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Trading Blog Monday (late night), April 29, 2024

4/29/2024

MARKETS UPDATE (11:30 pm EDT)

The broad stock market seems persistent in its desire to rally as all three indices (DOW, S&P 500, NASDAQ) made more gains today and even closed back above their 15-day moving averages (although they still remain below their 45-day moving averages). We note, however, that while the S&P 500 and NASDAQ made new weekly highs today, the DOW did not, and this gives us a case of intermarket bearish divergence. Is it possible these indices made their final medium-term cycle bottoms on April 19 (S&P 500 and NASDAQ) and April 17 (DOW)? Well, maybe; but those bottoms were not in any reversal zone or "pivot point" area which we like to see at any major turning point. And there's still time for this market to fall lower inside our current strong reversal zone which ends on Friday. Let's stay on the sidelines for now with the idea of a lower low by Friday. We note that even if the final cycle bottoms are in, the market is rallying into our current reversal zone, and that could turn any new cycles bearish very quickly.

Both gold and silver made isolated lows last Tuesday, but the rally from those lows has been very tepid as both metals seem reluctant to rise above their 15-day moving average. Last Tuesday's lows could have been significant sub-cycle lows as they happened two days inside a reversal zone specifically for the precious metals, but prices need to rally strongly now to confirm that scenario. I think it's more likely prices will fall lower into the second half of this reversal zone which ends this Friday. Let's stay on the sidelines for now as we wait for that to happen. If we don't get new lows by the end of the week, we will have to assume the sub-cycle bottoms are in.

Crude oil prices made an isolated low last week on Monday ($80.70 - June contract chart) that was on the first day of our general reversal zone as well as the first day of a reversal zone specifically for crude (April 22 - May 3). Technically, that could qualify as a final medium-term cycle low, but the short rally from that low into last Friday is now turning down just under the 15-day moving average. As with our other markets, we could easily see lower prices into the end of this week for a better medium-term cycle bottom under the 45-day moving average. Let's remain on the sidelines of this market as we wait to see if a deeper correction is forthcoming.

Trading Blog Wednesday (late night), April 24, 2024

4/24/2024

MARKETS UPDATE (11:30 pm EDT)

We are now inside a strong general reversal zone for all markets (April 22 - May 3) where we are expecting all of the markets that we follow to be making significant lows. So far, the broad stock market has been rising from last week's lows (the DOW from Wednesday, and the S&P 500 and NASDAQ from Friday). Those lows were just outside our reversal zone and a bit early, so there's a good chance these indices could resume their fall to a deeper low due anytime through next week. The rally over the last few days is now encountering resistance at the 15-day and 45-day moving averages, and that could turn these indices back down. We will watch for this now as a deeper correction to the final bottom of the current medium-term cycle could be in the cards.

We are expecting a sub-cycle correction of shorter duration for our two precious metals, gold and silver, and we may have already gotten that with their isolated lows on Tuesday ($2295 in gold and $26.69 in silver). Nevertheless, it is still early in our strong general reversal zone (which is running parallel to another reversal zone specifically for gold and silver), and we have another strong potential "pivot point" coming up Friday through next Monday specifically for gold. As with the broad stock market, prices in both these metals could drop lower before reversing back up with a strong rally. Let's hold off any buying until we are more certain a significant bottom is in.

Crude oil may have made a significant bottom on Monday at $80.70 (June contract chart), but its rally from there has not been strong, and prices are holding below the 15-day moving average. As with the broad stock market, we are expecting a full medium-term cycle correction in this market which could be quite steep and last 2 - 5 weeks. Therefore, it would not surprise me to see prices move lower, and ideally complete a final bottom sometime next week, still inside our general reversal zone, which is especially relevant to this market.

We are remaining on the sidelines of all of these markets for now.

Trading Blog Tuesday (night), April 16, 2024

4/16/2024

MARKETS UPDATE (10:00 pm EDT)

All the markets we cover (stock market, precious metals, crude oil) are currently in the process of taking significant short-term corrections from recent highs.

The broad stock market continues its trek downward with all three indices (DOW, S&P 500, NASDAQ) now well below their 15-day and 45-day moving averages. There are no reversal zones for this market this week, so I don't expect a final bottom to this correction until next week when we enter another strong reversal zone (April 22 - May 3). That bottom should be the final bottom to the current medium-term cycle in all three indices, and we will likely be looking to buy there.

