Blog Archives

Trading Blog Thursday, February 28, 2019

2/28/2019

MARKETS UPDATE (3:30 pm EST)

As we move toward the center of our new reversal zone for equities and precious metals (Feb. 26 - March 7), the broad stock market has been relatively flat and seems reluctant to rally. This week's disparaging comments on President Trump from his former attorney Michael Cohen, the current break down of talks with North Korea as well as the dragging on of trade deal talks with China are most likely weighing heavily on investor's minds. The DOW, S&P 500 and NASDAQ all made new highs on Monday. Those highs could end up being the top of a sharp correction if a pessimistic mood takes hold on Wall Street and continues into next week. If that happens, we will watch for a bottom to buy. But equity markets may shrug off their worries and rally into next week. This would be an ideal scenario if one or two (but not all three) indices make new highs early next week giving us an intermarket bearish divergence signal to sell short. We are on the sidelines for now as we watch for either one of these scenarios to unfold.

Gold and silver prices continue to fall reinforcing the idea that both metal's medium-term cycle tops may be in with last week's highs. If so, they are now falling sharply to their final cycle bottoms. We will continue to watch for a buy spot at the bottom, ideally around $1280 in gold and $14.75 in silver.

Crude oil prices have been edging up this week. If crude can beak above last week's high of $57.81 (April contract chart) then we could see a rally into next week's reversal zone specifically for crude oil (March 5 - 14) that could get above $60. If that happens, we will have a good spot to sell short for a sharp sub-cycle correction. If last week's high holds, however, there is still time for prices to fall to a low in that same reversal zone. In that case, a low near $51 would be a good place to go long. Still on the sidelines of this market.

Trading Blog Monday, February 25, 2019

2/25/2019

MARKETS UPDATE (4:00 pm EST)

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

"...we did not get any intermarket bearish divergence signal. We usually like to see that before a significant reversal. There is therefore still the possibility of this market pushing higher into the next reversal zone (Feb. 26 - March 7)."

It looks like that is happening as all three indices (DOW, S&P 500, NASDAQ) rallied strongly this morning. Today directional momentum in the S&P 500 and NASDAQ turned 100% bullish (the DOW is still mixed bullish and bearish) so it appears equities want to go up. President Trump's announcement today that a new U.S.-China trade deal is "very close" may be giving this market some of its lift. We are also getting new weekly highs in all three indices today which means we will have no bearish divergence signal again this week. The center point of the new reversal zone we are entering tomorrow (Feb. 26 - March 7) is next Monday. Although this market is now touching our minimal target areas for a top (26,200 in the DOW and 2,800 in the S&P 500) and could turn down any time now, I am reluctant to sell short. I am inclined to wait for a possible bearish divergence signal early next week. Let's stay on the sidelines for now and see how the market moves this week. If we do get a sharp correction now, we will wait to buy at the bottom which could end up in either one of the two reversal zones I mentioned last Thursday (Feb. 26 - March 7 or March 12 - 21 ).

It looks like gold may have made its final medium-term cycle top at $1346 on Feb. 19 (last Tuesday) and is now headed down to the final cycle bottom (and start of a new cycle). A good target for the bottom would be around $1280. That could come next week or it could fall into the middle of March for a final low. Any sudden rally above last week's high would negate this scenario and could give us a new high to sell short in the upcoming reversal zone for precious metals (Feb. 26 - March 7, same as for equities), but I think it's more likely that the top is in and we will instead wait for a cycle bottom to buy. On the sidelines of gold.

Silver's current medium-term cycle top may also be in with last week's high at $16.20, but silver's short-term chart looks a little more bullish than gold's so we also can't rule out silver's prices pushing higher into this week's and next week's reversal zone. If this happens, it could give us a very good shorting opportunity. If it doesn't, we will wait for the final cycle bottom to buy. A good target for silver's cycle bottom would be around $14.75. On the sidelines of silver.

