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Trading Blog Wednesday, January 31, 2024

1/31/2024

BROAD STOCK MARKET UPDATE and COMMENT ON THIS WEEK'S FOMC MEETING (10:00 pm EST)

After this week's FOMC meeting concluded at 2 pm today, the Fed left interest rates unchanged. This was not a surprise, but many investors and traders WERE surprised by Fed chairman Jerome Powell's slightly hawkish rhetoric in which he squashed their hopes of an interest cut as soon as March. Powell announced that rate cuts would not be appropriate until there is "greater confidence that inflation is moving" towards the central bank's 2% target. Most analysts expect the first rate cuts to begin in late spring or early summer. Crestfallen traders led a sharp sell-off in the broad stock market following Mr. Powell's press conference.

Anyone reading this blog will know that we have been anticipating a sharp drop in equity markets no later than this week as the medium-term cycles in all three of our stock market indices (DOW, S&P 500, NASDAQ) are old and due to top out anytime, and this week is the end of a very strong reversal zone. Today the DOW dropped 317 points, the S&P 500 dropped 79 points, and the NASDAQ fell a whopping 346 points. This looks like the beginning of a fall to the final medium-term cycle bottoms (unless the market snaps back up tomorrow). We will be looking to buy at those bottoms, as long as the correction doesn't go too low. We would expect the final bottoms to break below the 45-day moving averages. For now, we remain on the sidelines as we wait to see if today's sell-off can gain more momentum over the next several days.

Trading Blog Friday (late night), January 26, 2024

1/26/2024

MARKETS UPDATE (11:00 pm EST)

In last Saturday's blog on the broad stock market I wrote:

"After their mid-cycle "dips", all three indices are now headed towards their final medium-term cycle highs to be followed by a steep correction down to their final cycle bottoms due sometime over the next two months. There's a good chance those final tops could happen in our next strong reversal zone coming up next week (Jan. 23 - Feb. 1) or even in a weaker one in the first week of February (Feb. 2 - 13)."

We are now at the center of that strong general reversal zone (Jan. 23 - Feb.1), and this market is rising steeply into it. A top could be imminent. The NASDAQ made a new weekly isolated high on Wednesday while the DOW and S&P 500 pushed to new weekly highs today. Because all three indices made new weekly highs, we have no bearish divergence signal this week; however, the NASDAQ still has not exceeded its all-time high from Nov. 2021 (16,212), but both the DOW and S&P 500 have now exceeded their all-time highs from Jan. 2022. This is a strong bearish divergence signal (until the NASDAQ breaks through that high - it is close). Although this market could turn down now, there is still time for it to push higher through next Thursday, and even into the following week (Feb. 2 -13). We will stay on the sidelines as we continue to wait for the final correction down to the end of the current medium-term cycle, which should be a good spot to buy as this market continues to look bullish into the summer.

It is getting late in the current medium-term cycle of gold, and prices seemed reluctant to rally this week as they stayed below both the 15-day and 45-day moving averages. Gold's recent low on Jan. 17 at $2003 was not in any reversal zones, so it is unlikely that was the end of the current medium-term cycle. In other words, prices are probably headed lower to the final cycle bottom. While it's still possible for prices to surge up and test the $2100 level before falling to the final cycle bottom, that is looking less likely now. Let's stay on the sidelines of gold as we wait for the final cycle bottom, which could end up happening in our current strong general reversal zone (that ends next Thursday). Ideally we would like to see gold drop down into the $1900 - $1950 area. That would be a good spot to buy, if it happens.

Silver made a deep low at $21.96 on Monday, and it has risen steeply from there. It's possible that low was the start of a new medium-term cycle as it was in a potential "pivot point" area for the precious metals, but that would be a bit early, and there's still plenty of time for silver to go lower before completing a final medium-term cycle bottom. Today silver tested and closed just below the 15-day moving average. Let's wait and see if this week's rally gains some legs next week or if it instead turns back down. We remain on the sidelines of silver for now.

