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Trading Blog Wednesday (evening), January 29, 2025

1/29/2025

COMMENT ON THE FED MEETING and MARKETS UPDATE (9:30 pm EST)

As expected, the Fed left interest rates unchanged at the end of today's FOMC meeting. The Fed's statement, released at 2 PM, also showed no indication that a rate change would be coming at the next meeting in March. Equity markets dropped a bit after the release of this statement, but then they recovered during the subsequent press conference by Fed Chairman Jerome Powell. Because there were no major surprises or dramatic rhetoric from this Fed meeting, it may not have much impact on the current direction of markets. We will therefore rely mainly on our technical and cycle analysis for clues on where the markets are going.

Today the DOW made a "double-top" near its all-time high (although it did not exceed it) inside our strong reversal zone (Jan. 22 - 30) which ends on Thursday. The S&P 500 and NASDAQ also made double-tops last Friday before "gapping" down dramatically on Monday. Both indices have rallied back up from Monday's lows, but they still haven't closed those gaps. The S&P 500 is the only index that made a new all-time high this month (last Friday), so we continue to have a strong bearish divergence signal between these indices. This is a strong bearish picture. Unless all three indices can break out to new all-time highs next week, it looks more like another significant correction may be in the cards. We'll remain on the sidelines of the broad stock market for now.

The Fed meeting did not seem to affect the precious metals market. Gold and silver prices have been relatively flat this week. Gold likely made a significant high last Friday at $2785 inside our general reversal zone as well as a reversal zone specifically for the precious metals (Jan.22 - 30). Unless gold can make a higher high next week, it should be falling lower from here (or from a new high tomorrow). We are still looking for a possible buy spot on any significant correction that holds above $2586. Silver prices seem congested between $30 and $31 which makes it difficult to label the current medium-term cycle. A break above or below these levels will help clarify this picture. We are currently on the sidelines of both metals.

Crude oil prices were also not affected much by today's Fed meeting. We are two days into a reversal zone specifically for crude (Jan. 28 - Feb. 6), and prices seem to be holding above a support line around $72 (March contract chart) in between the 15-day and 45-day moving averages. A sharp turn back up could be imminent. I am still holding my long position in this market for now. There should also be support near the 45-day moving average (now at $71.50) and after that at $70. Any of these support areas could be used as stop loss points for long positions.

Trading Blog Tuesday, January 28, 2025

1/28/2025

COMMENT ON THIS WEEK'S FOMC MEETING (9:00 pm EST)

Today and tomorrow the Fed has its first FOMC meeting of the new year. It will conclude at 2PM tomorrow afternoon. After three rate cuts last year, it appears the Fed will not cut rates this time around as inflation is still problematic. Last year, many analysts were expecting the Fed to pause their rate cutting in Jan. 2025 but then to continue cuts in March; however, persistent inflation is leading many to doubt there will be a cut in March.

It's hard to say how the markets will react to tomorrow's Fed statement at 2PM (and the subsequent press conference with Fed Chairman Jerome Powell). Even though most are expecting a pause in rate cutting, too much hawkish rhetoric from Mr. Powell could trigger a sell-off, especially since our cycle analysis and reversal timing is suggesting that a significant correction down is imminent.

The S&P 500 and NASDAQ both made new all-time highs last week without the DOW, which still remains below its all-time high this week. Thus this bearish divergence signal is persisting. On the other hand, the DOW has not made a new weekly low so far this week while the S&P 500 and NASDAQ did make new weekly lows yesterday, and this gives us a BULLISH divergence signal. We'll have to wait and see how this market reacts to the Fed meeting tomorrow to determine which signal is correct.

Trading Blog Monday (late night), January 27, 2025

1/27/2025

UPDATES ON CRUDE OIL and the BROAD STOCK MARKET (11:30 pm EST)

Today crude oil broke and closed below a support line at $74. There is another line of support around $72. Tomorrow is the eighth day of declining prices from the Jan. 15 high of $79.39. A normal sub-cycle correction usually lasts 3-8 days. We are also at the exact center of a strong general reversal zone, and tomorrow we enter a reversal zone specifically for crude. A corrective bottom could be forming shortly, ideally between the 15-day and 45-day moving averages, which is where we are right now. There's a possibility of a deeper correction, but I'm not going to worry about that unless prices start closing below the 45-day moving average (now at $71.36 and rising). That average is still my stop loss for my long position in crude, which I am holding for now.