Crude oil prices are dropping sharply today. This may be the start of a sharp sub-cycle correction in this market from last week's high of $57.81 (April contract chart). A good target for this correction would be $50 - $51. Ideally, that low would happen in the upcoming reversal zone for crude (March 5 - 14). We will watch for this as an opportunity to buy. If prices instead push higher into that time frame, we might get a (short-term) shorting opportunity (probably above $60) and will have to wait a little longer for a sub-cycle correction and bottom to buy (probably a little above $51). On the sidelines of crude oil for now.

Trading Blog Thursday (evening), February 21, 2019

2/21/2019

MARKETS UPDATE (6:30 pm EST)

Our trading decisions may get a little tricky when we enter the month March as we have several overlapping reversal zones to deal with. They are:

Feb. 26 - March 7 (broad stock market and precious metals)
March 12 - 21 (very strong - broad stock market and precious metals)
March 5 - 14 (crude oil)

We will keep in mind that in all of these reversal periods the most likely turning point is to be found in the center of the reversal. Remember that these reversals can be either a significant turn down from a top or a significant turn up from a bottom depending on what direction the market is moving.

Tomorrow is the last day of our current reversal period for equities, and it looks like this market does not want to touch our minimal targets for a top (26,200 in the DOW and 2,800 in the S&P 500). The broad stock market is turning down today so it's possible a high is in (from yesterday), and we could see a correction now with a bottom forming in next week's (or the following week's) reversal zone. But I am noting here that all three indices (DOW, S&P 500, NASDAQ) made new highs this week so we did not get any intermarket bearish divergence signal. We usually like to see that before a significant reversal. There is therefore still the possibility of this market pushing higher into the next reversal zone (Feb. 26 - March 7). If the top is in, we should see a sharp and steep correction down from here. If we don't, I am favoring the idea of a little more rallying over the next week or two. Because we're assuming this market is bullish, our primary trading strategy now is to buy the bottom of any significant correction. But a significant top over the next two or three weeks may also give us a good short-term shorting opportunity as the subsequent correction down could be steep. Stay tuned for trade alerts. Still on the sidelines of the broad stock market.

Today is the last day of our current reversal zone for precious metals. Yesterday silver made a new monthly high ($16.20) and on Tuesday gold made a new monthly high ($1346). This negated our bearish divergence signal from last week and early this week. Despite that, gold and silver prices are falling sharply today. As with the broad stock market, if prices continue to fall sharply into next week's reversal zone we will likely see a significant bottom to buy (maybe the final medium-term cycle bottom in both metals). But no bearish divergence signal this week also tells me that gold and silver's rally may not be over yet. If prices push higher next week, we may be looking for the final top in both metals and a possible shorting opportunity to ride a steep (but brief) correction down to the final cycle bottoms. Still on the sidelines of gold and silver.

The U.S. Dollar Index has been falling this week, but it may be finding support around 96.40. Yesterday's and today's lows tested that level then snapped back up. Significantly, Monday was the center point of a reversal zone specifically for currencies (that ends today) so we could see the greenback rally from here. If it does, that would put downward pressure on gold and silver and perhaps push prices down to their final cycle bottoms as discussed above.

Let me say here that despite any short-term bullishness in the U.S. dollar, the longer-term picture for the greenback is not looking very good. Many financial analysts now believe that the status of the U.S. Dollar as the world's reserve currency is in jeopardy. Supporting this idea is the fact that the dollar is probably in the late stages of a 16 year cycle that started in March 2008 and may have peaked in Jan. 2017 at 103. Unless the dollar soon surges above that 103 top, it is most likely headed down for several more years and could end up in the low 70s or even lower by 2025. The Federal Reserve's hawkish attitude last year certainly helped boost the U.S. Dollar, but recent dovish rhetoric from the Fed (seemingly to head off a collapse in equity markets) has at least temporarily taken the wind from the greenback's sails. Needless to say, if the dollar is ready to collapse as just described, it will be good news for precious metals. The wind that was driving the greenback could then drive gold and silver prices into an explosive long-term rally. This is one of the reasons I am so bullish on precious metals right now.

Crude oil prices also made a new high yesterday ($57.45 - April contract chart) and are down today. Crude prices could fall from here and make a sub-cycle low within the next two weeks which would give us a good spot to go long. If prices push higher next week, however, we may have to wait a bit longer for a significant sub-cycle correction. As I've stated in recent blogs, this market is looking quite bullish as it is just starting a new medium-term and probably longer-term (3 year) cycle. That means we are looking for a good entry point to buy as soon as possible. On the sidelines of crude oil for now.