The U.S. Dollar Index made a new weekly high (103.82) on Tuesday, but that was just one day outside a reversal zone for currencies (Jan. 24 - Feb. 1). If the greenback can push higher next week, we could get another isolated high inside the reversal zone and then a significant correction down. if that scenario plays out, it could correspond to a significant bottom and reversal back up in the precious metals. We will watch closely for this next week.

Crude oil prices have finally broken upside out of their $70 - $75 (March contract chart) congestion zone. Prices are now even closing above the $76.31 high from Dec. 26. This strongly suggests that the $68.28 low on Dec. 13 was the start of a new medium-term cycle. If that's the case, a significant sub-cycle top is due shortly, and we are now in the center of a reversal zone specifically for crude Jan. 23 - Feb. 1 (it overlaps precisely with our strong general reversal zone). There is also considerable resistance between $78 - $80. We should be watching next week for a top and a correction back down which could give us a good entry point into this new cycle as the cycle's current trend looks quite bullish. We are on the sidelines of crude oil for now.

Trading Blog Saturday (late night), January 20, 2024

1/20/2024

UPDATES on THE BROAD STOCK MARKET and CRUDE OIL (10:00 pm EST)

On Thursday and Friday last week, all three of our broad stock market indices (DOW, S&P 500, NASDAQ) rallied strongly and broke to new weekly highs. Significantly, the S&P 500 finally broke above its all-time high (4,819 from Jan. 2022). This leaves only the NASDAQ below its all-time high (16,212 from Nov. 2021), but it is fast approaching that high after last week's steep rally. Until the NASDAQ breaches that high, however, we have a strong intermarket bearish divergence signal to put a curb on any rally.

After their mid-cycle "dips", all three indices are now headed towards their final medium-term cycle highs to be followed by a steep correction down to their final cycle bottoms due sometime over the next two months. There's a good chance those final tops could happen in our next strong reversal zone coming up next week (Jan. 23 - Feb. 1) or even in a weaker one in the first week of February (Feb. 2 - 13). We may consider short-selling if a top looks imminent, but because the trend in this market is very bullish now, we might just wait for the final bottom and buy the start of a new medium-term cycle and ride a bullish rally into the middle of the year. For now, we will not chase this rally, and we will remain on the sidelines of the broad stock market.

Crude oil broke and closed above its 15-day and 45-day moving averages on Friday. While this is bullish behavior, we note that prices are still below the strong resistance at $75 (Feb. contract chart), and we are about to enter a very strong general reversal zone that precisely over laps another reversal zone specifically for crude coming up next week (Jan.23 - Feb. 1). Unless these reversals correspond to a "break-out" in crude (possible, but not likely), we could see prices turn back down from an isolated high anytime in the next two weeks. If prices can rally significantly above $76.18 before turning down, it could confirm the low of Dec. 13 ($67.98) as the start of a new bullish medium-term cycle. Otherwise, we expect prices to go lower before we see a significant medium-term cycle bottom, and possibly a 4-year cycle bottom at or below $65.24. We remain on the sidelines of crude oil.

Trading Blog Wednesday (late night), January 17, 2024

1/17/2024

MARKETS UPDATE (11:00 pm EST)

Last week the S&P 500 and NASDAQ snapped back up from their sub-cycle corrective lows on Jan. 5 and the DOW rose up a bit from the bottom of its sub-cycle "dip" from Jan. 8, but this week all three indices are falling again. We may be starting a 2 - 5 week decline to the final bottoms of the current medium-term cycles, but there's still time for this market to push a little higher before that happens. We want to focus now on the next strong general reversal zone which is coming up next week (Jan. 23 - Feb. 1). This could coincide with the final tops in the current medium-term cycles, but if the market continues falling from here, it could instead coincide with a bottom (probably another sub-cycle bottom, but if the fall is steep, possibly a final cycle bottom, although that would be a bit early). Because the general trend of this market is still bullish, we are waiting to buy at the final bottom of this current medium-term cycle. A good target for the DOW would be around 35,600 - 36,000. The S&P 500 could get back down to 4,600. We will wait for these levels before thinking about going long. For now we remain on the sidelines of the broad stock market.

