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Trading Blog Friday, March 31, 2023

3/31/2023

MARKETS UPDATE (4:00 pm EDST)

A rally in the broad stock market continued today suggesting a bullish tailwind into next week - reinforced by the fact that all three indices (DOW, S&P 500, and NASDAQ) are now above both their 15-day and 45-day moving averages. The next headwind for this rally is coming in the second half of next week with some strong potential "pivot points" Wednesday - Thursday. Stronger resistance may come the following week in our next general reversal zone April 11 - 20. As always, we will be prepared to sell our long position if a serious correction looks imminent. But if these new medium-term cycles are bullish, any corrections now could be modest, and a rally could continue to at least test the Dec. 13, 2022 high in the DOW (34,712) and the Feb.2 highs in the S&P 500 and NASDAQ (4,142 and 12,270, respectively). For now, we will hold our long position in this market.

Silver made yet another new weekly high today ($24.16) while gold is still below its high from last week ($2007). We are thus ending the week with a strong intermarket bearish divergence signal. We also note that last week's high in gold was a new yearly high, but silver has yet to break its high from last year (it is close) for yet another strong bearish divergence signal. This means a downward reversal could be imminent and could happen any day now. We are very interested in this next corrective drop in gold. If it is strong and falls below $1807, it will support the idea that an old 23-year cycle is falling to its final bottom due this year or next. But if a correction is modest and gold rallies back up above $2000 (and especially $2070), it would mean that a new 23-year cycle has already begun (from last year's "double-bottom" lows of $1616 and $1617 on Sept. 28 and Nov. 3, respectively). We are thus at an important crossroads in the long-term 23-year cycle in gold. If a new 23-year cycle has started, that would be VERY bullish for gold prices. For now, we will hold our short position in gold with a stop loss based on a close above $2000.

Silver's new medium-term cycle (which started on March 10 at $19.91) has been very bullish, but its steep rise to $24 in just three weeks is leading me to think that, like gold, it may be peaking early. If that's the case, we won't want to buy any corrective drops as the price may be heading back below $19.91 soon. We will remain on the sidelines of silver for now.

The U.S. Dollar Index seems to be finding support at the 102 level. If it launches a rally from there, it would help turn down gold and silver prices, so we will watch this carefully now.

Crude oil prices are breaking above $75 today (May contract chart) and they are testing the 45-day moving average. Crude may be taking its signals from the broad stock market and is looking quite bullish. It's starting to look like the low of $64.36 on March 20 could be the start of a new medium-term cycle (and maybe even a new 3-year cycle). If that's the case, crude is bullish, and we will want to go long on any significant corrective drops. For now, we will remain on the sidelines.

Trading Blog Wednesday, March 29, 2023

3/29/2023

MARKETS UPDATE (5:30 pm EDST)

We are now free and clear of this month's strong reversal zones, and it looks like a rally is underway in new medium-term cycles that began two weeks ago in all three of our broad stock market indices (DOW, S&P 500, NASDAQ). Our next general reversal zone is coming up April 11 - 20, but it is slightly weaker in strength than those we saw this month. We also have a brief short-term reversal zone coming up next week from Wednesday - Friday which abuts that larger reversal window, so we could see some high volatility within this entire time frame (i.e. April 5 - 20).

We should see this rally continue at least into late next week before encountering any serious resistance, so we will hold our long position in this market for now. Because these new medium-term cycles are young, there's a good chance they will rally for many more weeks (with corrective dips along the way). It wouldn't be unusual to see the DOW challenge its December 13, 2022 high (34,712), and the S&P 500 and NASDAQ could easily test their Feb. 2 highs (4,195 and 12,270, respectively). If those highs are breached, these new medium-term cycles would officially have a bullish trend, and there is a possibility of seeing at least the DOW challenge its all-time high of 36,723. (The S&P 500 and especially the NASDAQ are unlikely to do the same). If that happens, we would have a VERY strong intermarket bearish divergence signal to sell short. I am speculating here, of course, for these markets could turn bearish anytime now, and we need to take this one step at a time. A rally into next week is the first step.

