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Trading Blog Sunday (night), March 31, 2019

3/31/2019

UPDATES on the BROAD STOCK MARKET and CRUDE OIL (9:00 pm EDST)

The next reversal zone for the broad stock market is coming up April 9 - 17. If the DOW can now rally above last week's high of 26,109, it looks like we could end up with another high in that time frame and probably see the final top of the current medium-term cycle. That would be a good opportunity for a short sell. But note that any short selling from a top in this next reversal zone (if we get a top) would be a short-term trade to take advantage of what is usually a brief but steep correction to a final cycle bottom. On the other hand, if next week the DOW breaks below last week's low of 25,372 then we should expect a low in that mid-April reversal zone. So these are two lines to watch next week to tell us the directional trend into mid April. Another level to watch is 25,208. Any break below there would be very bearish with the market pointed down for possibly many more weeks. In that scenario, we would be waiting for the final bottom to the medium-term cycle to buy. I still think we could have another strong rally from that bottom into the summer that could easily make new highs and possibly even be a "blow-off" top before the start of a very severe correction into next year. I am favoring a break to the upside next week so stay tuned as we may be buying any short-term dip that stays above last week's low (25,372). On the sidelines of the broad stock market for now.

Crude oil prices made a new monthly high last week. That was not in a reversal zone, but prices could still turn down here as a sub-cycle high is due (overdue), and it would be nice to see crude fall from last week's high ($60.73 - May contract chart) or perhaps from another high this week into that April 9 - 17 reversal (which is relevant to crude) and form a sub-cycle low to buy. A good price target to buy would still be in the $55 -$56 range. If equity markets rally next week, crude may follow suit and push higher into the early part of the reversal zone. In that case we may have to wait a bit longer for a corrective low to buy. We are still bullish on crude through the rest of this year. Still on the sidelines and waiting to go long.

Trading Blog Thursday, March 28, 2019

3/28/2019

GOLD TRADE ALERT (1:00 pm EDST)

Gold and silver prices are plummeting today. We were expecting this correction but were also expecting it to be more severe for silver with the assumption of that metal's final medium-term cycle bottom being due soon with gold already starting a new medium-term cycle with its low of $1281 on March 7. That still may be the case, but today's steep drop in gold has broken below some important short-term support lines, and this could mean that gold is also completing an older cycle and could drop significantly lower. Since gold is now at or close to our entry point from March 4, I am going to sell my long position here with little or no loss and stand aside. We are still out of silver.

NOTE: There is a good chance one or both metals will hit their final cycle bottom(s) very soon (maybe over the next several trading days) so we may be looking to buy again rather quickly. Normally, I don't "day trade" the markets in such short time periods, but there is a possibility here of gold dropping significantly lower (perhaps to $1240) so I feel it is worth unloading our longs at the "break-even" point and wait for a bottom in both metals. (Our original stop loss for this trade was $1280, but we are pulling out a little earlier because of several short-term bearish signals).

Trading Blog 2 Monday (afternoon), March 25, 2019

3/25/2019

PRECIOUS METALS and CRUDE OIL UPDATE (3:00 pm EDST)

Both gold and silver took corrective dips last week, but gold seems to be snapping back much quicker than silver which suggests that silver may still dive deeper to complete the bottom of an older cycle while gold may have started a new cycle on March 7 at $1281. If silver does make a new low (below $14.90) with gold staying above $1280 then we will have a strong intermarket bullish divergence signal and a good spot to buy silver (we are already long in gold). It is also possible that silver started a new medium-term cycle on March 7 (at $14.90). In that case, both metals will be bullish now, and we will have to wait for a sub-cycle dip to buy silver. Holding my long position in gold and still on the sidelines of silver.

Crude oil is most likely taking a significant sub-cycle correction from last week's high at $60.19 (May contract chart). The bottom of that correction is due between now and the second week of April (which happens to be in our next reversal zone specifically for crude - April 9 -17, same as for the broad stock market). A good target for this correction is now around $55 - $56. We will watch for that as a good spot to buy. Although it would be nice to see that low in the April reversal zone, it could happen anytime over the next three weeks so we will use the target price as our buy signal. On the sidelines of crude and still looking to buy soon.