As with the broad stock market, we are also waiting to buy the final medium-term cycle bottoms in gold and silver.
It is late in both of these cycles, so a final bottom is due soon. Prices are falling sharply today, and both metals are below their 15-day and 45-day moving averages. The descent to the final cycle bottoms could be underway. Nevertheless, there's still time for gold to rally back up and challenge its Dec. 28 high around $2070 (but probably not its all-time high of $2123 from Dec. 4) before hitting its final cycle bottom. (Today gold made a new weekly low without silver - a bullish divergence signal that could indicate an imminent reversal back up.) Silver looks a bit more bearish than gold at the moment. If silver rallies now, it might get back up to $24, but then it should fall again towards its final cycle bottom due anytime now over the next six weeks.

There's a possibility that gold's final medium-term cycle bottom could go quite low, i.e. back to the $1900 area. If that happens, it would be a good buying opportunity. A good buy spot in silver could be between $21 and $21.70. We will stay on the sidelines until prices approach these levels.

After falling from a high of 103.10 (Feb. contract chart) on Jan. 5 (which was right in the middle of our reversal zone for currencies), the U.S. Dollar Index is rising again and today made a new weekly and monthly high at 103.69. This is putting downward pressure on gold and silver prices, but we note that next week we enter another reversal zone for currencies (Jan. 24 - Feb. 1). If the greenback pushes higher into that time frame, another turn down could follow which could lift precious metal prices. We will watch this carefully as we move into next week.

Crude oil prices continue to stagnate between support at $70 (Feb. contract chart) and the falling 15-day and 45-day moving averages (now at $72.42 and $73.62, respectively). We are still not sure if crude started a new medium-term cycle with the low of $76.43 on Aug. 23 or if a new cycle started with the Oct. 6 low of $77.86. If the former, the medium-term cycle could be ending and bottoming now, or it may have already ended with the Dec. 13 low ($67.98). If the cycle started on Oct. 6, it is very bearish and prices should be headed lower for at least 3 or 4 more weeks to a price below $67.98. We will be better able to tell which medium-term cycle labeling is correct once crude prices break out of their congestion zone ($70 - $73.62) one way or the other. Until then we will remain on the sidelines of this market.

It is also not clear if a longer-term 4-year cycle ended on May 4 at $65.24 or if that cycle will go lower over the next six months (it is due anytime now before August). We are very interested in going long at the bottom of the 4-year cycle as a strong rally should follow that could see prices rise 100% by the end of the year. If crude prices break upside soon and are able to close above $76.18, it would support the idea of a new medium-term cycle starting on Dec. 13 and also the idea that a new 4-year cycle began on May 4 at $65.24. In the bearish alternative view, prices could soon break below $67.98 as crude heads to the end of an older 4-year cycle below $65.24 and possibly below $62 anytime before August.

Trading Blog Thursday, January 11, 2024

1/11/2024

MARKETS UPDATE (3:30 pm EST)

It looks like all three of our broad stock market indices have more or less completed their medium-term mid-cycle "dips". The NASDAQ's sharp 5-day drop last week that broke well below the 15-day moving average was a legitimate sub-cycle correction. The S&P 500's 5-day drop was not as steep or deep, but still qualifies as a sub-cycle. The DOW's 4-day "dip" barely tested its 15-day moving average, and one could argue that this buoyant index is heading straight to its medium-term cycle top with no sub-cycle corrections (very bullish).