Trading Blog Tuesday (night), February 19, 2019

2/19/2019

MARKETS UPDATE (10:30 pm EST)

The DOW, S&P 500, and NASDAQ (Nasdaq Composite) are all starting the trading week with new weekly highs so we are not going to get a bearish divergence signal this week. (The March contract chart for the NASDAQ 100 Index, however, did not make a new high today. We may consider this a bearish divergence signal if it stays below last week's high for the rest of the week.) Today is the dead center of our reversal zone for equities which will last through Friday, and we are thus anticipating a high to be followed by a corrective dip. A good target for the high would be around 26,200 in the DOW and 2,800 in the S&P 500. We may consider selling short if these targets are reached before the end of the week. If we end up missing the top, however, we will simply wait for a corrective dip to buy, as long as that correction doesn't go too low. Good buy spots for a dip would be around 24,000 in the DOW (yes, that far down - that is why we are considering a short sell at the top) and 2,550 in the S&P 500. After any corrective dip we are still expecting this market to be bullish for at least a few more months. On the sidelines of the broad stock market for now.

Gold and silver prices both shot up today with gold rising $18 as it made a new monthly high at $1343. Silver's rise was also substantial, but it was not able to exceed last week's high of $16.18. We thus have a case of intermarket bearish divergence unless silver breaks that high over the next few days (it is close). We are now in a reversal zone specifically for precious metals that ends on Thursday. If silver cannot break above $16.18 over the next two days, I will consider selling short. Otherwise, we will wait for a final corrective drop (which is imminent) to the bottoms of the current medium-term cycles in both metals to buy. Still on the sidelines of gold and silver.

It still looks like crude oil started a new medium-term cycle on Dec. 24 at $42.67 (March contract chart) and maybe even a new longer-term (3 year) cycle. This means crude could be very bullish for the rest of the year. We have been waiting for a sharp sub-cycle correction and a good spot to buy. Prices have been rising into the current reversal zone for the broad stock market (which ends this Friday). This reversal zone could also influence crude so we may see a high and a corrective drop start this week or next. We are still looking to buy around $50. If prices edge higher after this week, we may have to wait until the first or second week of March to see a top as that is the next reversal zone specifically for crude oil (March 5 - 14). On the sidelines of crude for now but looking to go long soon.

Trading Blog Friday, February 15, 2019

2/15/2019

MARKETS UPDATE (3:00 pm EST)

It's pretty clear that the broad stock market wants to rally into our current reversal zone (Feb. 13 - 22). The center point for this reversal is next Tuesday. Let's watch for a top around then. If one or two (but not all three) market indices (DOW, S&P 500, NASDAQ) make new highs next week (bearish divergence), that could be a sign that a top is imminent. We might try and sell short at the top for a brief (but possibly steep) dip down or we will just wait for the dip and buy at the bottom (as long as the correction doesn't go too low). This current new medium-term cycle in equities still looks bullish. On the sidelines of the broad stock market for now.

Gold and silver prices are surging up today, and gold is close to breaking to a new monthly high while silver remains a considerable distance below its recent Jan. 31 high of $16.18. This could carry over to next week as an intermarket bearish divergence signal still within the current reversal zone for precious metals (that ends next Thursday). If so, we could see a final medium-term cycle top in gold next week to be followed by a steep correction to the cycle bottom. Silver's top may already be in with that Jan. 31 high. We are still waiting for the final medium-term cycle bottoms in both metals to buy (they are due any time over the next several weeks). Still on the sidelines here.

Crude oil seems to be taking its cues from the bullish broad stock market as prices edged up to new monthly highs today. The current reversal zone for equities could also influence this market so we might see a top in crude next week and a corrective sub-cycle dip to follow. If that happens, we will be looking to buy the bottom of that correction (perhaps a little above the $50 level). One the sidelines of crude oil for now.