Trading Blog 1 Monday (early AM), March 25, 2019

3/24/2019

BROAD STOCK MARKET UPDATE (1:15 am EDST)

The Fed's dovish "gift" to Wall Street last Wednesday (the likelihood of no interest rate hikes for the rest of the year) was not enough to push the DOW above its Feb. 25 high of 26,241 by the end of the week. In fact, after an optimistic surge on Thursday, the DOW dropped a whopping 460 points on Friday. If Tuesday's high at 26,109 was a significant top (it was in a reversal zone), we could now see the broad stock market fall steeply to the end of the current medium-term cycle, with the final low possibly in our next reversal zone (April 9 - 17). Because the DOW did not exceed that Feb. 25 high, we still have an intermarket bearish divergence signal against the S&P 500 and NASDAQ, and that is supporting the idea of more falling from here. But as I mentioned last week, all financial markets may be highly volatile through the end of this month. The DOW could suddenly reverse back up and give us a new high in that next reversal zone instead of a low. A break above 26,109 would suggest that is happening, but a move below 25,208 would suggest the bearish scenario playing out. If bearish, we will buy at the final cycle bottom. If bullish, we will look to sell short at a new high most likely above the Feb. 25 high (26,241). Either one of these trades would most likely happen in the next reversal zone (April 9 - 17).

The S&P 500 and NASDAQ both made new highs last Thursday before turning down. If this market is turning bearish now, the tops to the medium-term cycles are in, and, as with the DOW, we will wait for their final cycle bottoms to buy. If they push higher into the next reversal zone, we will look to sell short.

On the sidelines of the broad stock market.

Trading Blog Thursday, March 21, 2019

3/21/2019

GOLD and SILVER UPDATE (12:30 pm EDST)

Yesterday gold and silver prices surged up as the Fed's dovish rhetoric kicked down the U.S. dollar. Today the precious metals may be topping at the end of a reversal zone and prices could now take a corrective dip. We have been expecting this and hoping for a new low in one of these metals (probably silver) but not the other for a case of bullish divergence and the signal of a final cycle bottom in both metals. Ideally, we want to see silver dip below $14.90 with gold remaining above $1280, but gold breaking $1280 and silver staying above $14.90 would also be an acceptable bullish buy signal. (It is also still possible that both gold and silver already started new medium-term cycles with their March 7 lows. In that case, any corrective dip now will be small). It's a little tempting to sell our gold long position here, but I think I will ride out any correction with the idea that both metals are starting or close to starting new medium-term cycles with a bullish rally just ahead. Holding my long position in gold and on the sidelines of silver for now.

Trading Blog Wednesday, March 20, 2019

3/20/2019

COMMENT ON TODAY'S FED ANNOUNCEMENT and BRIEF MARKETS UPDATE (3:00 pm EDST)

Today the Federal Reserve announced that it would leave interest rates unchanged and also released projections suggesting that the Fed won't raise interest rates at all for the rest of the year. The broad stock market is surging up on this news (after falling significantly earlier in the day), and if this rally gains legs and pushes into next week, we will be out of our reversal zone and likely bypassing a corrective dip (which was probably starting with this mornings steep drop). In this scenario, we may have to wait for a top in our next reversal zone for equities (April 9 - 17). This bullish view hinges now on the DOW breaking above its Feb. 25 high of 26,241 and negating a strong intermarket bearish divergence signal against the S&P 500 and NASDAQ. If this Fed triggered rally can push the DOW over that line, equity markets could continue higher over the next few weeks. Still on the sidelines of the broad stock market.

The dovish announcement from the Fed could also push down the U.S. Dollar Index and boost precious metal prices. If this happens, it will be good for our long position in gold.

Crude oil may also take a cue from a strong equity rally and push higher into April; however, there is still the chance of a top in this week's reversal zone and a corrective dip. If prices push higher past Friday, though, we may need to wait a bit longer for that corrective dip to buy.

Trading Blog Monday, March 18, 2019

3/18/2019

MARKETS UPDATE (3:30 pm EDST)

Caveat: All financial markets may exhibit strong volatility through the end of this month which means we can see strong swings (up and down) that could be of short duration. We should keep this in mind and be very careful in our trading moves. Markets should become a bit more stable in April.

I am starting to think that last Monday's low in the DOW (25,208 on March 11) was a significant sub-cycle bottom and that sub-cycle bottoms also formed in the S&P 500 and NASDAQ on March 8 (at 2,722 in the S&P 500 and 7,333 in the NASDAQ). If this is correct, these indices could rally strongly over the next several weeks, possibly to new all-time highs. We have to acknowledge, however, that we are now in the center of a strong reversal zone (it ends Thursday), and we are seeing a continuation of bearish divergence this week as both the S&P 500 and NASDAQ made new monthly highs today while the DOW is still significantly below its Feb. 25 high of 26,241. This strongly suggests we will see some sort of correction start this week. If such a correction doesn't go too low, it may give us a good opportunity to go long in the broad stock market. We will watch for this. Still on the sidelines of this market.

We are also at the center of a reversal zone specifically for precious metals, and both gold and silver prices are edging a bit higher today. This means we could see a high and a reversal before the end of the week. If that happens, we ideally want to see one metal make a new monthly low without the other for a bullish divergence signal to buy. While it is possible that both metals started new medium-term cycles with their lows in early March (gold at $1281 on March 7 and silver at $14.90 on March 5), it is more likely that only one metal started a new cycle and the other is still completing an older cycle that will bottom soon below one of the lows just mentioned. We will watch for that to go long in silver. We are already long in gold and will hold that position for now.

