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Trading Blog Sunday (late night), April 28, 2019

4/28/2019

MARKETS UPDATE (11:30 pm EDST)

We entered a short position in the broad stock market last Thursday as we approached the center of our current reversal zone (April 22 - May 1) with a strong intermarket bearish divergence signal between the three major market indices (DOW, S&P 500 and NASDAQ) relative to their all-time highs (i.e. the DOW still well below its all-time high and the S&P 500 and NASDAQ making new highs). (Note, however, that we did not get a weekly bearish divergence signal as all three indices made new weekly highs.) The DOW gapped down dramatically on Thursday suggesting a significant correction had started, but on Friday equity markets rallied significantly and started to close that gap. We will watch this gap carefully this week. If the DOW edges up early this week and closes above that gap (i.e. closes above 26,583) then it's possible we could see a bullish trend push this index (and possibly the other two) up higher into the next reversal zone (May 1 - May 9) which is back to back with our current reversal zone (and overlaps one day - May 1). On the other hand, if this week the DOW stays below last week's high (26,696) while the S&P 500 and/or the NASDAQ make a new weekly high, it will reinforce our bearish divergence signal and point to a decline to the final cycle lows. What we can do here is hold our short position with a stop loss based on all three indices exceeding last week's highs (that would be DOW - 26,696; S&P 500 - 2,940; and NASDAQ - 8,152). As mentioned earlier, we also don't want to see the DOW closing above that gap from last Thursday (i.e. above 26,583). If that happens, we may also consider covering our short position. Stay tuned this week. Note that it is very late in the medium-term cycles of both the S&P 500 and NASDAQ (and possibly the DOW) so a final top is due in one of these two reversal zones (i.e. by May 9). Our goal here is to sell short at that top. Holding my short position for now.

I'm a bit more confident in our short position in crude oil also established last Thursday. Prices started falling from a high of $66.18 (June contract price) on Tuesday and then plummeted sharply on Friday to a low of $62.28, the day after we re-established a short position. It looks like crude is now falling to its final medium-term cycle low. That low could get down to $55, but a minimal correction might find support around $61. We enter another reversal zone specifically for crude this week (April 29 - May 8). A final cycle decline should last at least 2 weeks so we will watch for a low this week (the second week of the decline) between $55 -$61 to cover our short position and take profits. Holding my short position for now.

We are still watching for the final medium-term cycle bottoms in gold and silver to buy. As I wrote in last Tuesday's blog:

"Both gold and silver pushed down to new monthly lows today so we are not going to get a bullish divergence signal this week. We may get one next week, however, and next Tuesday we enter a reversal zone specifically targeted to precious metals (April 30 - May 9). That would be a good time for a bottom in gold and/or silver and a bullish divergence signal to buy. But this week is also a general reversal zone that can affect these metals so we can't rule out a bottom in one or both metals this week. We are already in our target range for a bottom in gold ($1251 - $1273). A good target range now for silver would be $14.10 - $14.57. Today's low at $14.76 is not quite there."

Well, we never got to our silver target last week. Both metal prices started rising from their Tuesday lows (especially gold). That could have been the low for gold, but maybe not silver. It would be nice to see silver make a new low this week in our target range ($14.10 - $14.57) with gold holding above its $1265 low from last week as we enter the new reversal zone for precious metals this week. That would be a good buy signal (bullish divergence) for both metals. One danger we need to be aware of now is the possibility that gold started a new medium-term cycle with its low of $1281 on March 7. If that's the case, then this market is headed significantly lower for many more weeks because prices have already moved below the start of the cycle (if it started on March 7). In that scenario, last week's rally was likely the start of a short sub-cycle rally that could easily peak around $1300 this week and then collapse. We need to see gold prices come down a bit early this week to maintain our bullish view (i.e. new cycle starting now - not on March 7). If we get that with the bullish divergence described above, we will look to buy. Otherwise we will remain on the sidelines. On the sidelines of gold and silver for now.

The U.S. Dollar Index made a new monthly high at 98.33 on Friday - at the dead center of our reversal zone specifically for currencies (April 23 - May 1). It could push higher, though, before we leave that reversal zone this Wednesday. Even if we get a reversal, we enter yet another reversal zone for currencies May 7 - 16 so the greenback might see some steep ups and downs over the next several weeks. Our main concern is how this will affect gold and silver prices. A significant top in the dollar will likely correlate with the cycle bottom in precious metals that we are waiting for. Ideally, I would like to see the dollar edge higher now to a top and push the precious metals down a bit more into this week's (or the following week's) reversal zone(s). We will watch for this. Needless to say, this market and the gold and silver market are tricky to call right now, and we need to be especially careful with our trading.