Trading Blog Tuesday, February 12, 2019

2/12/2019

MARKETS UPDATE (3:00 pm EST)

Last week's lows (on Friday) in the DOW and S&P 500 just touched the 15-day moving averages (the NASDAQ came close but did not touch its 15-day moving average) so that may have been a significant sub-cycle correction for those two indices. A deeper correction would have been better (and would have allowed us to buy). We could still get that if this market falls into our next reversal zone which starts tomorrow and ends late next week (Feb. 13 - 22), but today's strong rally is suggesting the broad stock market wants to go up from here. If that happens and we get new highs well into this reversal period, it will make no difference if last week's lows were or were not legitimate sub-cycle dips as we will likely have a new sub-cycle top followed by another (most likely steeper) correction and another opportunity to buy. So for now we wait and see how this market moves into the end of this week and next week. A deeper correction could give us a buy spot, but more rallying means we will have to wait a bit longer for an opportunity to buy. All of this is based on the assumption that new medium-term cycles started on Dec. 26 and that this market is now bullish for at least several more months (which is my preferred scenario for now). On the sidelines of the broad stock market.

We are also now entering a reversal zone specifically for precious metals (Nov. 12 - 21). Gold and silver prices could make either a top or bottom in this time period, but at the moment prices seem reluctant to rally, and there are some short-term technical signals suggesting prices could go lower. As with the broad stock market, we will have to wait and see how prices move this week and into next week. We may see a bottom to buy, but we also can't rule out the possibility of new highs and a top to sell short. It is late in the medium-term cycles of both gold and silver, and the final corrective bottoms to these cycles are due soon (maybe even next week). As long as those bottoms don't go too low, the precious metals market looks quite bullish. Still on the sidelines of gold and silver.

We have been waiting for a buy spot in crude oil around $50 (or lower), but today's equity rally (as well as announcements of cuts in crude oil production by Saudi Arabia and OPEC) seems to be lifting crude prices. If equity markets rally now, we may have to wait a bit longer for a dip in crude prices to buy. On the sidelines of crude oil for now.

Trading Blog Thursday, February 7, 2019

2/7/2019

MARKETS UPDATE (4:00 pm EST)

It looks like I covered my short position in the broad stock market too early on Tuesday as today's equity plunge is taking the DOW back down to the 25,000 level and the S&P 500 a little below 2,700. We are now out of a (weak) reversal zone, but we enter another (stronger) one next week (Feb. 13 - 22). If this market continues to fall into the end of next week, that will be a good time to look for the bottom of the correction and go long. As I stated in an earlier blog, that correction could end up as low as 23,600 in the DOW or as high as the 15-day moving average (now around 24,800). We will look for a buy spot starting next Wednesday in this target range. Alternatively, If today's downturn doesn't gain any momentum and the market pushes higher into late next week, we may be looking for another top to sell short (especially if the rally is weak). Longer-term we are still viewing this new medium-term cycle (that started on Dec. 26) as bullish with the potential to rally for several more months. Now on the sidelines of the broad stock market.

Gold and silver prices have been falling steeply from last week's highs in both metals. If those highs were the final tops to the current medium-term cycles then prices could push lower into next week's reversal zone for precious metals (Feb. 12 - 21, almost the same as for the broad stock market). However, last week was a little too early for a normal cycle peak so it is possible for prices to push higher for a top in next week's reversal zone instead of a bottom. I am favoring the idea of a top for now. Good targets for a top would be around $1340 in gold and $17 in silver and would be areas to consider short selling. If instead we get a low in the reversal zone, we will look to go long as it may be the end to the current medium-term cycles (and the start of new ones). As long as these cycle bottoms don't go too low, the next cycles should be quite bullish. On the sidelines of precious metals for now.

This week's steep rally in the U.S. Dollar Index has been the force pushing gold and silver prices down, but the dollar is now up against a strong resistance line around 96.60 and is entitled to take a breather. If the greenback backs down here, it would help push precious metal prices back up and favor our scenario for a top next week.

Crude oil again seems to be taking its cues from the broad stock market as prices dropped significantly today. We are still looking to buy a low in crude around $50 (or lower) soon. A break below $45, however, might make me hesitate and delay buying as it could indicate the final cycle bottom isn't in yet. We are assuming for now that the final medium-term (and possibly longer term) cycle is in with the Dec. 24 low of $42.67 (March contract chart). On the sidelines of crude for now.

