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GOLD TRADE ALERT (3:00 pm EDT)
Gold looks like it's forming a top today, and a deep correction down may be starting (as described in yesterday's blog). I am going to enter s short position in gold today. We are still on the sidelines of silver. UPDATES ON THE BROAD STOCK MARKET and PRECIOUS METALS (10:30 pm EDT)
After rallying sharply off the deep low of April 7 (36,611), the DOW encountered resistance near its 15-day moving average last week and is now falling again. The S&P 500 is showing a similar pattern. These indices are now approaching those deep lows from April 7. Because we are in the center of another reversal zone (April 14 - 25), we might get a "double-bottom" formation this week which would support the idea of a new medium-term cycle and a new longer-term 3-year cycle starting together. A lower low this week could also define the start of these new cycles, but if these indices continue falling past this week (Friday is the last day of the reversal zone), then we may have to wait a bit longer for the bottom to a medium-term (and 3-year) cycle. The current medium-term cycle could have started on Jan. 13 or March 13 or April 7 (see my April 10 blog). If we do get a significant bottom this week, it may be a good spot to buy as a significant rally would be expected at the start of a new 3-year cycle. For now, I am still on the sidelines of the broad stock market. As with the broad stock market, gold's medium-term cycle is not clear at the moment. A new cycle could have started with the $2835 low on Feb. 28 or the $2961 low on April 7. This may not be that relevant as either way, a longer-term 31 month cycle top is now due (overdue), and gold prices are now within the price range for such a top ($3400 - $3600, or even $3700). From this top, we anticipate a correction down of $400 - $600. Thus, a good short-selling opportunity may be imminent. Today gold made a new all-time high at $3430 as silver barely made a new weekly high while remaining well below its yearly high (so far) of $34.54 on March 28. This creates a bearish divergence signal. Although we just exited a reversal zone specifically for the precious metals (it ended last Friday), we are still near the center of a general reversal zone that applies to both metals through the end of this week, so a top could be imminent. We will watch for a possible short-selling opportunity over the next few days. Silver may have started a new medium-term cycle with its April 7 deep low of $28.56. Its sharp rise from there is now encountering some resistance around $33 (and the 45-day moving average) in the middle of a general reversal zone. If prices roll over here, they may head back down towards $30 and form a "double-bottom (not uncommon at the beginning or end of a cycle). If that happens, it may be a good buy spot, but if prices fall below $28, it would mean the cycle is turning bearish and we would stay on the sidelines. We are currently on the sidelines of silver. CRUDE OIL TRADE ALERT (6:30 pm EDT)
It looks like it's time to bail out of my crude oil long position. I entered this way back on Jan.24 at $73 when this market was looking quite bullish. Earlier this month, however, crude prices got a one-two punch. Following President Trump's reciprocal tariff announcement, OPEC announced higher than expected production increases. This combo plunged crude prices dramatically, and they haven't recovered very much since then. Prices broke below an important low at $63.70 on April 4 (May contract chart), and last week crude nearly touched $55. This means crude's trend has turned bearish, and prices could (should) fall lower. Although there has been a sharp bounce from that $55 low, the rally is now encountering potential resistance at the 15-day moving average ($64.46 and falling) and another resistance line near $65. We are presently near the center of a general reversal zone (April 14 - 25), so it seems likely this rally will turn back down. It looks like a good time to bail out of any long positions. I realize this entails a significant loss, but I think it is best to get out now as there seems to be a high risk of prices falling considerably lower. I am putting a crude sell order in today for tomorrow's market open. MARKETS UPDATE (10:00 pm EDT)
We are now at a major crossroads in the broad stock market in terms of our cycle analysis. There are three ways to label the current medium-term cycle in the DOW. Two of them are very bearish, but the third one is very bullish. I had been going with the idea of a new medium-term cycle starting on Jan. 13's low of 41,845. That cycle would be bearish as it has moved well below its starting point. A second possible labeling could be a medium-term cycle starting from the 40,662 low on March 13. That cycle would also be bearish as last week's sell-off took this index well below 40,662. A third possibility is starting to look possible (even probable). This would be a new medium-term cycle starting with this week's deep low at 36,611 or perhaps another deeper low to come next week. This labeling is appealing because we are in the time frame for a longer-term 3-year cycle bottom, and Monday's plunge to 36,611 is in the the ideal target range for this 3-year cycle (33,352 - 37,861). Monday's low was also inside a general reversal zone (April 1 - April 8). If this low is the start of both a new medium-term AND 3-year cycle, it could mean the market is about to turn very bullish. The strong rally off Monday's lows was the result of President Trump suspending the severe tariffs he implemented last week. But how long will Mr. Trump hold back? Does Wall Street have enough confidence to rally strongly? If it does, this could mark the start of a new 3-year cycle and a bullish rally. We note that for this scenario to be valid, we must see the DOW first break through