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Trading Blog Wednesday, April 29, 2020

4/29/2020

BRIEF UPDATE OF THE BROAD STOCK MARKET (6:30 pm EDST)

More news of possible treatments for COVID-19 and increasing signs that "lockdown" standards are easing are pushing the broad stock market upwards. All three broad stock market indices (DOW, S&P 500, NASDAQ) have now made new weekly highs so our earlier bearish divergence signal is negated. We could still see a top and the start of a correction this week, but if the rally continues into next week, we may have to wait until our next reversal zone (May 11 - 20) to see a top and subsequent reversal. This won't make much difference to our trading strategy as we are waiting to buy the bottom of any significant correction (as long as it doesn't go too low). Still on the sidelines of this market.

Trading Blog Monday, April 27, 2020

4/27/2020

MARKETS UPDATE (6:00 pm EDST)

Today is technically the end of our current reversal zone for all markets (April 13 - 27), but I am going to extend it a bit into Thursday to accommodate some technical signals that could signify a reversal in the middle of this week. The broad stock market is rallying today on decreasing coronavirus fears and hopes of an easing of "lockdown" standards fairly soon to help businesses get back on their feet. The S&P 500 and NASDAQ are making new weekly highs today, but the DOW is not (but it's close). This gives us an intermarket bearish divergence signal until the DOW can break last week's high. We could see a turn-down start here. If we don't and the DOW pushes to new highs, we may have to wait a bit longer for a top and correction down. We are still planning to buy the bottom of that correction, as long as it doesn't go too low. Our targets are still around 22,000 in the DOW and 2,600 in the S&P 500. Still on the sidelines of the broad stock market.

Gold and silver prices are both down a bit today. We are getting mixed signals from this market right now. We have been looking to go long, but so far prices have not dipped to our ideal levels for buying. There is an equal chance of gold (and silver) rallying strongly now or taking another dive. A strong dip in the broad stock market could pull down the precious metals. Let's stay on the sidelines of this market for now.

Crude oil MAY have started a new medium-term cycle last Tuesday with its low at $6.50 (May contract chart), but as I wrote in my last blog, crude's recent dramatic and historical plunge into negative pricing has thrown a wrench into our normal cycle analysis. It is probably best to stay on the sidelines of crude trading for awhile as we re-calibrate the cycle patterns in this market. At least one benefit from all this is that we can expect lower prices at the gas pumps.
We are out of crude oil for now.

Trading Blog Thursday, April 23, 2020

4/23/2020

MARKETS UPDATE (3:30 pm EDST)

The broad stock market fell strongly on Monday and Tuesday, but it did not get to our target zones for a low (22,000 in the DOW and 2,600 in the S&P 500). While it's possible Tuesday's lows were a significant sub-cycle bottom, it's more likely that was just a minor dip. In other words, I think a significant sub-cycle top is still forming (i.e. it was not last Friday) to be followed by a more significant correction. We are still looking to buy that corrective bottom as the cycle is still young and most likely bullish for at least several more weeks. If we get a new top this week or next, we might see the sub-cycle corrective bottom in the first two weeks of May. Still on the sidelines of this market.

Gold and silver, like the broad stock market, also may have hit significant lows on Tuesday. Gold is rising strongly from its low on Tuesday but silver just a bit. The timing is right this week for a sub-cycle bottom, and yes, we have been looking for a spot to buy. Despite these bullish signals, there are some bearish technical factors suggesting precious metal prices could still fall further before starting a significant rally. Another potentially bearish influence would be a significant correction in the broad stock market discussed above. Gold and silver seem to be parroting equity markets right now so they may push higher as equities potentially make a new top this week (or early next week), but then they are likely to fall if equities make a corrective reversal. We are going to be cautious and remain on the sidelines of the precious metals for now.