Last Wednesday I wrote about the broad stock market:

"Right now it makes no difference whether these are old medium-term cycles or newer ones. Even if they are new ones starting with last week's lows on Jan. 13, there is a strong possibility of an imminent high between now and next Friday and then a sharp reversal back down. If that reversal becomes serious, we might see the deep correction we were expecting sometime this year come sooner rather than later."

Today all three of our broad stock market indices (DOW, S&P 500, NASDAQ) took downward corrections, but the S&P 500 and NASDAQ plunges were especially dramatic (the NASDAQ dropped over 3%). It looks like a significant correction is underway from today's new high in the DOW and last Friday's highs in the S&P 500 and NASDAQ, which is not surprising as we are at the center of a strong reversal zone. We'll have to wait and see how low this correction will go before we can start to label the current medium-term cycles. If the DOW starts closing below 41,647 and the S&P 500 below 5696, we could be seeing the start of a serious sell-off. We are remaining on the sidelines of this market for now.

Trading Blog Thursday (night), January 23, 2025

1/23/2025

CRUDE OIL TRADE ALERT (9:30 pm EST)

Crude oil's current medium-term cycle (which started on Dec. 6) is bullish. On Jan. 15 prices made the first significant sub-cycle high in this young cycle, and they have fallen sharply from there for 5 days to today's low, which tested a strong support line at $74. A normal sub-cycle correction should last 3-8 days, so we are in the time band for a sub-cycle bottom, and we are also at the center of a strong general reversal zone at a strong support line. Furthermore, the price is now between the 15-day and 45-day moving averages which is what we like to see for a sub-cycle bottom. This looks like a good time to go long in crude oil (please see my blog on crude from yesterday). I am going to enter a long position now for tomorrow's market open. I am putting an initial stop loss for this trade on a close below the 45-day moving average (now around $71).

Trading Blog Wednesday (late night), January 22, 2025

1/22/2025

MARKETS UPDATE (11:30 pm EST)

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

"We cannot rule out this market turning back down to make a final medium-term and long-term cycle bottom in this upcoming strong reversal window."

However, I also noted:

"If the current rally gains legs and starts closing above the 14-day and 45-day moving averages, we could see a significant top form in the upcoming reversal zone, and that would be even more reason to stay out of the market as another steep drop could be in the cards."

It looks like the second scenario is playing out as this market is rallying strongly this week. All three indices are now above their 15-day and 45-day moving averages. Furthermore, the S&P 500 is making a new all-time high while the DOW and NASDAQ are not (the NASDAQ is close) which is giving us a strong intermarket bearish divergence signal as we enter a new strong general reversal zone (Jan. 22 - 30).

Right now it makes no difference whether these are old medium-term cycles or newer ones. Even if they are new ones starting with last week's lows on Jan. 13, there is a strong possibility of an imminent high between now and next Friday and then a sharp reversal back down. If that reversal becomes serious, we might see the deep correction we were expecting sometime this year come sooner rather than later. For now, we are staying out of this market.

It looks like gold started a new medium-term cycle with Nov. 14's low at $2541 as well as a new longer-term 50-week cycle that same day. If true, prices could be bullish now and ready to move as high as $3000 sometime this year, although there are other technical factors that could cap any rally around $2800 if the new cycle(s) turn bearish. Either way, cycle analysis tells us that a significant sub-cycle top is due soon to be followed by a 3-8 day sub-cycle correction. There is a reversal zone specifically for the precious metals that overlaps precisely with this new general reversal zone (Jan. 22 - 30), so that sub-cycle high and correction could happen anytime now. If we get a substantial 3-8 day correction that holds above $2585, it may be a good spot to buy. We are still on the sidelines of gold.