Crude oil prices also seem to be falling from a double-top high on April 5 ($87.63) and April 10 ($87.67) (May contract chart). Today prices closed just below the 15-day moving average, so we expect them to fall lower - most likely into next week's general reversal zone, which is also applicable to crude. We expect the final medium-term cycle bottom in this market next week or the week after, and we expect it to be a good spot to buy - as long as prices stay above $70.

Gold and silver both made significant highs on April 12, and a significant correction may be in progress in both metals now. A sharp sub-cycle corrective drop could unfold that would test the 15-day moving average and maybe even the 45-day moving average. Next week's strong reversal zone is also relevant to gold and silver, and that would be a good time for a sub-cycle bottom. We note that we are still inside a potential "pivot point" for both metals that ends Wednesday, and another one starts Friday and ends next Monday. We could see one or both metals edge back up to a new high before taking a more serious fall. We might even see prices move higher into next week's reversal zone before falling. Whichever way this plays out, we are on the lookout to buy the bottom of the next significant sub-cycle correction in one or both precious metals.

We are currently on the sidelines of all these markets (broad stock market, crude oil, gold, and silver).

Trading Blog Friday (evening), April 12, 2024

4/12/2024

MARKETS UPDATE (9:30 pm EDT)

Gold and especially silver prices shot up strongly today but then fell back down and closed near the bottom of today's range (bearish behavior). Gold soared to a new all-time high of $2427 and closed around $2344. Silver made a new three-year high at $29.68 and closed near $27.94. A significant sub-cycle correction could be imminent as today's tops are happening inside a strong potential "pivot point" for both gold and silver that continues into early next week. We'll continue to watch for a strong correction down that may give us another buying opportunity in both metals. We are on the sidelines for now.

We are now two days past our last reversal zone, and the broad stock market continues to push lower. The DOW has been leading the way with a sharp decline, but the S&P 500 is not far behind. Both closed below their 45-day moving averages today. The NASDAQ's fall has not been so steep (yet). It is still testing its 45-day moving average, but it may push lower next week as we are free of any reversal zones until the following week (April 22 - May 3). As with the precious metals, we are looking to buy the bottom of any significant correction, which in this market would likely be a final medium-term cycle bottom. We are still on the sidelines of the broad stock market.

After edging lower all week, crude oil surged up today and tested its high ($87.63 - May contract chart) from last Friday before falling and closing in the lower part of today's range. Last Friday's high was in the center of our reversal zone, so today's high could be a bearish "double-top". If that's the case, we should see prices fall from here as they make their way down to the final medium-term cycle bottom in two to five weeks. We will most likely be looking to buy at that bottom. Right now we remain on the sidelines of crude.

Trading Blog Wednesday, April 10, 2024

4/10/2024

COMMENT ON THE FED, INTEREST RATES, and THE BROAD STOCK MARKET (4:30 pm EDT)

The FOMC's minutes from its last March 20-21 meeting were released today and showed that the participants had been more hawkish in their approach to lowering interest rates than Wall Street had assumed (the DOW rallied strongly after that meeting with strong hopes for imminent rate cuts). The minutes released today stated:

"“Participants noted indicators pointing to strong economic momentum and disappointing readings on inflation in recent months and commented that they did not expect it would be appropriate to reduce the target range for the federal funds rate until they had gained greater confidence that inflation was moving sustainably toward 2%,”

In other words, the decision to lower interest rates is going to strongly depend on seeing an improvement in inflation data. Unfortunately, data on hiring and inflation released over the last several days has been very disappointing and almost guarantees the Fed will not cut rates at its May or June meetings. Some analysts now give 40% odds for a cut in July, and perhaps 65% odds for a September rate cut.

The broad stock market did not react well to all of this today as the DOW "gapped" down nearly 500 points this morning and stayed down through the closing bell. Because today is the last day of our relatively weak general reversal zone (April 1 - 10), the DOW could be forming a final medium-term cycle bottom here - especially since it has been down almost three weeks from its isolated high on March 21, it is making a new weekly low today well below the 45-day moving average, and it is approaching some support around 38,000.

The NASDAQ is not making a new weekly low today, but last week's low represented a two week corrective drop, and today this index is testing and finding some support at the 45-day moving average. The S&P 500 is making a new weekly low today near its 45-day moving average, and it has also been correcting down for two weeks.

The bottom line here (pun intended) is that these indices could be making their final medium-term cycle bottoms now. The FOMC minutes combined with disappointing inflation data spooked the markets into a "crash and burn" dive today, but if Wall Street shrugs off this news tomorrow, we could see a new rally rise from the ashes. If this market takes the news more seriously, however, we could see the sell-off continue, perhaps into our next strong reversal zone coming up April 22 - March 3. For now, we remain on the sidelines and wait to see how this plays out over the next several days.