Trading Blog Thursday, April 25, 2019

4/25/2019

BROAD STOCK MARKET and CRUDE OIL TRADE ALERT (10:30 pm EDST)

We are now at the center of this week's reversal zone (April 22- May 1). Yesterday and today the NASDAQ made new all-time highs while the S&P 500, and especially the DOW, are both remaining below their all-time highs (26,951 in the DOW and 2,941 in the S&P 500) which is giving us a strong bearish divergence signal. Also, the DOW opened today with a dramatic 250 point drop. There is a good chance we are at a top and a turning point for a final corrective drop in the medium-term cycles of at least the S&P 500 and NASDAQ (the DOW may take a lesser sub-cycle correction) to their final cycle bottoms. I am therefore going to enter a short position in the broad stock market market today. Traders using index fund ETFs should focus on the S&P 500 and/or NASDAQ as their drops may be more substantial than the DOW's. Our stop loss for this trade will be based on both the S&P 500 AND the DOW breaking their all-time highs (given above).

Although we covered our short position in crude oil on Tuesday, I am going to re-enter that short position today. Even though we broke our original stop loss of $66 (June contract chart), we didn't actually close above that mark. Early this morning crude made a new high ($66.28) but is now pulling back sharply from that high. This is bearish behavior and we are now at the center of a reversal zone. It looks like this medium-term cycle is poised to take its final corrective decline (which is due/overdue). A bearish turn in the broad stock market would be supporting this idea. Entering a short position (again) in crude oil today.

Trading Blog (2) Tuesday (late night), April 23, 2019

4/23/2019

UPDATE on the BROAD STOCK MARKET and PRECIOUS METALS (11:30 pm EDST)

The broad stock market rallied strongly today. All three indices (DOW, S&P 500 and NASDAQ) are making new weekly highs so last week was not a cycle top. We are now entering another reversal zone (April 22 - May 1) with a strong potential for giving us a top to sell short. All three indices are now approaching their all-time highs (26,951 in the DOW, 2,941 in the S&P 500, and 8,133 in the NASDAQ) so we will watch for an intermarket bearish divergence signal where one or two indices break(s) to a new record high, but not all three. That could happen this week or next week and would most likely be a good opportunity to sell short the S&P 500 or NASDAQ (not the DOW as it may have already started a new medium-term cycle from its March 25 low at 25,372, and if so, any correction would be modest). At the time of this writing, breaking news is reporting that U.S / China trade talks are to resume next week in Beijing. This announcement could further boost the stock market tomorrow and propel those indices into record highs. Still on the sidelines.

Both gold and silver pushed down to new monthly lows today so we are not going to get a bullish divergence signal this week. We may get one next week, however, and next Tuesday we enter a reversal zone specifically targeted to precious metals (April 30 - May 9). That would be a good time for a bottom in gold and/or silver and a bullish divergence signal to buy. But this week is also a general reversal zone that can affect these metals so we can't rule out a bottom in one or both metals this week. We are already in our target range for a bottom in gold ($1251 - $1273). A good target range now for silver would be $14.10 - $14.57. Today's low at $14.76 is not quite there. Let's stay on the sidelines for now and wait for a stronger signal to buy. Directional momentum is still nearly 100% bearish in both metals so prices could move lower. Perhaps gold makes its low this week and silver makes its low next week for an ideal case of bullish divergence in that new reversal zone. We will watch for this.

One of the factors driving down precious metal prices now is a recent surge in the U.S. Dollar Index. The dollar is at an interesting point right now. Today the greenback made a double-top to its high from last year. (It actually exceeded that high of 97.71 on Dec. 13, 2018 just a bit - today's high was 97.77). This is a significant resistance line for the dollar, and we are just entering a reversal zone specifically for currencies (April 23 - May 1). The greenback may be ready to top out and reverse down here just in time to drive a rally from a bottom in gold and silver.

