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Trading Blog Thursday, April 27, 2023

4/27/2023

BROAD STOCK MARKET TRADE ALERT and UPDATE ON GOLD, SILVER, AND CRUDE OIL (3:00 pm EDST)

After making deep lows yesterday (DOW and S&P 500) and Tuesday (NASDAQ) between their 15-day and 45-day moving averages and inside a strong "pivot point" zone for the broad stock market, all three indices are rallying strongly today and breaking back above their 15-day moving averages. This is a strong signal that the sub-cycle correction is over and a new rally is starting. Let's enter a long position in this market today with a stop loss based on yesterday's lows in the DOW and S&P 500 and Tuesday's lows in the NASDAQ.

Both Gold and silver seem reluctant to rally as they encounter resistance at their 15-day moving averages. We need to watch this carefully now as a break above those averages as well as a break above their highs from April 14 is necessary to confirm that their cycles are bullish. Otherwise, both markets could be turning bearish. Silver prices may be edging to a new low either tomorrow or Monday near our "pivot points" as gold bides its time above last week's low. That sort of bearish divergence between the two metals could still be a signal to buy silver, but lets's stay on the sidelines for now. We continue to hold our long position in gold.

Crude oil prices are edging slightly lower today, but the correction so far from the April 12 high has been 11 days. and that is too long for a short sub-cycle correction in a bullish cycle. That means a longer sub-cycle correction could be in progress or the market could be turning bearish. Either way, we want to stay on the sidelines for now.

Trading Blog Wednesday, April 26, 2023

4/26/2023

MARKETS UPDATE (3:30 pm EDST)

Today the DOW and S&P 500 are making new April lows (the NASDAQ did this yesterday), so our bullish divergence signal from yesterday has been negated. Both the DOW and S&P 500 are approaching their 45-day moving averages while the NASDAQ seems to be finding support at its 45-day moving average. If these 45-day moving averages can hold the correction, we may look to go long. But if they break, we may put off buying as the market could turn bearish. We will stay on the sidelines of the broad stock market for today.

Gold prices are staying above last week's low, but they're finding resistance at the 15-day moving average (around $2001). They need to clear that and then break above $2047 soon to confirm the current medium-term cycle is bullish. We are holding our long position in gold with a close stop loss based on a close below the 45-day moving average (around $1941 and rising slowly). As long as gold stays above its low from last week ($1970), our bullish divergence signal with silver remains intact.

Silver is also struggling to break above its 15-day moving average (around $25.17) today. As I mentioned yesterday, tomorrow and Friday are strong potential "pivot points" for silver, so a new low over the next few days could be a sub-cycle bottom and good place to go long. We are on the sidelines of silver for now.

Crude oil prices are plummeting today. They are closing well below the 45-day moving average and below a strong support level around $75 (May contract chart). Prices have also now closed the bullish "gap-up" space that we saw on April 3. These are all bearish signals which means that crude could be taking a longer and deeper sub-cycle correction. The next support level is around $70. We need to watch this correction carefully. Any break below the start of the current medium-term cycle ($64.58) would indicate the market is turning bearish. We remain on the sidelines of crude.

Trading Blog Tuesday, April 25, 2023

4/25/2023

MARKETS UPDATE (3:30 pm EDST)

Today the DOW and S&P 500 are finally breaking below their 15-day moving averages. (The NASDAQ did this last week and it is is now approaching its 45-day moving average.) All three indices are now between their 15-day and 45-day moving averages which is an ideal spot for the bottom of a sub-cycle correction that is now due for all three. We also have some bullish divergence as the NASDAQ is making new monthly lows while the S&P 500 and DOW are not. We are inside a strong potential "pivot point" in the broad stock market today and tomorrow, so it looks like a good time to consider going long for another rally into May. That rally could test the highs of the previous medium-term cycles in the DOW and S&P 500 (that would be 34,712 in the DOW and 4,195 in the S&P 500). If this market stays bullish, there's still the possibility of at least the DOW testing its all-time high of 36,953 from Jan. 2022. Let's plan on going long tomorrow if the DOW and S&P 500 can edge a bit lower for a second day under their 15-day moving averages. A close back above those averages would signal that the corrective low is in. We will remain on the sidelines for today.