Trading Blog Tuesday, April 9, 2024

4/9/2024

MARKETS UPDATE (8:30 pm EDT)

The broad stock market continues to "waffle" about in its directional trend, and this is making it difficult for us to definitively label the current medium-term cycles in the DOW, S&P 500 and NASDAQ. My best guess at the moment is that all three indices have expanded and they are currently in the process of falling to their final medium-term cycle bottoms. If this is the case, prices should be headed lower to make a final bottom - either tomorrow (the last day of our relatively weak reversal zone) or more likely into our next strong reversal zone coming up April 22 - May 3.

We also need to consider the possibility that the DOW and NASDAQ's medium-term cycles already bottomed with last Thursday's lows. Those lows came two weeks after their isolated highs on March 21, and a 2-week fall is our minimum requirement for a final cycle low. The S&P 500's low from last Thursday was only a week after its March 28 high. That might also be a final bottom, but if it pushes lower this week, it too would satisfy a minimum 2-week drop. If the final bottoms are in, then these indices should be very bullish and ready to rally strongly. Let's wait to see if that happens.

Our trading strategy now is to look to buy the start of any new medium-term cycle. We may have to wait until the end of the month for that, but if new cycles already started from last Thursday's lows, we may see a strong rally into the new strong reversal zone coming up at the end of the month instead of a fall. In that situation, we would watch for a high inside the reversal zone and then a significant correction down to a good buy spot. We anticipate more bullish rallying into the summer. We remain on the sidelines of this market for now.

Silver and gold prices continue to push higher with gold touching $2364 and silver reaching $28.29 today before they both backed down a bit. Both metals are still inside our general reversal zone until tomorrow, but they are moving away from several "pivot points" from last week and yesterday. These prices have been rising very steeply for almost two weeks and are overdue for a correction. If it doesn't happen now, we could see prices edge higher into the end of this week and early next week where we have more potentially strong "pivot points" for both metals. Our cycle analysis is also suggesting an imminent sharp correction is possible in both gold and silver.

Any significant correction in gold should at least test the 15-day moving average (now at $2256 and rising) but could also get as low as the 45-day moving average (now at $2141 and rising). Silver could also drop into a wide price range from $23 - $25 to satisfy a significant sub-cycle correction. Let's watch for a sharp correction into these ranges where we will consider going long again in both metals. For now, we remain on the sidelines.

Crude oil prices rallied a bit today. Last Friday's high at $87.63 (May contract price) was probably the final high in crude's current medium-term cycle (unless prices edge higher this week). That high is now due (overdue). We like to see a 2-5 week corrective fall from the final high to the final cycle bottom. If prices continue to fall, it will be a 3-week correction into our next reversal zone for crude (April 22 - May 3). That would be the ideal spot for a bottom. Let's watch for it. As long as prices stay above $70, we will be looking to buy at that bottom as crude continues to look very bullish into the end of this year. We are on the sidelines of crude for now.

Trading Blog Thursday (evening), April 4, 2024

4/4/2024

MARKETS UPDATE (9:00 pm EDT)

The broad stock market made an attempt to rally this morning but then turned abruptly down in the afternoon before closing the day with a heavy loss. The DOW was down 530 points, the S&P 500 down 64, and the NASDAQ down 228. It looks like a final corrective drop to the end of the current medium-term cycles in all three indices is underway. Our current, relatively weak general reversal zone continues into next Wednesday. It's possible we could see a cycle bottom by then, but the corrective drop could continue longer into the end of the month and land inside our next strong reversal zone April 22 - May 3. We will remain on the sidelines of this market until we see signs that a bottom is in.

Gold and silver may be topping out today as both tested and then closed below round number resistance levels (gold at $2300 and silver at $27). As I mentioned in yesterday's blog, it's a good time for prices to roll over as we are in the center of a general reversal zone as well as inside a potential "pivot point" for precious metals through Friday (and possibly next Monday). For these reasons, we sold our long positions in both gold and silver yesterday, and we are now on the sidelines of both metals. We may look to go long again after any significant corrective drop over the next week or two.

The U.S. Dollar Index has been falling and is now testing its 15-day and 45-day moving averages (near 104) in the center of our current reversal zone. If it turns back up over the next several trading days, it could put downward pressure on both gold and silver and trigger the downward correction we are anticipating in both these metals.