The DOW made a new weekly and all-time high today. The S&P 500 also made a new weekly high, and it is just 20 points away from exceeding its all-time high (4819 from Jan. 2022). The NASDAQ, however, did not make a new weekly high today (it is close), and it is still a good distance away (about 1000 points) from its all-time high of 16,212 from Nov. 2021. Thus we still have strong bearish divergence signals in place that could lead to a more severe turn down in this market. We are now in the center of a relatively weak general reversal zone (Jan. 8 - 16), so another reversal back down is possible; however, this market seems to have a lot of bullish energy, and both the DOW and S&P 500 are breaking above last week's highs which suggests their trend is still pointed up. A very strong reversal zone is coming up in two weeks (Jan. 23 - Feb. 1). We could see this market continue its rally into that time frame, but then we'll have to watch for a top - possibly the final top in the current medium-term cycle - followed by a steep correction down to the cycle's final bottom. We're staying on the sidelines of this market until we see a more significant corrective drop.

Gold and silver are both making new weekly lows today (negating the bullish divergence signal from earlier this week), and silver is testing its previous sub-cycle low ($22.52 on Dec. 13). Could these metals now be headed down to their final medium-term cycle bottoms? Yes, but we note a strong potential "pivot point" for both gold and silver coming up tomorrow through next Tuesday. Prices could snap back up from any new lows in this window, at least temporarily. We are still staying on the sidelines of both metals until we see the current medium-term cycles complete their final bottoms. Gold's bottom could happen anytime starting next week through the end of February. Silver's bottom is due anytime starting this week through the end of February.

Crude oil prices have remained relatively flat this week as they continue to test both the 14-day and 45-day moving averages but remain below both of them. These two averages are converging with both sloping down as they approach the strong $70 support line. Crude prices have been stuck in a congestion zone between these moving averages (now at $73.80 and $72.68) and the $70 support and should soon break out one way or the other. We abandoned our long crude position on Tuesday to avoid a potential break below $70 (and especially $67.98) and are now on the sidelines of crude. There is a reversal zone specifically for crude coming up Jan. 23 - Feb. 1 (it overlaps with the strong general reversal zone mentioned above for equities). If prices do break lower, we might see a significant bottom in that time frame and another opportunity to go long.

Trading Blog Tuesday, January 9, 2024

1/9/2024

CRUDE OIL TRADE ALERT (3:15 pm EST)

After looking over the charts for crude oil, I've decided to sell my long position. Today prices rallied a bit, and we are back to a "break even" point in our long trade (which we entered on Dec. 14) so we should be able to get out now with little or no loss. There are several short-term signals now that look bearish and they are increasing my fears that prices could break lower (i.e. below $70, and especially below $67.98 - Feb. contract chart). Any traders who are more risk tolerant could still use those prices as stop loss points, but I am going to play it safe here and get out.
I am selling my long position in crude oil today.

Trading Blog Monday (evening), January 8, 2024

1/8/2024

MARKETS UPDATE (7:00 pm EST)

After rising last week to nearly touch the 45-day moving average, crude oil prices fell back down again today and remain trapped between support around $70 (Feb. contract chart) and the falling 45-day moving average (now at $74.18). As this range narrows, crude should break one way or the other, and we hope to the upside - not below $70 (our first stop loss point for our long position). As I mentioned in last week's blog, we're still going with the idea that the low of $67.98 on Dec. 13 was a medium-term cycle bottom (and the second one following a possible 4-year cycle low on May 4 last year at $65.24). But if prices start to fall below there, we will have to abandon our long trade, revise our cycle labeling and wait a little longer for the 4-year cycle to bottom before we go long again. Let's continue to hold our long position in crude for now.

The broad stock market, and especially the DOW, is demonstrating amazing buoyancy right now. All three market indices (DOW, S&P 500, and NASDAQ) are rallying strongly today. The S&P 500 took a 5-day dip from its Dec. 28 high and made a low last week below its 15-day moving average, but today it is closing back above that average. The NASDAQ took a steep 5-day correction from Dec. 28 - getting close to its 45-day moving average - but it too is rallying back up today. In contrast, the DOW pushed higher into Jan. 2 before dipping slightly to barely test its 15-day moving average last week, and it is closing back above it today. Unless the DOW turns back down this week, we will have to assume it is not going to take a sub-cycle correction and that the medium-term cycle will move straight up to its peak before it turns to fall to its final bottom. It is unusual to have a medium-term cycle with no sub-cycle corrections (usually there are two, but sometimes just one), but if a market is very bullish, it can happen. The S&P 500's 5-day correction was shallow, but it would qualify as a sub-cycle. The NASDAQ's steep correction towards its 45-day moving average was a more normal sub-cycle drop, but it was still a bit on the bullish side as it could have gone lower (and still could this week).