Crude oil seems to be recovering from its plunge into negative pricing earlier in the week. Today prices are in the $16 range. We are, nevertheless, very cautious about entering this market right now. Crude's unusual and dramatic price plunge on Monday and Tuesday has necessitated a re-calibration of our cycle charts for this commodity, and it will be at least several more weeks before we can be comfortable with any new cycle pattern. Needless to say, this collapse in oil prices does not bode well for the broad stock market and just reinforces my view that a more severe correction is still coming in equities. We will remain on the sidelines of crude oil for the time being.

Trading Blog Monday. April 20, 2020

4/20/2020

MARKETS UPDATE (6:00 pm EDST)

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

" ...I would prefer to wait until next week for a possible bearish divergence signal that would be a better point for a reversal. When the reversal occurs, we will be looking for a brief sub-cycle correction to buy close to the 15-day moving average..."

We got that bearish divergence signal today as the NASDAQ made a new weekly high while the DOW and S&P 500 did not. After marking their highs this morning, all three indices are closing in negative territory (with the DOW losing 592 points). A reversal is likely starting now. If this market is to be short-term bullish, this correction should not be deep. Good targets now would be around 22,000 in the DOW and 2,600 in the S&P 500 or close to the 15-day moving averages of both indices (those targets are just a bit below those averages). Our ideal scenario is to see a sub-cycle correction to these levels and then a reversal back up and more rallying for at least a few more weeks. If this correction pushes significantly below these targets, however, we may have to abandon our short-term bullish view. For now, I anticipate buying the bottom of this correction. Still on the sidelines of this market.

Gold and silver prices are falling into the center of our current general reversal zone (April 13 - 27) now, and as with the broad stock market, we are looking for a low spot (sub-cycle correction) to buy. Some technical factors are pointing to Wednesday or Thursday for an ideal bottom. Gold is already in a good target price range (around $1685), but it could still go lower. A good target for silver would be around $1430, considerably below today's closing price of $15.27. Let's wait a few days to see if prices move down some more and give us a good buy spot later this week. On the sidelines of gold and silver.

Interestingly, we have a reversal zone specifically for currencies coming up this week and next (April 22 - 30), and the U.S. Dollar Index has been rising. If the dollar can make a new weekly high into this reversal zone at the same time the precious metals are making sub-cycle lows, a turn-down in the dollar could support the rally we want to see in gold and silver. We will watch for this.

The big news in the financial world today was an unprecedented historical crash in crude oil prices. By early afternoon crude had lost nearly 100% of it's value. It then plunged further (at 2:30 pm it posted a NEGATIVE 300% LOSS) and closed the day still in negative territory(- $13, May contract chart). COVID-19's negative impact on global demand for crude as well as the recent price war between Saudi Arabia and Russia is clearly having a negative impact on this market. Nevertheless, this collapse into negative pricing is having even veteran financial analysts shaking their heads in wonderment. As one trader put it: "If you owned oil at the end of this day and you wanted to sell, you would have to pay someone $13/ barrel just to take it away."

Needless to say, we are happy to be on the sidelines of crude oil today. We had been anticipating a sub-cycle low, but certainly not THIS low. Our cycle analysis of this market is useless at the moment, and we will have to wait until prices stabilize (if they do) before we can make any sense of this market going forward.

We are without doubt in strange financial times.

Trading Blog Wednesday (late night), April 15, 2020

4/15/2020

MARKETS UPDATE (11:30 pm EDST)

We have now entered a new reversal zone (April 13 - 27) for all markets. The broad stock market is rallying and could form a top (and maybe also a bottom) in this time frame. All three indices (DOW, S&P 500, NASDAQ) made new highs yesterday so we will not get an intermarket bearish divergence signal this week. Could we still get a top this week? Yes, but I would prefer to wait until next week for a possible bearish divergence signal that would be a better point for a reversal. When the reversal occurs, we will be looking for a brief sub-cycle correction to buy close to the 15-day moving average or near the targets mentioned in my last blog (21,900 in the DOW and 2,500 in the S&P 500). (Note - If these indices start to fall below their 3/23 lows, we will abandon this bullish buy strategy). The idea here is that we have started new medium-term cycles and the market could rally for at least several more weeks (or longer).
On the sidelines for now.