Crude oil is making a new low today at $76.50 (May contract chart). Prices have been sharply down for 9 days from the $83.38 high of April 12. Today's low could easily be a sub-cycle bottom, but if prices start pushing below the 45-day moving average (currently flat at $76.25), this market could turn bearish. If prices rally instead and close back above the 15-day moving average (currently $80.21 and falling slowly), it would mean the sub-cycle low is in, and that would be a good signal to go long for another strong rally. Let's wait for that signal as we remain on the sidelines of crude for now.

Today silver prices dipped to a new weekly low ($24.53) while gold did not, and both are closing in the upper part of their day's range. This is a bullish divergence signal and is supporting our idea that a sub-cycle low and a reversal up is imminent in both metals. We went long in gold last week (its sub-cycle low was due) but held off on buying silver as this week seemed a more likely time for silver's low. Today's low may be it, but a strong potential "pivot point" for silver is coming up Thursday and Friday. I would be more comfortable seeing a low then (or even tomorrow) before going long. Let's stay on the sidelines of silver and see if it can go lower over the next day or two. We are still holding our long position in gold.

Trading Blog Wednesday, April 19, 2023

4/19/2023

GOLD TRADE ALERT and UPDATES ON SILVER AND CRUDE OIL (3:00 pm EDST)

This morning gold dropped sharply below its 15-day moving average, but then prices snapped back up and are closing in the upper part of today's range (bullish behavior). Prices got down to $1970 which is in our acceptable range for a sub-cycle low, and that low is due this week. This low is also happening inside our current reversal zone (that also ends this week). The minimum requirement for a sub-cycle low would be a test of the 15-day moving average and at least a 3 day drop from a crest (this is day three from last Friday's $2047 high). This looks like a good time to cover our short position in gold and reverse to the long side. (We entered our short position on March 20, so we are just about breaking even on this trade.)

It looks like gold is turning bullish and will now challenge the all-time high of $2070, and there's a good chance it will exceed that high and confirm that a new long-term cycle in gold is underway (see my recent blogs on gold's long-term cycle - I will discuss this in more detail later). Today I am covering (unloading) my short position and entering a long position in gold. For now, we can put a stop loss on this trade based on a close below the 45-day moving average (now at $1925 and rising slowly).

Silver also dropped sharply this morning below its 15-day moving average and then snapped back up and is closing above it. Today's low was at $24.66. I am going to raise my previous target for a sub-cycle low ($22 - $24) to $23 - $25. This puts today's low within acceptable range. Silver's sub-cycle low is due either this week or next. This week is within our general reversal zone, but next Thursday and Friday is a potentially strong "pivot point" for silver, so it's possible to see a sub-cycle low then. I am going to hold off going long in silver for now. If prices dip below the 15-day moving average over the next few days and hold above $23, we will consider going long.

Today crude oil prices broke sharply below support at $80 (May contract chart) and seem to be closing just below the 15-day moving average (around $79.21). This move is now starting to close the wide "gap-up" space from April 3 when prices jumped overnight from $75.67 to $80.10. As I stated in yesterday's blog, it's a little early for a sub-cycle low this week, but next week might qualify. Let's wait to see if prices can go lower into next week before we think about going long. Ideally, we would like to see prices stay above the 45-day moving average, and right now that just happens to be near the lower end of that "gap-up" space just discussed (around $76). We will stay on the sidelines of crude for now.

