In Sunday's blog I mentioned the possibility of the broad stock market forming a medium-term cycle bottom this week and then rallying into the next critical reversal zone coming up around the second week of April. The DOW, S&P 500 and NASDAQ all made new weekly lows on Monday and have rallied a bit from there. We are watching this carefully, but there are no technical signals (so far) that point to a significant cycle bottom here. The fact that all three indices made new lows on Monday (i.e no intermarket bullish divergence) suggests weak upward momentum so this market could still be headed down into mid-April. Let's continue to hold our short position in the broad stock market for now.
Gold and silver both made new weekly highs on Monday. Gold prices retreated back a bit Tuesday and today while silver prices pushed a little higher. It is still not clear if these metals will rise into early April's reversal date or if they will fall into it. Both metals are now approaching their February highs ($1,263.59 on Feb. 27 for gold and $18.53 on Feb. 24 for silver). An ideal set-up to sell short would see one metal break above its February high while the other does not (intermarket bearish divergence), ideally in the first two weeks of April. We will watch for this. If prices instead fall into early April, we may be looking to buy a low in the reversal zone. Still on the sidelines of gold and silver.
On Sunday and Monday, the U.S. Dollar Index fell below its low from Feb. 1 as directional momentum changed from mixed bullish and bearish to nearly 100% bearish. This is suggesting that Feb. 1 was not the start of a new medium-term cycle (as we had been thinking) and that an older cycle is still in the process of bottoming. The next major reversal zone for the dollar would be in the second or third week of April so that would be a good time to expect a bottom. This scenario would support the idea of precious metal prices rising into early April as described above.
Crude oil prices made a low last week at $47 (May contract chart) and had been flat until today when prices jumped to $49.50. It is possible last week's low was a medium-term cycle bottom, but next week is a major reversal zone for crude, and it would be better from a technical point of view for the low to happen in that time frame. Since directional momentum in this market is still nearly 100% bearish, a new low next week is possible. We will stay on the sidelines of crude as we watch how prices move into late this week and next week.