It looks like my decision to enter a short position in gold last week (Thursday) was a good one. Gold prices dropped significantly on Friday and the current technical signals are reaffirming that a significant correction is likely in progress. Silver also dropped very steeply on Friday confirming my comment the day before that silver's correction had already started. Unfortunately, I avoided a silver short position as I thought the risk of an upside surge was too high. Because silver is already down over 3% and the current price dip may be brief, we will not chase this metal's correction even though it could go lower. We will rely on our gold short position for our profit in this precious metal trade. Gold prices could now move down to $1170 or lower very quickly. Holding my short position in gold but still out of silver.
The broad stock market is starting to manifest bullish technical signals that may be signaling a rally stronger than I had expected. We may therefore see this market rise to the upper end of our target zones (16,800 - 17,200 in the DOW and 1950 - 2000 in the S&P 500) or perhaps even higher. We will watch this rally carefully as we move into the month of March. As I have stated in earlier blogs, there are several turning points in March that could lead to more than one reversal, but we are on the lookout for a medium-term cycle high that could be followed by a major correction to a cycle bottom that could break below this market's recent lows of 15,450 in the DOW and 1810 in the S&P 500. As I have stated before, a clear break below 1800 in the S&P 500 would mean big trouble for these markets and could trigger a major sell-off in equities. Still on the sidelines of the broad stock market.
Our long position in crude oil seems to be holding up, and any rally now in the broad stock market should help push crude's price higher. I am still looking for a rally to at least $38 and maybe higher. This is possible as long as prices remain above the low of Feb. 11 (now $28.74 in the April contract chart). Holding my long position in crude oil.