Crude oil prices edged a bit higher today and briefly exceeded $87 before closing at $86.59 (May contract price). It is late in the current medium-term cycle, and a final top is now due that should be followed by a sharp correction down to the final cycle bottom. As with gold and silver, today's high is in the center of our general reversal zone as well as inside a potential "pivot point" for crude. A roll over in prices could be imminent. When it happens, we will be looking to buy at the bottom of any significant correction. For now, we remain on the sidelines of crude.

Trading Blog Wednesday, April 3, 2024

4/3/2024

GOLD and SILVER TRADE ALERT (2:30 pm EDT)

Today gold and silver are rallying with gold approaching $2300 and silver prices surging steeply to touch $27. This parabolic rally is looking "toppy", especially as today's highs are in the center of this week's "weak" reversal zone and also inside a potential "pivot point" zone for gold and silver (today through Friday). We entered a long position in silver on March 1 around $23, so we now have a 17% profit - not bad for a one month trade. We entered gold later on March 20 at $2186, which gives us a 5% profit today. Let's take profits and sell our long positions in both metals today as another significant sub-cycle correction could be imminent. We will likely re-enter our long positions later depending on how low any corrective declines go as the trend in both metals is still looking bullish.

Trading Blog Tuesday, April 3, 2024

4/2/2024

MARKETS UPDATE (11:30 pm EDT)

The broad stock market may at last be taking its final corrective drop to the final medium-term cycle bottom in all three of our indices (DOW, S&P 500, NASDAQ). Today the DOW plunged nearly 400 points to close below its 15-day moving average. The NASDAQ also closed below its 15-day moving average with a 156 point drop. The S&P 500 broke (but did not close) below its 15-day moving average and lost 38 points.

The final corrective drop in a medium-term cycle usually lasts 2 - 5 weeks, but since this one is late, it may not last that long. The DOW has already fallen almost 2 weeks from its 39,889 isolated high on March 21. Ditto for the NASDAQ's March 21 high at 16,539. The S&P 500, however, is only down 2 trading days from its isolated high (5,265) from last Thursday. Clearly, all three could fall some more. As I suggested in my last blog, a final bottom could happen in a rather weak general reversal zone (April 1 -10) this week or next, but a better time for the medium-term cycle bottom would be near the end of this month inside a much stronger reversal zone (April 22 - May 3). We are looking to buy at this bottom (as long as it doesn't go too low) as we anticipate another strong rally into the summer. We remain on the sidelines of the broad stock market for now.

Gold and especially silver prices rallied strongly today. Gold has little resistance encumbering it now as it rises steeply to new all-time highs; however, our estimated target range for the top of the current medium-term cycle (which began Feb. 14) would be $2300 - $2400, and we are close to the bottom of that range now. As we are in a weak reversal zone this week, we could see a pullback from any isolated highs. On the other hand, it's still early in this cycle and the trend is bullish, so prices could push higher. Let's hold our long position in gold for now.

Silver's current medium-term cycle also began on Feb. 14. Prices rose sharply from there to $25.74 on March 21, and then the cycle took its first sub-cycle dip to $24.34 six days later. Prices have now risen sharply from that low, and today they surged dramatically and surpassed the March 21 high, closing just above $26. This demonstrates a bullish trend, but as with gold's cycle, another pullback could be imminent. If prices push higher tomorrow, we may look to take profits in our long position. We remain long in silver for now.

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

"...the sub-cycle labeling of the current medium-term cycle is a little unclear. But we know the cycle is old and near completion, so a final top is imminent and will be followed by a final sharp correction down to the cycle bottom. That bottom is due anytime now by mid-May. Because the final corrective drop should take 2 - 5 weeks, the final top cannot be far away. We may even see it this week as today and Friday defines a potentially strong "pivot point" for this market (and others). Also, next week we enter another (somewhat weak) general reversal zone (April 1 - 10). After that, we don't have any reversal zones until the last week of April (April 22 - May 3, a very strong reversal). Based on all this, a likely scenario could see a final top in crude this week or next followed by a sharp correction down into a final bottom in late April/early May. Crude still looks very bullish into the end of this year, so we will be looking to buy this current medium-term cycle bottom, wherever it ends up landing."

It looks like prices want to push higher into this week's reversal zone. We have a strong potential "pivot point" for crude tomorrow and Thursday (which is also near the center of our reversal zone) as prices approach possible resistance at $86 (May contract chart). A final top and reversal could be imminent. If it happens, we will be looking to buy the bottom of the correction. We are still on the sidelines of this market.

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