What would make the greenback turn south right now? Well, just a few weeks ago President Trump suggested that the Federal Reserve not only stop raising interest rates but bring back QE (Quantitative Easing)! Whether or not the Fed will take this suggestion seriously is debatable, but Fed Chairman Jerome Powell and the FOMC seem to have recently switched their policy tone from quite hawkish to cautiously dovish, and that may have been prompted by criticisms from Mr. Trump. Dovish fiscal policy puts downward pressure on the U.S. dollar. I should further mention here that the U.S. dollar is slightly past the center point of a long-term 16.5 year cycle that started in early 2008 around 73. There is a good chance this cycle peaked on Jan. 2017 at 103.82 and is now pointed down for a bottom in early 2025 that could go back to that 73 area or even lower. Of course, there will be ups and downs along the way (we have been riding a big "up" since early 2018), but if 103.82 was the high, the general trend of the U.S. dollar will be bearish over the next several years. The only thing that would change this scenario would be for the greenback to break above 103.82. I don't think it's going to do that, but these days it seems like anything is possible so we can't rule out that possibility. Most significantly to us, a bearish dollar would mean a bullish market in precious metals.

Trading Blog Tuesday, April 23, 2019

4/23/2019

CRUDE OIL TRADE ALERT (3:00 pm EDST)

It looks like crude oil is going to close the day above our stop loss of $66 (June contract chart) so I am reluctantly going to cover my short position in this market today. I say reluctantly because this new top is happening in a reversal zone, and we are even a bit above a normal target for this rally as well as overdue for a top so prices could easily turn down now and fall to the final cycle bottom over the next several weeks, and that bottom could go as low as $55. But prices could also push higher into next week's reversal zone which is specific to crude and make a new top then. Today's bullish "pop" in the broad stock market could be inspiring crude to come along for the ride, and breaking a significant resistance just above $66 could indeed lead to a "break-out" type rally. This has me concerned, and we have already taken a 2-3 % loss on this trade so I think it is best to unload my short position now. Traders who don't have time to cover this position today can place an order for tomorrow's market open and may even get a better price if it moves down. Covering (unloading) my short position in crude oil. Should prices rally significantly next week, we will look for another spot to sell short. Otherwise, we will wait for the final cycle bottom to buy as (longer-term) crude still looks bullish for the rest of the year.

I will comment on the broad stock market and precious metals later this evening.

Trading Blog Sunday (late night), April 21, 2019

4/21/2019

MARKETS UPDATE (11:30 pm EDST)

We are about to enter a time period (now through the third week of May) that contains several reversal zones for several financial markets with many overlapping each other. We are thus on high alert for tops with significant turn downs or bottoms with significant turn ups. The reversal zones are as follows:

BROAD STOCK MARKET (and other markets): April 22 - May 1 and May 1 - May 9
CURRENCY MARKETS : April 23 - May 1 and May 7 - May 16
GOLD and SILVER : April 30 - May 9 and May 15 - 22
CRUDE OIL : April 29 - May 9

All of this means we will likely be trading more frequently than usual over the next several weeks, but we have to be careful as trades may be short-term with markets possibly reversing more than once in a relatively short period of time. Our understanding of cycles will help us with our trade decisions.

Speaking of cycles, gold is most likely still finding the bottom of its current medium-term cycle, and that final bottom could end up in one of the above reversal zones for gold and silver or the broad stock market (that could mean as early as next week). A good target for this low would be between $1251- $1273. This scenario (bottom still forming) would be bullish, and we would expect a strong rally from that bottom. An alternative scenario (less likely) would view the medium-term cycle as having already bottomed on March 7 (at $1281). That would be bearish because prices are already below the start of the cycle and gold would thus be pointed down for at least another two months. Even if this bearish scenario is correct, however, a sub-cycle bottom is now due and should happen in one of the upcoming reversal zones. That means we can still buy and then just wait to watch the strength of the rally. A strong rally will support the bullish (new cycle) scenario and we will stay long. A weak rally and/or a move back below the bottom will tell us to bail out. Silver's medium-term cycle bottom may be forming now, but, like gold, the bottom may already be in with last Tuesday's low at $14.79. It would be nice to see gold make a new low this week with silver staying above $14.79 (bullish divergence in a reversal zone), but if both metals make new lows, we might have to wait another week or two to go long. Bottom Line: There are many technical signals suggesting we are at or near a medium-term cycle bottom in both metals and that a significant rally is imminent. We are therefore very keen to go long in both gold and silver at some point over the next three weeks. On the sidelines of both metals for now.