As a reminder, our longer-term view is still focused on the idea that the broad stock market has already made a long-term (90-year) cycle top with the all-time highs of Jan. 2022 (DOW and S&P 500) and Nov. 2021 (NASDAQ) and that the process of correcting down to the final 90-year cycle bottom (at least 50% from those highs) is in progress. It would take a break above ALL THREE of those highs to negate this idea.

Last week's highs in gold and silver seem to be holding, but both metals seem reluctant to drop strongly in price - something we want to see if the trend is turning bearish. As I have discussed in recent blogs, it is especially important for gold to stay under $2000 and drop sharply soon in order to confirm that an old 23-year cycle is in place and about to to take its final sharp correction down to its final bottom due next year. That is still our preferred scenario, and we will hold our short position in gold for now with a stop loss based on prices closing above $2000.

Silver may edge up to a new high over the next day or two, but there are no reversal zones or pivot points next week, so we could easily see some sort of top and corrective dip in silver shortly, especially if gold prices drop some more. If that happens, we will likely look for a good spot to buy (as long as any correction holds above $20). We are still on the sidelines of silver.

Crude oil prices continue to rally strongly from last week's deep bottom at $64.36 (May contract chart) suggesting that was the start of a new medium-term cycle. Prices are now closing above the 15-day moving average which is another bullish sign (but they are still below the 45-day moving average). There is a strong line of resistance at $75 (which is currently converging with the 45-day moving average), so prices may be pushed back down from there. Any pullback now that holds above $65 may be a good spot to buy, but if prices start moving below there, we may have to wait for a lower low to buy sometime in April (or maybe even May). We are still on the sidelines of this market.

Trading Blog Monday, March 27, 2023

3/27/2023

BROAD STOCK MARKET TRADE ALERT and PRECIOUS METALS UPDATE (2:30 pm EDST)

We are now out of our strong general reversal zone (March 13 - 23), and the recent lows in the DOW and S&P 500 on March 15 (DOW at 31,430) and March 13 (S&P 500 at 3,809), both of which were in the reversal zone, have held. Furthermore, the DOW and S&P 500 are now moving above their 15-day moving averages. This strongly suggests that these two indices started new medium-term cycles from those lows (especially since the end of the previous cycles were due that week of March 13). All new cycles are bullish in their early phase, so we are going to enter a long position in the broad stock market today. The DOW could rally now to challenge its Dec 13 high of 34,712, and the S&P 500 could retest its Feb. 2 high of 4,195. Our stop loss for this trade can be based on a close below those March 13 and 15 lows.

It's important to note that we expect any rally from here to be the last thrust up in the broad stock market before a longer-term correction resumes with equity markets expected to fall sharply, possibly to the final bottom of a long-term 90 year cycle over the next year or two AT LEAST 50% from the all-time highs (those highs were 36,953 for the DOW and 4,819 for the S&P 500 - both achieved in January 2022). We don't expect any rallies now to break those all-time highs. If BOTH indices do break those highs, we may have to abandon this idea of a major "crash" and assume the market is going to be bullish for many more years. I don't think that's going to happen, so until those all-time highs are breached, we will be on the lookout to sell short at the top of these new medium-term cycles.

Gold is at a major crossroads right now that could determine whether or not a long-term 23-year cycle is in it's final phase of a sharp correction down to its final bottom or if a new 23-year cycle has already begun from the recent "double-bottom" lows of $1616 on Sept. 28, 2022 and $1617 on Nov. 3, 2022. Last week gold was challenging the strong resistance line around $2000. Any close above $2000 would mean the that the "double-top" highs of $2070 from Aug. 2020 and $2066 from March 2022 are being tested. A potential "triple-top" to an older 23-year cycle is possible here, but if those double-top highs are exceeded, it would likely indicate that a new 23-year cycle has begun.

It is still early in gold's current medium--term cycle (5th week), but the 5th week means that gold is now due for a possible sub-cycle correction. Last Friday's high ($2007) could have been a top as it was at the end of two strong reversal zones. We are out of those reversal zones this week, but there are potentially strong "pivot points" for a reversal in both gold and silver from today through Thursday. The bottom line here is that we would like to see gold prices fall now to confirm that an older 23-year cycle is still in progress and taking its final steep correction down (possibly to the $1000 level by next year). But if prices start closing above $2000, and especially above $2070, we will have to give up that idea and assume a new 23-year cycle is underway.

