207 low in the NASDAQ and the Nov. 22 lows in the DOW and S&P 500 (32,573 and 3,764, respectively). Ideally, I would like to see these indices fall further into this week's reversal zone and see at least one go below its previous low. That would probably be a good spot to buy. An alternate scenario would have these indices rallying into the new reversal zone. If that happens, and the indices can test or break slightly above their 45-day moving averages, then we may have to assume that the sub-cycle lows are in and that a new sub-cycle high could be forming with an imminent reversal down to follow. That would likely be an opportunity to sell short. So this market could go either way at the moment. We will need to wait at least a few more days to see which scenario is likely to play out, so we remain on the sidelines of the broad stock market for now.

(Note that any equity buying now would be for a short-term - but possibly steep - rally and applicable to mostly shorter-term investors. We are still favoring our longer-term view that a possible major long-term 90-year cycle in the broad stock market peaked in January 2022 (DOW and S&P 500) and November 2021 (NASDAQ). If this is true, we will not see those all-time highs exceeded (36,953 in the DOW, 4,819 in the S&P 500, and 16,212 in the NASDAQ) for some time in all three indices (we may see one - probably the DOW - challenge or slightly exceed its all-time high). In other words, the top of the 90 year cycle is probably in, and the markets are now likely falling to the 90-year cycle bottom due sometime around 2024 - 2025 with a final corrective low at least 50% (possibly much more) down from the all-time highs. The only thing that would negate this view now would be ALL THREE stock market indices breaking above those all-time highs in the first half of this year. Right now, only the DOW seems close enough to do this. Longer-term investors are now advised to be out of all equity markets or in short positions, or ready to sell short soon.)

That new Jan. 5-13 reversal zone is also applicable to the precious metals. We are expecting a sharp sub-cycle correction in gold's medium-term cycle and a sharp correction to the final bottom of the medium-term cycle in silver - both very soon. Gold's sub-cycle corrective low is due anytime now by Jan. 21. Silver's bottom is due anytime by Jan. 28. The Jan. 5-13 reversal zone would be a good time frame for these bottoms. Gold and silver prices have been rising this week, but they may be peaking now. Gold accelerated to a new weekly high today at $1864, and silver hit a new high yesterday at $24.52. Both metals seem to be pulling back from those highs, so a sharp correction down into this new reversal zone (which starts tomorrow) could be imminent.

A good target for a corrective drop from today's high in gold would be around $1766. We're still looking at $21 - $22 as a good target for silver's cycle bottom. Even if these metals push a bit higher into the reversal zone, we could have two reversals - a top and a bottom - in the same time frame. We will stay on the sidelines of both metals as we wait for those corrective drops.

There are several possible ways to label the current medium-term cycle in crude oil - it could be a new or old cycle. Regardless of the cycle labeling, the new reversal zone that starts tomorrow (Jan. 5-13) is also applicable to crude, and today prices are plummeting sharply and rapidly towards that $70 low from Dec. 9. It looks like we may be headed for a significant cycle or sub-cycle low inside this new reversal zone - a low that could test or even break below $70. That could turn out to be a good place to buy, so we will watch for it. We will remain on the sidelines of crude oil for now.

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