The labeling of silver's medium-term cycle is still not clear. If it started with the double-bottom lows of Nov. 14 and Nov. 28 ($29.74 and $28.70, respectively), then the cycle has turned bearish because it has already gone well below those lows. On the other hand, if a new medium-term cycle began with the double-bottom lows of Dec. 19 and Dec. 31 ($28.78 and $28.80, respectively), it could be bullish, but prices have to start closing above $32.31 soon to make this valid. Because we just entered a reversal zone for gold and silver, a new high could be forthcoming, but so could a new low. I am staying on the sidelines of silver until the medium-term cycle is more clearly defined.

On Jan. 9, I wrote about crude oil:

"It looks like crude oil started a new medium-term cycle with its low of $66.71 on Dec. 6 (Feb. contract chart). Prices have been rising sharply from there and they broke through a congestion zone ($66 - $72) last Friday. This week the price is testing strong resistance at $74. A sub-cycle crest and corrective dip can be expected anytime now over the next few weeks, so this resistance line would be a good place for it to happen."

Well, crude prices were not held back very long by that resistance at $74 but instead soared much higher - to $79.39 on Jan. 15 (March contract chart) before falling back (they closed below $76 today). That high was a significant sub-cycle top, and a 3-8 day correction is in progress that is now testing the 15-day moving average. We have just entered a strong general reversal zone (Jan. 22 - 30) and will also enter a reversal zone specifically for crude next week (Jan. 28 - Feb. 6). We should be looking for a corrective bottom to buy - likely between the 15-day and 45-day moving averages.

Several longer-term cycles in crude look quite bullish, and the current medium-term cycle is still young and also looks very bullish. This means we should be looking to buy any significant corrections in crude. Prices could rise to $110 - $130 this year, and possibly go even much higher. We are currently on the sidelines of crude, but I will be looking for a spot to buy this week or next.

Trading Blog Wednesday (late night), January 15, 2025

1/15/2025

BROAD STOCK MARKET UPDATE (11:30 pm EST)

It's still not clear if the broad stock market started a new medium-term cycle on Nov. 4 or if a much older cycle is still in place and falling to its final bottom. That final bottom (older cycle) would be due (overdue) now, and Monday's new weekly lows in the DOW, S&P 500, and NASDAQ may have been it as a strong rally seems to be taking off from there. All three indices are now testing their 15-day and 45-day moving averages, and if they can close above both, it will be strong evidence that the correction is over. That would mean the start of a new medium-term cycle that should soon test and likely exceed the recent all-time highs.

But wait...there's more to consider here. There's a good chance that a longer-term 50 week cycle is nearing completion. In fact, the bottom to that cycle is overdue and should coincide with the end of a medium-term cycle. The minimal target for the 50 week cycle should be around 40,0000 in the DOW and 5,600 in the S&P 500. These indices are still a good distance above those levels, so that suggests this market could fall further (below Monday's lows). There was a minor "pivot point" for equities on Monday, but there is a much stronger general reversal zone coming up next week (Jan. 22 - 30). We cannot rule out this market turning back down to make a final medium-term and long-term cycle bottom in this upcoming strong reversal window. For this reason, I am remaining on the sidelines of the broad stock market for now.

If the current rally gains legs and starts closing above the 14-day and 45-day moving averages, we could see a significant top form in the upcoming reversal zone, and that would be even more reason to stay out of the market as another steep drop could be in the cards. On the other hand, a new low at or below those targets mentioned above (40,000 in the DOW and 5,600 in the S&P 500) happening inside that Jan. 22 - 30 window could give us a very good buying opportunity as it would likely be the start of a new medium-term AND a 50 week cycle. Stay tuned for updates.

Trading Blog Thursday, January 9, 2025

1/8/2025

MARKETS UPDATE (3:00 pm EST)

In Monday's blog I wrote:

"Both the S&P 500 and NASDAQ made "gap-ups" today which created "bullish island reversal" patterns in their charts, but strong resistance could turn these indices back down and negate that pattern (or not)."

Indeed, both indices did turn down and closed those gaps to negate those "bullish" island reversals. Could this market turn back up? Yes. Could it continue down? Yes. We have no reversal zones coming up until the last week of this month (Jan. 22 - 30), so this market could progress extensively in either direction for two more weeks without pausing and forming a major turning point. I'm remaining on the sidelines of this indecisive market for now.