As I wrote in in last Tuesday's blog:

"Our decision to short gold yesterday seems to have been a good one as prices dropped sharply today. Our view of gold is now bearish, but prices have to drop below $1807 to confirm this and to confirm that the current medium-term cycle has just peaked. If it hasn't peaked, that $1807 low will hold and gold prices may move higher to challenge the all-time highs at $2066 and $2070. If those highs are exceeded, it would mean that a new 23 year cycle has already started, and that would be VERY bullish (see earlier blogs on gold)."

Today's price drop is encouraging, but we have to be ready to cover our short position if prices start closing above $2000. For now, we will remain short in gold.

Silver prices have pushed higher than we expected from the $19.91 low on March 10. That low was most likely the start of a new medium-term cycle. As with gold, last Friday's high may be some sort of a top (or we could get another this week), and a sub-cycle correction could be imminent. If silver takes a modest correction now and stays above $19.91, we may look to buy again as silver still has the potential to rally higher (possibly as high as $30). We will remain on the sidelines for now.

Trading Blog Wednesday, March 22, 2023

3/22/2023

COMMENT ON THE FED MEETING and BRIEF MARKETS UPDATE (5:00 pm EDST)

Today the Fed announced another one-quarter point hike in key interest rates (which was expected by most analysts, investors, and traders), but the Fed statement as well as Chairman Jerome Powell's comments in a subsequent press conference suggested there might be only one more rate hike this year. Equity markets were stable up to the Fed announcement at 2pm, they rallied a bit just after the announcement, but then started to fall steeply during Powell's press conference as he acknowledged the current banking crisis and warned that inflation is still not under control.

Did the markets dislike Powell's final words, or are we seeing a case of "buy the rumor" (the market rallying this week on expectations of the Fed softening rate hikes), then "sell the news" (confirmation of fewer hikes today with the market having already factored in the rally)? It's hard to say, but if today's sell-off continues into Friday, we could see at least the DOW make a new low at the end of our current strong reversal zone, and a good spot to go long. We are currently on the sidelines of the broad stock market.

The Fed's slightly dovish curbing of rate hikes may have pushed the U.S. Dollar Index lower, and this in turn boosted gold and silver prices. But the greenback is approaching a strong support line at 102. It could reverse back up from there and push the metals back down. Gold prices are still below Monday's high of $2007, so we will maintain our short position in that metal for now. We are still on the sidelines of silver.

Crude oil prices pulled back with the broad stock market today after the Fed's rate hike announcement. Crude may be encountering some resistance in the $70 - $72 range (May contract chart). As I stated in yesterday's blog, I would like to see crude move lower into April for a final medium-term cycle bottom (and a good buy spot), but if the current rally picks up momentum and starts closing above $75, we may have to abandon that idea. We are still on the sidelines of crude.

Trading Blog Tuesday, March 21, 2023

3/21/2023

MARKETS UPDATE (3:30 pm EDST)

Another FOMC meeting concludes tomorrow afternoon with another potential rate hike from the Fed looming over the markets. Because of the recent banking crisis, some analysts are expecting the Fed to pull back a bit on rate hiking or at least soften their recently hawkish rhetoric, but others feel this won't happen because inflation is still very high. There is therefore a lot of uncertainty about tomorrow's meeting, and stock markets do not like uncertainty - it tends to give them the "jitters". We could see some volatility in the markets over the next few days, but we will try and navigate the situation with our technical and cycle analysis.

We are now moving into the last half of our strong general reversal zone from March 14 - March 23 (it ends Friday), and the broad stock market continues to rally from last week's lows. If those lows aren't revisited over the next few days, it will strongly suggest that they are the final medium-term cycle bottoms in the DOW and S&P 500 (the lows were well inside our target ranges and were also inside our reversal zone). If that's the case, another rally could be starting that could challenge the December highs in the DOW and February highs in the S&P 500. Today the S&P 500 broke above its 15-day moving average, and the DOW is challenging its 15-day moving average. Closing above those averages is a strong sign that new medium-term cycles are starting. If both indices can break and stay above their 15-day moving averages through the end of this week, we will look to buy this market. We remain on the sidelines for now.