Trading Blog Tuesday, April 18, 2023

4/18/2023

MARKETS UPDATE (3:30 pm EDST)

Last week the DOW and S&P 500 made new weekly highs but the NASDAQ did not. That gave us an intermarket bearish divergence signal. Today, the S&P 500 and NASDAQ are both making new weekly highs, but the DOW is not - another bearish divergence signal. We are still inside our new reversal zone (April 11- 21) through the end of this week, so all three indices have time to form a sub-cycle top in this time frame before correcting down. These two bearish divergence signals are a strong indicator of that correction being imminent. We will remain on the sidelines of the broad stock market and wait for that corrective drop for a possible spot to buy (which could come as early as next week).

Our corrective dips in gold and silver are finding some support near $2000 and $25, respectively. The rising 15-day moving average in both metals is also approaching these support lines and may strengthen them. Prices have been down for two days (from highs on Friday), and we like to see at least a three to eight day drop for a typical sub-cycle correction. We would also like to see the 15-day moving average broken and ideally silver down to at least $24 and gold to at least $1970. In terms of cycle timing, a sub-cycle bottom is due this week in gold and this week or next week in silver. Let's hold our short position in gold and stay on the sidelines of silver for now until we are closer to our target prices. We note that last week's highs did not manifest bearish divergence (i.e. both metals made new weekly and yearly highs), and bearish divergence is something we like to see before a significant correction. It's possible that one metal could pop up to another weekly high by the end of this week without the other doing so, and that could give us our bearish divergence signal. That is not, however, a necessary requirement for a sub-cycle correction.

Today is the 4th day of a corrective drop in crude oil prices (from last Wednesday's high at $83.53). Not surprisingly, crude is finding support at the recent "gap-up" top just above $80 (May contract chart). It's a bit early for a sub-cycle bottom, but if prices push lower into next week, we may get one then with a good spot to buy. If instead prices bounce from the current support ($80) and make a new high by the end of this week, that would be a better candidate for a sub-cycle top than last Wednesday's high. If that happens, we will wait for another corrective drop to buy.

As you can see, this market is a bit tricky to call at the moment. The bottom line here is that a new medium-term cycle began with the $64.36 low on March 20, and that was also most likely the bottom of a new long-term 3-year cycle in crude. This means that crude should be very bullish now with prices pointed up for many more months. We therefore want to go long on any significant corrective drops, and the first sub-cycle correction is imminent in our current medium-term cycle. Let's stay on the sidelines for now and see if we get a new high or new low by the end of the week.

Trading Blog Friday, April 14, 2023

4/14/2023

BROAD STOCK MARKET TRADE ALERT (1:00 pm EST)

This morning the DOW and S&P 500 made new weekly highs while the NASDAQ did not, and all three are now falling steeply and will likely close in the lower part of their daily ranges. As I explained in yesterday's blog, this look's like
a good time to sell and take profits in our long position. We entered this position on March 27 and have a profit a little over 4% in the DOW for a three week trade. I am selling my long position in the broad stock market now.

Our strategy from here will be to watch from the sidelines any correction to see how low it goes. If it stabilizes between the 45-day and 15-day moving averages, we will look to buy again for another rally into May. After that, we may switch to bearish strategies as the long-term cycle correction could kick in.

It appears that gold and silver are finally taking their corrections as we have been predicting, with both prices falling steeply today which is good for our short position in gold. We will also be looking to buy the bottom of these corrections, as long as they don't go too low. Holding our short position in gold today and still out of silver.

Trading Blog Thursday, April 13, 2023

4/13/2023

MARKETS UPDATE (5:30 pm EDST)

We are now three days inside our new general reversal zone (April 11 - 20) and the broad stock market is rising into it. (The FOMC minutes released yesterday describing committee member's concern about a recession spooked the market into a dip, but those fears seem to have abated with today's strong rally). All three of our market indices (DOW, S&P 500, NASDAQ) started new medium-term cycles in mid-March and are in their 4th week. This means a sub-cycle top followed by a corrective dip can happen anytime now. We will therefore be looking for a top this week or next.