In my last blog on gold and silver (April 7) I wrote:

"It does look like gold started a new medium-term cycle with its low of $1453 on March 16. It is therefore early in this new cycle. New cycles always start off bullish, and this one has rallied strongly from that $1453 bottom over the last three weeks. In order to remain bullish, however, gold has to exceed the high of the previous cycle which was $1701 (from March 9)."

Gold is now pushing above $1701 as we enter our new reversal zone. We may have seen a significant top yesterday at $1744, but there is plenty of time left in this reversal zone for it to go higher. As with the broad stock market, we will now watch for a brief sub-cycle correction and a spot to buy. We might see that back down around $1600+/- 35.

Silver does not look as bullish as gold at the moment, and it too could top and make a sub-cycle correction anytime now. A target to buy silver could be around $14 +/- 0.50. For now, we are on the sidelines of both metals.

In my last blog on crude oil (April 8), I wrote:

"Crude oil made a new low at $19.27 (May contract chart) last Monday (March 30) right at the center of our reversal zone and then rallied strongly off that low. That could easily be the start of a new medium-term cycle (unless prices soon drop back below $19.27)."

Well, today prices did edge a bit lower (to $19.20 - May contract chart), and it is happening in a new reversal zone. It's a little tempting to go long here, but there's plenty of time for prices to go lower in this new reversal zone (especially if the broad stock market starts to turn south). Let's stay on the sidelines of crude for now.

Trading Blog Monday (late night), April 13, 2020

4/13/2020

BRIEF UPDATE ON THE BROAD STOCK MARKET (11:30 pm EDST)

In my last update on the broad stock market last Monday I wrote:

"We are still in a reversal zone (it ends Tuesday) so the market could turn down from today's highs. But if the rally continues tomorrow, it will make a good case for March 23 being the start of a new medium-term cycle in all three indices, and that would be at least short-term bullish for this market."

Well, the market did rally into the end of the week, and it looks likely all three market indices (DOW, S&P 500. and NASDAQ) started new medium-term cycles with their lows of March 23. That means any corrections now will most likely not take out those lows, and we should be looking to buy any substantial dips. Good targets would be around 21,900 in the DOW and 2,500 in the S&P 500.

I will post a more extensive update on all markets tomorrow.

Still on the sidelines of all markets.

Trading Blog Wednesday, April 8, 2020

4/8/2020

UPDATE ON CRUDE OIL (3:30 pm EDST)

Crude oil made a new low at $19.27 (May contract chart) last Monday (March 30) right at the center of our reversal zone and then rallied strongly off that low. That could easily be the start of a new medium-term cycle (unless prices soon drop back below $19.27). This would normally be a good spot to buy as the early part of any cycle is unusually bullish. But we are not in "normal" financial times.

The recent plunge in crude prices triggered by a price war between Russia and Saudi Arabia has turned the longer-term trend of crude bearish. There is a 3 year cycle in crude that started with a $42.36 low in late Dec. 2018. We are only 15 months into that cycle and prices have already plunged far below that $42.36 start. That means the cycle has turned bearish and will continue to move lower until it bottoms (probably sometime in late 2021 or early 2022). That does not mean prices will move straight down over the next year and a half. As in all cycles, prices will rise and fall in (hopefully) predictable sub-cycle patterns.

If last week's low was the start of a new medium-term cycle then it is possible for prices to rally back up to the $40 level; HOWEVER, there is resistance at the $30 level, and there is especially strong resistance in the "gap down" space around $35 - $41. These resistance zones could significantly curb any potential profits in going long now so
I am going to stay on the sidelines of crude for now. (If prices do edge lower and redefine the start of the medium-term cycle below $19.27, I may change my mind and buy at the bottom). For now, I am going to anticipate the possibility of selling this market short when we get to the top (many weeks away) of a new medium-term cycle (that has either just begun or will begin shortly).