Contrary to my statement yesterday of silver looking more bullish than gold, it"s starting to look like the opposite could be true, or at least it may be a coin toss between the two. Gold's surge to $2000 was unexpectedly bullish and was a bit sharper than silver's rally to resistance around $22.50. Both metals are pulling back today near the end of a strong reversal zone for precious metals (that ends today) and the end of a strong general reversal zone for all markets (that ends Friday). A corrective drop is most likely starting in both metals, but the big question is how low will they go?

It's still a bit early for silver's new medium-term cycle (that started March 10) to peak (we expect at least a 2-5 week rally from the start), but it's not impossible that yesterday's high was it. If that was the cycle peak, prices will soon move below the low from March 10 ($19.91). I think it's more likely, however, that any correction now will hold above that price and rally again to challenge or break above $22.50. We'll just have to wait and see how prices move over the next several days. If no new high forms by Friday, we may look to buy any significant correction in silver that holds above $19.91. We took profits on our long position in silver last week and remain out of silver for now.

Our decision to short gold yesterday seems to have been a good one as prices dropped sharply today. Our view of gold is now bearish, but prices have to drop below $1807 to confirm this and to confirm that the current medium-term cycle has just peaked. If it hasn't peaked, that $1807 low will hold and gold prices may move higher to challenge the all-time highs at $2066 and $2070. If those highs are exceeded, it would mean that a new 23 year cycle has already started, and that would be VERY bullish (see earlier blogs on gold). For now, we are going with the bearish scenario and will hold our short position in gold with the expectation of at least a few days of falling prices following yesterday's high. If this correction fails to gain momentum and remains above $1807, however, we will be prepared to cover this short position and possibly reverse back to the long side. We must be nimble as traders in this market right now.

In last Friday's blog on crude oil I wrote:

"...we are now in the center of a strong reversal zone, so some sort of bottom and reversal back up could be imminent. This reversal zone lasts through the end of next week. If prices can fall into our $60 - $65 target range for a medium-term cycle bottom, we might see that final bottom next week. However, the final bottom is more likely to happen in mid-April, which would be a more normal length for the medium-term cycle in crude."

Well, yesterday prices dropped into the upper part of our target range ($64.12 - April contract chart) and are now rising sharply from there. Could this be the final cycle bottom? Yes, but I am inclined to think it will go lower as we move into April. Let's plan on that for now with the idea of a very good buy spot in April deeper into our target and possibly at the end of a longer-term 3 year cycle (and the bullish start of a new one). We will remain on the sidelines of crude oil for now.

Trading Blog Monday, March 20, 2023

3/20/2023

GOLD TRADE ALERT (2:30 pm EDST)

Gold prices have been unusually bullish in their sharp rise from a new medium-term cycle that started on Feb. 28 at $1807. Today gold briefly exceeded $2000 before pulling back sharply. This testing of the $2000 level is coming close to challenging the all-time highs of $2066 in March 2022 and $ 2070 in August 2020. We have been labeling those two highs as a "double-top" to a long-term 23 year cycle in gold that should be coming to an end by next year with a final correction that could take prices back down to around $1000.

I am still favoring that bearish labeling of the long-term cycle, but gold's current bullishness is increasing the likelihood of an alternative labeling that I have mentioned in earlier blogs. That would be the idea that gold's 23 year cycle ended in 2022 with the double-bottom lows of $1616 on Sept. 28, 2022 and $1617 on Nov. 11, 2022. The difference between these two scenarios is dramatic as the alternative labeling would mean that gold is just beginning a new 23 year cycle, and that would be VERY bullish with prices pointed sharply up for many more years. The older cycle labeling (which I am still favoring at the moment) would mean gold prices are ready to take a dramatic drop of up to 50% over the next year or two!

So what should be our trading strategy here? We are currently nearing the end of a very strong reversal zone for gold (and silver) that ends Tuesday but overlaps with a strong general reversal zone (for all markets) that ends Thursday. Gold prices have been rallying strongly into both. Today's strong pull back from a top just above $2000 is a bearish signal that could signal a reversal is imminent. If gold's long-term cycle is old and bearish, this current medium-term cycle is likely peaking early here and will turn bearish as it starts to fall below $1807. If gold's long-term cycle is new and bullish, any corrective drop will be modest and not go below $1807 before the rally resumes and soon challenges and exceeds those double-top highs from 2022. Any new highs after Thursday would support this idea. Because I am still favoring the bearish scenario, I think it is worth entering a short position in gold at this juncture and waiting to see how far down any correction will go. If that $1807 level holds, we can cover our short trade and reverse to the long side if appropriate later.