As far as trading goes, we have not seen a deep enough corrective drop in the DOW or S&P 500 to justify going long (yet). If we don't see deeper corrective lows this week, we may have to wait until the end of these current medium-term cycles and their final corrective bottoms to buy (which could be in as little as two weeks from now in the DOW, but could also be as long as 12 weeks). For now, we remain on the sidelines of the broad stock market.

Gold dropped to a new weekly low ($2019) today while silver remained above last week's low ($22.75) which creates a bullish divergence signal between the metals (until silver moves below $22.75). Could these metal prices start to rise from here? Yes, they could. We also note that the U.S. Dollar Index made an isolated high last Friday near its 45-day moving average and that this was near the center of a reversal zone specifically for currencies (Jan. 1 - 9) that ends tomorrow. If the dollar drops back down now, it could help push gold and silver prices up.

In last Thursday's blog on gold and silver I wrote:

"...we are not chasing any rallies in these metals at this late stage in their medium-term cycles and will wait for their final bottoms before considering any long positions. Gold's final cycle bottom is not due for at least two more weeks, and prices could theoretically go quite low - even back down to the $1900 area."

This still applies, so we remain on the sidelines of both metals. Could gold prices still jump up and challenge or exceed its all-time high of $2123 from Dec. 4? It's possible, but it is late in the medium-term cycle, and even if that happens, prices would soon fall back down to form the final cycle bottom, which could go quite low (i.e. towards $1900) and give us a better spot to buy.

Trading Blog Thursday, January 4, 2024

1/4/2024

MARKETS UPDATE and IMPORTANT INFORMATION ON CRUDE OIL (7:00 pm EST)

This is the 10th week in the medium-term cycles of all three of our broad stock market indices (DOW, S&P 500, NASDAQ) that started with their late October lows (Oct. 26-27). These indices rallied steadily for over two months from those lows with no significant sub-cycle corrections until this week. That is unusually bullish behavior. Even this week, the DOW seems reluctant to turn down as it tests its 15-day moving average. The S&P 500 and especially the NASDAQ seem to be leading a corrective drop as they are descending more rapidly and are now closing below their 15-day moving averages. Next week is the deadline for the bottom of any significant corrective drop. Let's wait and see if the DOW can push lower and give us a deeper sub-cycle low to buy. We remain on the sidelines of this market for now.

Gold and silver prices seem to be continuing their "rollover" pattern with silver even testing its recent sub-cycle low of $22.52 low from Dec. 13. If silver breaks below there, the current medium-term cycle trend will be officially bearish with prices likely moving lower to complete the final cycle bottom which could happen anytime now over the next eight weeks. Gold, on the other hand, is nowhere near its recent sub-cycle low and still seems like it could rally up some more to challenge or exceed its recent Dec. 4 all-time high of $2123.. Silver could rally too from a support line now around $23, but it seems less likely it would challenge its recent high of $25.79 (also on Dec. 4). As I've been stating in recent blogs, we are not chasing any rallies in these metals at this late stage in their medium-term cycles and will wait for their final bottoms before considering any long positions. Gold's final cycle bottom is not due for at least two more weeks, and prices could theoretically go quite low - even back down to the $1900 area. We remain on the sidelines of both metals for now.

The U.S. Dollar Index has been rising into a reversal zone specifically for currencies (Jan. 1 - 9), and it made an isolated high yesterday at 102.73. A turn down could be imminent, and that could kick-start a rally in the precious metals. We will watch this index carefully now.