Trading Blog Tuesday (late night), April 7, 2020

4/7/2020

GOLD and SILVER UPDATE (11:00 pm EDST)

I have avoided discussing the precious metals over the last week or so because their chart patterns have not been that clear, and especially because the analysts that I follow have been differing widely in their opinions on what trend these metals are taking now. (This is unusual as most of them usually agree in their analyses most of the time, and that consistency is always a good sign that they're on the right track).

It does look like gold started a new medium-term cycle with its low of $1453 on March 16. It is therefore early in this new cycle. New cycles always start off bullish, and this one has rallied strongly from that $1453 bottom over the last three weeks. In order to remain bullish, however, gold has to exceed the high of the previous cycle which was $1701 (from March 9). It's getting there as yesterday's high got to $1666. But yesterday was the last day of our reversal zone, and prices are down a bit today suggesting that the market could turn back down here, If it does, we may fish for a good buying spot (as long as prices stay above that $1453 low). Any break and close above $1701 would verify that this new cycle is bullish and would also have us looking for a spot to buy. In that case we might see a strong rally to challenge or even exceed the all-time high of $1920 (Sept. 2011).

Silver may have started a new medium-term cycle on March 18 with its low at $11.70, but it might be still completing an older cycle whose bottom will soon go lower. We will have to wait and see how prices move from here to determine which interpretation is correct. As with gold, if silver takes a moderate correction and holds above that $11.70 low, we may look for a spot to buy.

Staying on the sidelines of both gold and silver for now.

Trading Blog Monday (late night), April 6, 2020

4/6/2020

BROAD STOCK MARKET UPDATE (11:30 pm EDST)

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

"The "crash" so far has been 38% on the DOW (from the 29,568 all-time high on Feb. 12 to the 18,213 low on March 23). The market is now rallying off that 18,213 low. This may be the start of a very significant rally into the summer and maybe even into the November election OR we may soon make another lower low and then start that significant rally."

OK. It's looking like the March 23 low in the NASDAQ was very likely the start of a new medium-term cycle (bullish). March 23 may also be the start of new medium-term cycles in both the DOW and S&P 500, but this is not as certain. These two indices may still be completing the end of an older cycle and could fall lower than their March 23 lows (which would be short-term bearish). If the DOW and S&P 500 are still making new cycle lows, they could pull down the NASDAQ into a sub-cycle corrective dip which could give us a good entry point to go long in all three indices.

Last Tuesday, the S&P 500 and NASDAQ made new weekly highs but the DOW did not. That gave us a bearish divergence signal (in our current reversal zone), and sure enough, the markets fell sharply into the end of the week. Today, however, these indices are back up sharply (coronavirus fears seem to be subsiding a bit), but this time all three indices broke above last week's highs which now negates that bearish divergence signal. We are still in a reversal zone (it ends Tuesday) so the market could turn down from today's highs. But if the rally continues tomorrow, it will make a good case for March 23 being the start of a new medium-term cycle in all three indices, and that would be at least short-term bullish for this market.

As far as trading goes, I would look to buy if the DOW or S&P 500 make new lows (below March 23 lows) now, but if they don't, I'm not anxious to chase this rally, at least not at the moment. I'm starting to question my previously bullish view of a strong rally into the second half of this year. If we get a good rally into mid-May, it's possible that could be it - i.e. we could see a top then (below the all-time highs of February) followed by a very severe correction well below those March 23 lows. I apologize for being a bit uncertain about this market, but we are in unusually volatile times, and market trends can shift rapidly. How bullish this market will be in the short-term is questionable, but I am still holding to the idea (for now) that the all-time highs of February will not be exceeded this year and that the market will resume it's longer-term correction down below the lows of March 23. We will stay on the sidelines of this market for now.

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