We already have a bearish divergence signal this week because the DOW and S&P 500 are making new weekly highs while the NASDAQ is still below its high from last week. Another bearish signal would be these indices closing the day in the lower part of that day's range. We will watch for that now as a cue to take profits and sell our current long position. If the NASDAQ manages to break last week's high tomorrow, we will look to next week for another possible bearish divergence signal and a good spot to take a profit. For now, we will continue to hold our long position in the broad stock market.

If equity markets stay bullish, we would expect any corrective drop to be modest - perhaps somewhere between the 15-day and 45-day moving averages (the NASDAQ is already testing this area). A more serious drop would concern us, and a drop below the lows that started these new medium-term cycles would mean the market is turning bearish. (Those lows would be 31,430 in the DOW, 3,809 in the S&P 500, and 10,983 in the NASDAQ.) My bias at the moment is that we will see a modest correction, and we may look to buy again at that corrective low.

Gold and silver continue to exhibit bullish momentum which is lending support to the idea that gold could be in a new long-term (23-year) cycle that started last year. As I wrote in my April 6 blog:

"...we are at a major crossroads in determining the longer-term direction of gold. If gold remains above $2000 and starts to break and close significantly above its all-time high of $2070, we will have to go with the idea that a NEW long-term 23-year cycle in gold started last year. If that's the case, gold would be VERY bullish now, and prices would be rising strongly for many more years. Alternatively, the current high in gold may be a "triple-top" to an older 23-year cycle (that began in 1999) and is ready to correct down to its final bottom with a potential 50% drop in price into the end of this year or next year. This scenario, of course, is very bearish..."

Well, gold prices are above $2000 again, and today they reached $2046 before backing down a bit. We are nearing the center of our general reversal zone, and it is applicable to the precious metals. A sub-cycle top in both gold and silver is also due anytime now, so it is likely that some sort of correction is imminent. Both metals are making new weekly highs today, so we don't have a bearish divergence signal this week (but we could get one next week). Although we like to see bearish divergence (one metal making a new high without the other) at a top, it is not required, especially in a bullish market. Traders who haven't been stopped out of their short gold positions can hold them for now (with a stop loss on a close above $2070 or $2050, depending on your risk tolerance) as a correction seems imminent. I'm starting to think that any correction now could be modest and would be followed by another rally to challenge the "triple-top". If that turns out to be the case, we will consider going long at the bottom of a corrective drop that stays above $1900.

Silver prices nearly touched $26 today, but as with gold, a sub-cycle top and correction down could be imminent. We will look to buy any corrective drop now that is not too severe. A good target would be around $23 - $24. If prices drop and stabilize around there, we will go long as we could see another rally get up to $30 - $35 (or even higher). We will remain on the sidelines of silver for now.

Unlike the precious metals and equities, the U.S. Dollar Index is falling (not rising) into our reversal zone. It is also approaching potential support around 101. A reversal back up now would support our idea of the precious metals turning down.

Crude oil has been rising steeply from its March 20 low at $64.36 (May contract chart) which can now be confirmed as the start of a new medium-term cycle (and possibly a new 3-year cycle). Prices are now testing the high of the previous medium-term cycle ($83.04), and a close above there would mean the new cycle's trend is bullish. But this steep price rise is peaking near the center of our current reversal zone, so a corrective drop may be imminent. We will now look to buy any corrective dip that doesn't go too low. A good target may be between $77 - $79. If crude is starting a new 3-year cycle (likely), then prices should be bullish now and pointed up for many months. A bullish close above $85 could lead to prices going up to the $98 area fairly quickly. We will stay on the sidelines for now as we wait for a corrective low to buy.