Another thing to watch carefully now is our long position in crude oil. Today prices pushed higher towards the 45-day moving average but ended up falling back and closing just below the 15-day moving average. We went long on Dec.14 with the idea that the previous day's low ($67.98 - Feb. contract price) was a medium-term cycle bottom (and maybe even a 4-yr. cycle bottom from the $65.24 low on May 4). That could still be the case, but if it is, prices need to start rallying strongly soon and break through that 45-day moving average (now at $74.76 and falling) as well as last week's high at $76.18. A break below $67.98 would be bearish and force us to relabel the cycles.

"HEADS UP" on CRUDE OIL: I should mention here that once we determine for certain that a new 4-yr. cycle has started, we can expect crude to rally strongly with prices potentially getting back up to $130 (or even much higher) by early summer this year. We're going with the idea of a new 4-yr. cycle having already started with the $65.24 low on May 4, 2023, but if prices should start breaking below there, we could see a new (lower) 4-yr. cycle start anytime over the next eight months (i.e. by August) - anywhere between $54 - $68. But even in this more bearish scenario, the bottom of the 4-yr. cycle would still be an excellent buy spot. We would just have to wait a bit longer for that opportunity.

Needless to say, crude has great investment potential at this time and could see a possible 100% gain within six months following the establishment of a 4-yr. cycle bottom This is why we are keen to go long near the start of its new 4-yr long-term cycle.

Let's continue to hold our long position in crude with a close stop loss based on a close below $70 or $67.98, depending on your risk tolerance.

Trading Blog Tuesday, January 2, 2024

1/2/2024

MARKETS UPDATE (2:30 pm EST)

As we start the first trading day of the new year and leave the "Santa Claus" rally of 2023 behind us, will equity markets now take a long overdue "breather" and give us a significant sub-cycle correction? At the time of this writing (around 2:30 pm EST), the DOW seems reluctant to fall, but the S&P 500 and especially the NASDAQ are taking significant dives. Perhaps the NASDAQ will lead this correction as it is already breaking below its 15-day moving average. Our minor reversal zone from last week extends through Friday this week, so it's possible we could see another top in the DOW, but most likely not in the NASDAQ or S&P 500. It seems like a correction has started, so we will wait to see how far it will go. Ideally, we want to see a correction fall at least between the 15-day and 45-day moving averages, but it could go lower - even below the 45-day moving average (now around 35,642 and 4,546 in the DOW and S&P 500, respectively) and still remain bullish. As long as it doesn't go too low, we will likely be looking to buy this sub-cycle bottom (if it happens) as this market still looks bullish - at least into the early part of this new year. For now we remain on the sidelines of the broad stock market.

Gold and silver prices still seem reluctant to rally, and both may be rolling over now. Last week's high in gold ($2088 on Dec. 28) and silver's high of $24.57 on Dec. 22 may have been sub-cycle tops. If so, prices are now headed lower to the final medium-term cycle bottoms in both metals. We note, however, that the U.S. Dollar Index is surging to a new weekly high inside a reversal zone specifically for currencies (Jan. 1 - 9). If the dollar reverses back down from a high this week or early next week, gold and silver prices could surge up and challenge those late December highs. Whatever happens, we will wait on the sidelines of both metals for their final medium-term cycle lows before we think about buying.

Our long position in crude oil is testing our first stop loss level at $70 (Feb. contract chart) today. Prices broke through the 15-day moving average last week but then closed below it, so that is now resistance. Prices are thus trapped between support around $70 and resistance around $72.50. For now, I am going to maintain my long position with the idea that this resistance line will break again with prices moving up for a second attempt to break the 45-day moving average. Again, our stop loss for this trade is based on a close below $70 or a close below $67.98 depending on your risk tolerance.

Trading Blog Monday, January 1, 2024

1/2/2024

WISHING A HAPPY AND PROSPEROUS NEW YEAR TO EVERYONE!

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