Crude oil prices continue to edge higher (they got to to $59.23 today - April contract chart), but a sub-cycle top is due now, and we are in the middle of a reversal zone that could influence this market. We could easily see a top this week and a reversal in prices. A good target now for a sub-cycle correction would be in the $54 - $56 range. We will watch for this as a good buy spot. Still on the sidelines of crude.

Trading Blog Thursday, March 14, 2019

3/14/2019

UPDATES on the BROAD STOCK MARKET and PRECIOUS METALS (7:30 pm EDST)

As we move close to the center of our new reversal zone for the broad stock market (March 12 - 21), both the S&P 500 and NASDAQ are making new highs for the month while the DOW is not, so we now have an intermarket bearish divergence signal. This is in addition to a bullish divergence signal we got on Monday (as the DOW made a new low and the S&P 500 and NASDAQ did not). The DOW is now halfway between its Feb. 25 high (26,241) and Monday's low (25,208) and is balanced between two opposing signals. There is still time for this index to make a steep sub-cycle correction, but if it does, it has to drop now as the bottom would be due this week (or early next week - probably close to 25,000 or lower). It's also possible that Monday's low of 25,208 was already the sub-cycle bottom. If that's the case then this index is going up, and we will wait for any modest dip to buy. For now, let's stay on the sidelines and see if this index can push lower over the next few trading days to give us a better spot to go long.

The DOW's directional momentum is currently 100% bearish while the S&P 500 and NASDAQ are nearly 100% bullish (which is unusual). This is why I am focusing on the DOW for a low to buy. Nevertheless, these other two indices are making new highs in a reversal zone, and we now have a bearish divergence signal against the DOW which means they could also fall sharply into a sub-cycle bottom sometime next week. We will also watch these two indices for lows to buy.

Gold and silver prices are falling sharply today from yesterday's new weekly highs. Ideally, we would now like to see silver make a new monthly low (i.e. below $14.90) by next Thursday with gold staying above its monthly low of $1281. That would give us bullish divergence and a signal to buy. Gold breaking its low with silver staying above $14.90 would also be an acceptable buy signal, but we don't want to see both metals making new lows as that could be a bearish warning of a deeper drop in prices. Holding my long position in gold and still on the sidelines of silver.

Trading Blog Wednesday, March 13, 2019

3/13/2019

CRUDE OIL UPDATE (2:00 pm EDST)

Today crude oil is exceeding its March 1st $57.88 high (April contract chart) and making a new high in the current medium-term cycle (which began with the low of $43 on Dec. 24, 2018). This is happening in an overlap area between two reversal zones (the crude oil reversal zone from March 5 - 14 and the new equity reversal zone from March 12 - 21). We could easily see a top any time now in either one of these reversal periods (i.e. sometime before next Thursday) followed by some sort of correction. A steep correction is possible (say, down to the $51 area), but if we get this, it has to bottom either this week or next. If prices push higher well into next week, the correction will likely not be as steep, and we will look to buy at a price above $51. As I've stated before, it is very likely that $43 bottom on Dec. 24, 2018 was the start of a new longer-term 3 year cycle in crude which means that crude prices should be quite bullish for at least the rest of this year. On the sidelines of crude for now and still looking for a good spot to buy.

Trading Blog Monday, March 11, 2019

3/11/2019

BROAD STOCK MARKET TRADE ALERT (2:30 pm EDST)

The DOW made a new weekly low early this morning while the S&P 500 and NASDAQ did not, and all three indices are now rallying strongly. This is starting the week off with a strong intermarket bullish divergence signal. Although today is not technically within a reversal zone, we are sandwiched right between two reversal zones (Feb. 26 - March 7 and March 12 - 21), and that can also be a significant turning point in markets. In other words, this sub-cycle correction may be over. Curiously, directional momentum in the DOW has now turned nearly 100% bearish while momentum in the S&P 500 and NASDAQ is almost 100% bullish. These mixed signals are keeping alive the possibility of this market still continuing down into late this week or even next week (i.e the March 12 - 21 reversal zone), but today's bullish divergence signal and strong rally are making that scenario seem less likely. I am going to cover my short position in this market today while we still have a profit. Yes, if this market does go back down we will miss that extra profit, but remember that we also want to buy at the bottom of this sub-cycle correction so we will soon be back in the market (long). Because the DOW seems less bullish than the other two indices, it's possible it could continue lower into the end of this week (or even into next week) while the S&P 500 and/or NASDAQ remain above their lows from last week. If that happens, the DOW would be a good index to buy at the bottom of this sub-cycle correction. Taking profits and covering (unloading) my short position in the broad stock market today.

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