Trading Blog Monday, April 10, 2023

4/10/2023

MARKETS UPDATE (2:30 pm EDST)

We are still waiting for the broad stock market to make a decisive move up or down. The DOW and S&P 500 were relatively flat last week and kept a reasonable distance above their 15-day and 45-day moving averages while the NASDAQ dipped down a bit and tested its 15-day moving average. (Today, that average is being tested again and seems to to be holding). Tomorrow we enter a new general reversal zone for all markets (April 11 - 20), but it's too early to tell if we will see a significant high or low (or both) in this time frame. My bias right now is that our new medium-term cycles in the these indices that started in mid-March will be at least short-term bullish and challenge or exceed their previous highs from Feb. 2 (S&P 500 and NASDAQ), and Dec. 13. 2022 (DOW). Let's continue to hold our long position in this market for now.

Both gold and silver prices are edging down today with gold testing its 15-day moving average. Gold is now back below $2000, but it has to fall a lot lower to confirm that the current medium-term cycle is turning bearish. There is a very strong potential "pivot point" for silver today and tomorrow, so we could see a sharp correction down from the resistance silver is now encountering around $25. We will hold our short position in gold for now and stay on the sidelines of silver until we see how serious any corrective drop will be.

Crude oil prices continue to stabilize just above $80 (May contract chart). As I mentioned in my last blog, prices need to start closing above $83.04 to confirm that the this new medium-term cycle that started on March 20 is bullish. We note that OPEC's surprise announcement of a production cut last week created a "gap up" in prices on April 3. Any "gap down" in price now could create a "bearish island reversal" chart pattern which could send prices back down very quickly. We will keep that in mind as we wait for a definitive price move in this market and remain on the sidelines for now.

Trading Blog Thursday, April 6, 2023

4/6/2023

MARKETS UPDATE (3:30 pm EDST)

Our broad stock market indices (DOW, S&P 500, NASDAQ) have been edging down since Tuesday as they have encountered "congestion zone" resistance, and all three are now making lows as they enter a potential "pivot point" zone today which extends into tomorrow and possibly Monday. This could lead to a reversal back up, but if not, we soon enter another general reversal zone next week (April 11 - 20) that could keep this market from going too low and even turn it around for another rally. Alternatively, if the market rallies up from this week's lows into the new reversal zone, we will have to keep our eye out for a significant top in that time frame.

All three indices just began new medium-term cycles from their mid-March lows and are therefore very young. Most cycles are bullish in their early phase, and these seem to be no exception as their rallies have been steep from those lows. But to maintain the bullish trend, all three now need to break above the high of their last medium-term cycle. For the DOW, that would be the 34,712 high from Dec.13, 2022, and for the S&P 500 and NASDAQ it would be their highs from Feb. 2, 2023 (4,195 and 12,270, respectively). The S&P 500 and NASDAQ are very close to those highs, while the DOW is further away from its high, a situation that could soon lead to a bearish divergence signal if the S&P 500 and/or NASDAQ make new highs without the DOW. We will have to watch this situation carefully as even young cycles can peak early and turn bearish. We note that all three indices are still above their 45-day and 15-day averages (although the NASDAQ is testing its 15-day moving average today). If they can stay above those averages, we could see more rallying. We will continue to hold hold our long position in the broad stock market for now.

Both gold and silver made new highs for the year yesterday (at $2032 and $25.13, respectively) and are backing down just a bit from those highs today. Monday and Tuesday of next week are potential "pivot points" for gold (and especially silver) so prices may edge up for a higher top over the next few days. We also enter that new general reversal zone next Tuesday (April 11 - 20) which is applicable to the precious metals. If these metals are going to be bullish, we could also see higher prices in that time frame.

As I've been discussing in previous blogs, we are at a major crossroads in determining the longer-term direction of gold. If gold remains above $2000 and starts to break and close significantly above its all-time high of $2070, we will have to go with the idea that a NEW long-term 23-year cycle in gold started last year. If that's the case, gold would be VERY bullish now, and prices would be rising strongly for many more years. Alternatively, the current high in gold may be a "triple-top" to an older 23-year cycle (that began in 1999) and is ready to correct down to its final bottom with a potential 50% drop in price into the end of this year or next year. This scenario, of course, is very bearish, but it's important to note that once that 23-year low is in (possibly around $1000), a new (bullish) 23-year cycle would be starting which would be a "golden opportunity" to buy. (Yes indeed, timing is everything right now.)