In the broad stock market, the S&P 500 and NASDAQ are also nearing the end of their current medium-term cycles and so we are watching for a final cycle top to be followed by a sharp downturn as both indices fall to their final cycle lows. Selling short from this top could give us a profitable short-term trade as final cycle corrections are usually steep, but if we miss this trade we will not have to wait long for the bottom, which will be an excellent spot to buy. Both these indices made new monthly highs last Wednesday, which was within our last reversal zone. It's therefore possible those highs were the cycle top(s) already. If so, they will now fall to their final bottom(s) which will most likely be in one of the upcoming reversal zones listed at the start of this blog. But this market seems bullish now, and these indices could easily push higher this week for a final top in these new reversal zones instead of a bottom. We will have to wait and see how the market moves this week. An intermarket bearish divergence signal next week between the DOW, S&P 500 and NASDAQ (where one or two of these indices makes a new high, but not all three) might give us a good signal to sell short. I have left the DOW out of most of this discussion because there is a possibility the DOW already started a new medium-term cycle (ahead of its two companions) on March 25 at 25,372. If that's the case, the DOW could be very bullish now, and we would not want to sell it short. Bottom Line: Let's watch for a signal to possibly sell short the S&P 500 or NASDAQ. If we miss it, we will wait for these cycles to bottom and then go long. I am still expecting the next medium-term cycle to rally strongly into the summer. Still on the sidelines here.

It is also very late in the medium-term cycle of crude oil, and the final cycle top is due (overdue). It had looked like that top was in on April 8 at $64.77 (May contract chart), but today crude is making a new high. At the time of this writing, Sunday's crude price has jumped a bit above our $65.50 stop loss point for our short position. Because we enter a new reversal zone on Monday and a top is due at any time, I am going to raise that stop loss to a close above $66. We would like the upcoming reversal zone for crude (April 29 - May 9) to be the final cycle bottom (with a profit on our short position), but if we are stopped out, it may instead turn out to be a new final top in a slightly distorted cycle. Stay tuned tomorrow as we may need to cover our short position. Holding my short position for now.

Trading Blog Tuesday, April 16, 2019

4/16/2019

TRADE ALERT for GOLD, SILVER, and BROAD STOCK MARKET (2:00 pm EDST)

One of the advantages of making trades very close to stop loss points (as we did yesterday) is, obviously, minimal loss if the trade crosses the stop point. The disadvantage is that this can happen very quickly if a market is ready to turn in one direction or the other.

The DOW, S&P 500, and NASDAQ all made new highs today (the DOW finally broke above 26,487- it's high from April 5) so our bearish divergence signal is gone and our stop loss parameter broken. We now need to cover the short position we entered yesterday (and wait for the next potential top). Unloading my short position in the broad stock market today.

Gold prices dropped today and crashed our stop loss level of $1280. Silver also dropped this morning, but not as severely, and it is currently slightly above yesterday's closing price. Nevertheless, we need to sell both metals now (some loss with gold but should be little or no loss in silver) because gold is possibly moving below the start of its new medium-term cycle (which could be from its low either March 7 or April 4) which would mean it is turning bearish.
I am selling both gold and silver positions today.

Our crude oil short trade is still valid as crude prices are still below our stop loss of $65.50 (May contract chart). There is one day left in the current reversal zone for crude. We don't want to see prices exceed $64.77 after Wednesday. That would be a bearish warning even before breaking our stop loss. Let's hold this short position for now. There are still a few short-term indicators suggesting a correction now.

I apologize for this abrupt change in trading positions. I am not usually a day trader so this rarely happens, but it can come about when placing trades close to stop loss points (which is actually an ideal reward/risk scenario that minimizes potential loss).

Trading Blog (2) Monday, April 15, 2019

4/15/2019

MARKETS UPDATE (5:30 pm EDST) after TRADE ALERTS given earlier today.

Both gold and silver's current medium-term cycles are due (overdue) for their final cycle bottoms. It is very likely gold's bottom already happened on April 4 with its $1282 low, and we are getting a re-test of that bottom now. A close below $1280 would be a failure of that re-test which is why that is our stop loss for the long position we entered today. Silver's cycle bottom is still forming, and today's low at $14.85 may be it as it is happening in the current reversal zone (which ends Wednesday). Even if silver edges lower over the next two days, we won't worry unless gold breaks that $1280 line. If the cycle bottoms are in, we should see both metals begin a new rally from here. We are now long in both gold and silver.