Trading Blog Tuesday, February 5, 2019

2/5/2019

BROAD STOCK MARKET TRADE ALERT (3:30 pm EST)

Two Fed executives (St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan) made public statements today expressing how beneficial it is right now to dovishly restrain the raising of interest rates. This news came in early afternoon and seemed to give a shot in the arm to equity markets that were starting to fall steeply from early morning highs. This bullish kick may be short-term, but I am losing my nerve with my short position. Yes, the market could still reverse down from here, but it could also "break out" dramatically through the current resistance lines mentioned yesterday (25,400- 25,500 in the DOW and 2,740 - 2,750 in the S&P 500). I am now covering (unloading) my short position in the broad stock market with a small loss. If the markets do take a dip, we will likely be looking to go long at the bottom of that correction (as long as it is not too severe).

Trading Blog Monday, February 4, 2019

2/4/2019

BROAD STOCK MARKET UPDATE (7:00 pm EST)

The broad stock market had a strong rally today as the DOW broke through and closed above our resistance (stop loss) line of 25,100. Again, as on Friday when we broke our 2,700 stop loss in the S&P 500, some traders may have covered their short positions today. I am being a little stubborn and perhaps pushing my luck a bit by holding my short position today, but we are still in a reversal zone, and this week there is another resistance area at 25,400- 25,500 in the DOW and 2,740 - 2,750 in the S&P 500. Those areas could still turn this rally down, but any move higher after tomorrow will most likely force me to cover my short position. The danger here is that this new medium-term cycle could be very bullish and might be bypassing its first sub-cycle correction and moving directly to the next sub-cycle top over the next two weeks. Stay tuned tomorrow and Wednesday for a possible trade alert. Some traders may still be short with me, but others are now on the sidelines.

Trading Blog Sunday (night), February 3, 2019

2/3/2019

MARKETS UPDATE (11:00 pm EST)

On Friday the broad stock market closed with the DOW below our stop loss line of 25,100, but the S&P 500 closed a bit above our stop loss of 2,700 (at 2,706). Some traders may have covered their long positions, but I chose to remain short. It still looks like these indices started new medium-term cycles on Dec. 26, which makes them young and bullish, but we are in the time band for a sub-cycle correction, and the market seems to be hesitating at resistance lines in the current reversal zone (that ends on Wednesday). Let's see if this market turns down early next week and gives us a better entry point to cover our shorts and go long. An ideal target now for a correction in the DOW would be around 23,600, but if this market is really bullish, it may only test the 15-day moving average (now around 24,500) before resuming its rally. The S&P 500 would ideally go near 2,550, but it too could only dip to its 15-day moving average (now around 2,650). We will keep these numbers in mind as we watch for some sort of correction next week. On the sidelines of the broad stock market for now.

Gold and silver seem to be moving through the final sub-cycle of their current medium-term cycle which means they are close to their cycle highs which should be followed by a steep correction down to their medium-term cycle bottoms. OK, that's a little confusing, but the bottom line here is that we are looking for a top in the current medium-term cycle (in both metals) and then a sharp correction down to this cycle's final bottom. Prices seem to be falling from last week's highs in both gold and silver, but that was a little too early for a sub-cycle peak, and prices did not get to our target areas (around $1340 in gold and $17 in silver). If prices don't fall too far this week, they could rebound and get closer to those targets over the next week or two. If they do, we may look to sell short at the top. Once the final correction is in, we will look to buy. Still on the sidelines of gold and silver.

Crude oil is also close to making a sub-cycle peak (the first one in its new medium-term cycle that started on Dec. 24 at $42.67 - March contract chart). Friday's high at $55.66 may have been it, and if so a correction back down to $50 would be a good target to buy. We will watch for that. If prices push higher before turning down, we may raise that target, but the sub-cycle bottom is due any time over the next three weeks so we shouldn't have to wait long to go long. On the sidelines of crude but waiting to buy soon.

Archives

LEGAL and DISCLAIMER