So what is our strategy for trading gold right now? We are currently holding our short position in gold with a tight stop loss based on prices breaking and closing above $2070. If that stop is triggered, we will cover our short position and start looking for opportunities to go long.

If instead gold prices start to fall now, we will hold our short position, but we note that prices will have to break below the 15-day and 45-day moving averages (currently $1982 and $1895, respectively. and rising) and then $1807 (the start of the current medium-term cycle) to confirm that the trend is turning bearish with gold falling steeply to the bottom of an older 23-year cycle due this year or next.

Silver will likely be taking its cues from gold. Like gold, silver started a new medium-term cycle about a month ago and is in its early phase (young), but it is also due for a sub-cycle correction. As with gold, we will carefully watch any corrective drop in silver. If prices break below the 15-day and 45-day moving averages and especially the $19.91 low that started the new medium-term cycle, then the cycle would be turning bearish. Otherwise, a more modest sub-cycle correction might be a good spot to buy for another rally that could coincide with a rally in gold. We will stay on the sidelines of silver for now.

Crude oil prices seem to be stabilizing just above $80 (May contract chart) after being dramatically kicked up there by OPEC's surprise announcement of their cuts in production earlier this week. We still need to see prices break above $83.04 - the top of the previous medium-term cycle - to confirm that the new medium-term cycle that started with the $64.36 low on March 20 is going to be bullish (and likely the start of a new 3-year cycle). If that's the case, we will be looking to buy any significant corrective dips in this market. For now we will stay on the sidelines of crude.

Trading Blog Tuesday, April 4, 2023

4/4/2023

UPDATES ON GOLD and the BROAD STOCK MARKET (3:00 pm EDST)

Gold prices are now challenging our labeling of an old long-term 23-year in gold about to take a strong corrective decline to its final bottom (due later this year or next year). As I've been discussing in my recent blogs on gold (please refer to those for more detail), gold is either about to end an old 23-year cycle with a strong corrective drop or it has already ended its old 23-year cycle and started a new one with the "double-bottom" lows of $1616 and $1617 on Sept. 28, 2022 and Nov. 3, 2022, respectively. The difference between these two cycle labelings (old or new) is important. If gold is still in an old cycle, we expect a very bearish drop in price to begin anytime now as the cycle moves to its final bottom (which could go as low as $1000 by late this year or into next year). Alternatively, if gold started a new 23-year last year, the cycle would be VERY young and VERY bullish, and prices would be pointed up for many more years.

Looking at a three year chart of gold prices, one can clearly see a "TRIPLE-TOP" now forming in this metal, with the two previous tops being $2070 in Aug. 2020 and $2066 in March 2022. Today gold broke through resistance at $2000 and reached $2024. It is closing above $2000 (around $2020). This break above $2000 is a bullish sign; HOWEVER, there are reasons to think a reversal and downturn are imminent:

1) Triple-tops can be very bearish signals of an impending plunge in prices.
2) A sub-cycle correction is now due in gold's current medium-term cycle.
3) There is a potential "pivot point" for gold prices Monday - Wednesday this week, so gold could turn down in this time frame.

I think I'm going to raise the stop loss for my short position in gold to a break above $2070 and hold this short position for now. I am trying to avoid being "whip-sawed" out of our short trade, but traders who are more risk adverse may want to cover their short position on this close above $2000.

The broad stock market is correcting down a bit today as all three indices are encountering resistance in "congestion zones" close to their February highs (33,000 - 34,000 in the DOW, 4,000 - 4,200 in the S&P 500, and 11,500 - 12,270 in the NASDAQ). As I mentioned in my previous blog, there could also be some more "headwind" to a rally coming up later this week and then all through next week. We should remain alert and nimble and ready to sell our long position in this market if a significant top or correction appears imminent. In the meantime, we will continue to hold that long position.

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