As we enter the latter half of the April 9 - 17 reversal zone for equities (and other markets), the DOW and S&P 500 are not making new monthly highs (they are close) while the NASDAQ is, so we still have a bearish divergence signal (at least for today). We could see a medium-term cycle top now in all three indices and a steep correction to follow. That is why we entered a short position today. If all three indices push higher (especially past Wednesday), however, we may have to cover our short position and wait to sell short again at a slightly higher top later in the month or early next month. It is worth chasing this correction as the final correction in a medium-term cycle is usually quite steep. We now have a short position in the broad stock market.

Last Friday's high at $64.65 (May contract chart) in crude oil could easily be a double top to the $64.77 high on April 8, and since it was in the center of our current reversal zone and a medium-term cycle top is due any time, we could now see a correction down to the final cycle bottom. That is why we entered a short position in crude oil today. It's still possible for prices to edge higher before the end of the reversal period on Wednesday, but we will stay short unless prices close above our stop loss of $65.50 or prices push higher after Wednesday. A minimum target for a correction would be around $58, but it could go lower. Holding a short position in crude oil for now.

Trading Blog Monday, April 15, 2019

4/15/2019

TRADE ALERTS (3:00 pm EDST)

We are nearing the end of the current reversal zone (it ends Wednesday), and all the markets we trade look to be at or near turning points. Because it is late in the day, I am going to forgo any detailed analysis right now and just give the trade alerts. I will explain the trades later this evening after the market closes.

GOLD AND SILVER TRADE ALERT: Buy both metals with a stop loss for both based on gold closing below $1280.

BROAD STOCK MARKET TRADE ALERT: Sell short with a stop loss based on all three indices (DOW, S&P 500, NASDAQ) making new weekly highs.

CRUDE OIL TRADE ALERT: Sell short with a stop loss based on crude closing above $65.50.

Trading Blog Sunday (night), April 14, 2019

4/14/2019

PRECIOUS METALS UPDATE (10:30 pm EDST)

I had been considering going long today in either gold or silver or both for Monday's market open, but as the market opens this evening we can see both metals dropping to new lows. We don't mind silver dropping a bit lower, but we don't want to see gold below $1280 as that could be a bearish warning. There are still three days left in the current reversal zone (it ends Wednesday) so I am going to stay on the sidelines for now and see if this bearish divergence (gold above $1280, silver below $14.90) persists into the first half of this week. We are still looking to buy if it does.

Trading Blog Friday, April 12, 2019

4/12/2019

MARKETS UPDATE (12:30 pm EDST)

We still have no clear directional pattern in the broad stock market even as we arrive at the center of the current strong reversal zone (April 9 - 17). We do have some bearish divergence as the DOW hasn't yet made a new weekly high while the S&P 500 and NASDAQ have, but today's strong DOW rally is bringing it close to negating that bearish signal. Also, the DOW and S&P 500 are staying above those strong support levels I mentioned in Tuesday's blog which is arguing against a strong downturn now. Indeed, the DOW tested its support at 26,128 yesterday and is now rallying strongly off it. Let's wait and see how the market moves into the first half of next week. New highs then (esp. with another bearish divergence signal) may still give us an opportunity to sell short. Still on the sidelines here.

Gold and silver prices plummeted strongly yesterday and may now be bottoming in the center of this current reversal zone. Gold did not make a new low but silver touched its $14.90 low from March 5 to make a possible double bottom. We may be at a good point to buy both metals. I will discuss this more on Sunday as we may enter a long postion then before the market opens on Monday. Stay tuned. On the sidelines of both metals for now.

Crude oil is a little tricky to call right now. Prices rose to a new high on Monday ($64.77 - May contract chart) then fell a bit, but that was one day before the current reversal zone (April 9 - 17), and the price is rising today and challenging Monday's high. It is obviously better to get a high (and top) in the reversal zone so I am going to wait and see if prices can exceed $64.77 today or early next week. A sub-cycle correction is (was) due this week so crude's cycle pattern is distorting a bit here. Nevertheless, if we get a new high by next Wednesday, it may be a good place to sell short. The broad stock market's bullish energy right now is likely a factor driving crude prices higher. Let's stay on the sidelines for now. Longer term, we are still looking to go long at the bottom of any correction as this market still looks bullish through the rest of this year.

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