As with the broad stock market, gold is also a bit tricky to call at the moment. It appears that the Nov. 14 low of $2541 was not only the start of a new medium-term cycle, but also most likely the start of a new longer-term (50 week) cycle as well. If true, gold could be very bullish and ready to rally strongly. But the rally so far has not been strong. In fact, the first sub-cycle peak in this new medium-term cycle was on Dec. 12 at $2724 which was well below the previous cycle's peak at $2790 (on Oct. 30). This means the current cycle's trend could be turning bearish. Prices need to start rallying above $2724 to negate this idea. Because gold's directional trend is not clear, I am staying on the sidelines of this metal for now.

There is some evidence that silver is also turning bearish. I've been labeling the "double-bottom" lows in silver on Nov. 14 ($29.73) and Nov. 29 ($29.70) as the start of a new medium-term cycle. If that labeling is correct, the cycle trend has already turned bearish because after prices rose to test $32 in the second week of December, they then fell to $29 in the last week of December (i.e. well below the start of the cycle). Prices are now rising from that first sub-cycle bottom, but if the trend is bearish, they should not get very far and could roll over soon. However, If prices keep rising and they can get above $32.31, I may have to change my labeling of the current cycle and consider a more bullish view. Until then, silver looks bearish and I am remaining on the sidelines of this metal.

It looks like crude oil started a new medium-term cycle with its low of $66.71 on Dec. 6 (Feb. contract chart). Prices have been rising sharply from there and they broke through a congestion zone ($66 - $72) last Friday. This week the price is testing strong resistance at $74. A sub-cycle crest and corrective dip can be expected anytime now over the next few weeks, so this resistance line would be a good place for it to happen. Any correction that does not go below $66.71 may be a good place to buy, but for now we will remain on the sidelines of this market.

Trading Blog Monday (late night), January 6, 2025

1/6/2025

BROAD STOCK MARKET UPDATE (11:30 pm EST)

The broad stock market continues to be tricky to call. In my last blog (Dec. 31) I wrote:

"All three indices are now approaching and testing their Dec. 20 lows. If those lows hold in the DOW and S&P 500, we may see a double-bottom formation that would support the idea of new medium-term cycles starting now. Furthermore, if the NASDAQ makes a lower low, that would suggest that it too is ending an old medium-term cycle and starting a new one as this index has now fallen the minimum 2 weeks from its Dec. 16 high that we like to see at the end of a cycle."

Well, all of this happened, but the rally off last week's lows could be short-lived. The NASDAQ's rally was strong today as it closed above both its 15-day and 45-day moving averages. The S&P 500 also closed above those averages. The DOW, however, did not, and all three indices lost much of their day's gains by the closing bell as they encountered strong resistance lines. Both the S&P 500 and NASDAQ made "gap-ups" today which created "bullish island reversal" patterns in their charts, but strong resistance could turn these indices back down and negate that pattern (or not).

There are two possible ways to label the current medium-term cycles in the the DOW and S&P 500:

Scenario 1: The medium-term cycle is old, peaked in early December, and is now falling to its final bottom which is due anytime over the next several weeks. If this is the case, a "double-bottom" could already be in for both indices on Dec. 20 and Jan. 2, or a lower bottom could be coming over the next few weeks. If the former, this market could be very bullish and ready to rally strongly to new highs.

Scenario 2: A new medium-term cycle could have started with the lows on Nov. 4. In this scenario, those recent lows on Dec. 20 (DOW) and Jan. 2 (S&P 500) could be the first sub-cycle lows in the medium-term cycle. This could be bullish if these two indices can now rally above their early Dec. highs, but if they roll over before doing that, the medium-term cycle could turn bearish and be pointed down for at least another month (and probably longer).

The movement of these indices over the next week or two should make it more clear which scenario will prevail. Right now, the DOW looks the most bearish, and the NASDAQ looks the most bullish, but once a trend is established, all three indices should fall in suit and either rise or fall as this new year gets underway. I am staying on the sidelines for now.

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