I am therefore going to enter a short position in gold today. We can set a tight stop loss for this trade based on gold breaking and closing above $2000, and especially breaking and closing above those double-top highs at $2066 and $2070.

As I mentioned in Friday's blog, unlike gold, it's a bit early for the current medium-term cycle in silver to be having its final peak. Therefore, any imminent corrective drop in silver would either not go below the presumed start of the cycle on March 10 (at $19.91) or would make a double-bottom to that low. Either way, any correction might present us with a good buy spot in silver. Silver seems like it could be more bullish than gold right now, and prices still may have the potential to rise as high as $28 in this new medium-term cycle. We will stay on the sidelines of silver for now.

Trading Blog Friday, March 17, 2023

3/17/2023

MARKETS UPDATE (5:00 pm EDST)

This week the DOW made a new low on Monday, rallied on Tuesday, and then made a deeper low (31,430) on Wednesday well into our target range for a medium-term cycle bottom. The S&P 500 also made a deep new low on Monday at 3,809 well inside our target range for a cycle bottom. Those Wednesday and Monday lows are holding today (even as the broad stock market falls a bit) and they could be the final cycle bottoms. We note, however, that our current strong reversal zone (March 13 - 23) continues through the end of next week, so there is still time for these indices to push lower. One sign that the bottom is in would be a close above the 15-day moving average. The DOW is a bit below there right now, but the S&P 500 tested its 15-day moving average yesterday and today and is encountering some resistance. We are looking to go long at the final bottom of these medium-term cycles, but let's wait and see how these indices move into next week. Ideally, we would like to see one make a new low next week without the other which would give us a nice bullish divergence signal to buy. We will stay on the sidelines of this market for now.

Gold prices have been rising steeply, which reinforces our labeling of the Feb. 28 low at $1811 as the start of a new medium-term cycle. Prices have easily pushed through a resistance zone around $1915 - $1920 and today are testing and exceeding the high of the previous medium-term cycle ($1959). This bullishness may come to an end shortly, however, as we are now in the dead center of two strong reversal zones, and one of them is specifically for the precious metals (these reversal zones end next week on Wednesday). This means a top and strong reversal back down could be imminent.

The next resistance area for gold is around $2000. I don't expect that price to be exceeded, but if that does happen after next Wednesday, we might have to abandon the bearish scenario of gold falling to a final long-term 23-year cycle bottom due this year or next possibly as low as $1000. If prices break above the all-time high of $2070, we will have to shift to the idea that a new 23-year cycle already started with the double-bottom lows of $1616 on Sept. 28, 2022 and $1617 on Nov. 11, 2022. I still favor the bearish scenario at the moment, but if the bullish one pans out (pun intended with gold), it would mean that gold is VERY bullish, and prices would be pointed up and rising steeply for many more years.

For now, until proven otherwise, we will stick to the idea that this current rally is probably the "last hurrah" for gold before it falls steeply to the final bottom of an older 23-year cycle due by next year near prices possibly approaching $1000. That means we are still watching for a good spot to sell short. Because gold is now making a new yearly high while silver is well below its highs from January, we have a strong intermarket bearish divergence signal in effect. Let's wait until early next week for a few more technical "sell" signals. We are still on the sidelines of gold.

Silver prices also rallied strongly today and managed to close above the 45-day moving average. Nevertheless, as with gold, this new high is happening in the center of strong reversal zones with bearish divergence to gold, so a downturn could be imminent. Silver's new medium-term cycle likely began with the low of $19.91 on March 10 and is only one week old. Unlike gold, it is too early for a top in its new cycle, so any correction down should stay above that low. If a deeper low does form early next week (highly unlikely), we would probably relabel the new cycle starting from that low and consider it a good spot to buy. Alternatively, we may look to buy any corrective dip that stays above $19.91 (or perhaps makes a double-bottom to it). The bottom line here is that the start of a new medium-term cycle in silver is overdue (if it didn't already happen on March 10), and we can expect at LEAST a two week rally to follow. If the new cycle is bullish, prices could go as high as $26 - $29. But if it turns out to be bearish, silver may not get past $23 after a MINIMUM 2 week rally (this is only week 1). Based on all this, we will look to buy silver on any significant corrective drop next week. If prices stay elevated past Wednesday, it could indicate a "break-out" is happening instead of a reversal. In that situation we would stay on the sidelines and wait for a corrective drop to buy. For now, we remain on the sidelines of silver.

Crude oil prices edged a bit lower today and nearly touched $65 (April contract chart). As I stated in yesterday's blog, we are now in the center of a strong reversal zone, so some sort of bottom and reversal back up could be imminent. This reversal zone lasts through the end of next week. If prices can fall into our $60 - $65 target range for a medium-term cycle bottom, we might see that final bottom next week. However, the final bottom is more likely to happen in mid-April, which would be a more normal length for the medium-term cycle in crude. Let's stay on the sidelines of crude for now and watch where prices go next week.

Trading Blog Thursday, March 16, 2023

3/16/2023

CRUDE OIL UPDATE (2:30 pm EDST)

Crude oil prices have finally broken out of their $70 - $83 (April contract chart) "congestion" range with a bearish plunge down to $65.65. The current medium-term cycle in crude most likely began with the Dec. 9, 2022 low of $70.86. If that's the case, the cycle's trend has now turned bearish (it has broken below its starting point). That means prices will continue lower until the final cycle bottom is attained. This medium-term cycle is mature, and its final bottom is most likely due in mid-April in the $60 - $65 range (possibly lower).

The bottom of the current medium-term cycle will also most likely correspond to the bottom of a longer-term 3-year cycle in crude (and start of a new one), which means it should be an excellent buy spot as the early stage of any cycle is bullish. I should also note here that the great "sell-off'" in crude that happened back in April 2020 (when prices actually dropped BELOW zero) resulted in a long-term low that marked the start of a new 18-year and 9-year cycle in crude. That means we are only three years into both of these cycles, so they are relatively young and bullish. What this means is that crude prices have the potential to move a lot higher over the next several years.

For now, we will keep an eye out for the final bottom of the current medium-term cycle. Prices are dropping sharply into the center of our current strong reversal zone, so some sort of significant bottom could form here. It's a bit early for the final bottom (which we would like to see in the $60- $65 range and closer to mid-April), but sometimes cycles contract, especially if they are aligning with a longer-term cycle (in this case, a 3-year cycle), so it wouldn't be impossible to see a final medium-term cycle bottom form now. We will keep in mind this possibility even as we expect a final bottom to be more likely in April. We are on the sidelines of crude oil for now.

Trading Blog Wednesday, March 15, 2023

3/15/2023

BRIEF UPDATE ON THE BROAD STOCK MARKET (3:30 pm EDST)

Our timing was good for unloading our short broad stock market position at today's opening bell as the market "gapped" down significantly and gave us some extra profit on the trade. The DOW made a new low, but the S&P 500 and NASDAQ remain above their Monday lows so we are getting some bullish divergence between these indices. Our current strong reversal zone ends next Thursday, so the final corrective bottoms to the current medium-term cycles of the DOW and S&P 500 should be in by then (if they are not in already). We will be looking for a good spot to buy once these bottoms have been identified.

Trading Blog Wednesday, March 15, 2023

3/15/2023

SILVER TRADE ALERT (3:00 pm EDST)

There are several short-term technical signals right now that suggest an imminent reversal in both silver and gold as we enter the center of a strong reversal zone for both metals (March 13 - 21). For this reason, I am going to take profits in my long position in silver and sell it today. If silver prices do drop, we may buy back if silver makes a new low by the end of next week (or even if it doesn't) because a new medium-term cycle is set to begin (from last Friday's low or a potential new one this week or next).

Gold's new medium-term cycle is already in its second week, and if it is bearish, it could easily peak this week or next in our current strong reversal zones. Let's stay on the sidelines for now but keep an eye out for a good spot to sell short.

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