the 15-day and 45-day moving averages and then clear it's all-time high of 45,073 (from Dec. 2024). Until that happens, this market is still bearish and could roll back over anytime to make deeper lows. Monday's low was inside a reversal zone, but we enter another reversal zone next week (April 14 - 25), so another turning point could be imminent. Due to the uncertainty in this market right now, I am remaining on the sidelines. Crude oil prices took another dive this week and nearly touched the $55 level (May contract chart). This was inside a general reversal zone, and prices seem to be finding some support near $60 (for now). There are no reversal zones specifically for crude for the rest of this month, but we enter another general reversal zone next week. That might be a top or bottom (deeper bottom or "double-bottom") in crude. I am still holding my long position for a better exit point on any short-term rally. All traders who were stopped out of any long positions should stay out. After a two trading-day drop, gold prices surged back up to a new all-time high today ($3213) while silver remained well below its highs from last week. This creates a strong bearish divergence signal between the metals. We also note that we just entered a reversal zone specifically for the precious metals (April 9 - 17). This means a top and reversal back down could be imminent in both metals. We are still on the sidelines of gold and silver. MARKETS UPDATE (11:00 pm EDT)
After crude oil's dramatic plunge last Thursday driven by President Trump's reciprocal tariff announcement, OPEC and its allies added further pressure to the sell-off by announcing larger-than-expected production increases. Prices dropped another $4 on Friday to close near $62 (May contract chart), and some analysts are predicting a further drop to $60. Other analysts point to the fact that Trump's tariffs on key OPEC nations (Russia, Iran, and Venezuela) may reduce their supplies to offset planned production estimates (note that oil and gas as commodities are exempt from the new tariffs). As I mentioned in my last blog, we were expecting a correction in crude prices, and we got one with a top falling precisely in the center of a general reversal zone (April 1 - 8). The correction, however, was MUCH bigger than I expected. Prices are now below what had appeared to be the start of the current medium-term cycle ($64.85 on March 5). We may have to change the labeling of this cycle. We now need to consider the possibility that a 2 year longer-term cycle bottom is still in the process of forming (instead of having bottomed on March 5 as I had suggested in my last blog). If this is the case, it means the longer-term trend in crude has likely turned bearish because prices are now below the last bottom of a 2 year cycle ($63.28 on May 4, 2023). Any traders who were stopped out at $64.85 should stay out for now. I am still long and will watch for a better exit point on any relief rally that could be forthcoming after such a steep drop. The broad stock market also continued its panic sell-off on Friday triggered by the Trump tariffs. In last Thursday's blog I wrote: "Today's market sell-off (triggered by President Trump's tariff announcement) hurled these indices below the March 13 lows which further confirms the bearish trend in the current medium-term cycles. So what does this all mean? It means that these indices will fall lower until they reach the end of their medium-term cycles 2 - 12 weeks from now. Target prices for the cycle bottoms could be around 39,000 in the DOW and 5,200 for the S&P 500." Friday's lows were already below these targets. There is another significant general reversal zone coming up (April 14 - 25) soon. We could see the sell-off continue into that time frame for a final cycle bottom. We will watch for that. Any modest rally following the final medium-term cycle bottom will mostly likely give us an opportunity to sell short as the overall trend of this market has turned bearish. We are still on the sidelines of the broad stock market. Gold prices may be rolling over now and falling to a significant medium-term cycle low. A new reversal zone for the precious metals is coming up next week (April 9 - 18). A good price target for a low would be around $2800 - $2850. If gold moves into that range inside this reversal zone, it may be a good buying opportunity. Unlike gold, silver prices fell dramatically last week as silver is not only a currency-backing precious metal but also an industrial metal used in high tech industries. It's value was thus more vulnerable to last week's tariff fears affecting the general economy. It is late in silver's current medium-term cycle, and we were expecting a sharp correction to the final bottom of the cycle. It is right on time. We normally anticipate a 2-5 week correction from the top (the top, in this case, was the March 28 high at $34.54). Next week is the second week of the correction down, and we are entering that new reversal zone at the end of the week. It looks like the final bottom could be imminent. Unfortunately, as with crude oil, silver's correction has been unusually deep and is now testing the start of the medium-term cycle around $29. If it drops below that level, silver's trend will turn bearish. Although I was planning on going long at the cycle bottom, this may not be a good idea if the price continues to fall. We are still on the sidelines of both gold and silver for now. MARKETS UPDATE (11:30 pm EDT)
Our cycle analysis of the broad stock market is currently very ambiguous with several possible labels for the medium-term cycles. Our most likely labeling places the start of the current medium-term cycles in all three indices (DOW, S&P 500, NASDAQ) on the lows of Jan. 13. In that labeling, all three indices have turned bearish as they have fallen well below their starting points. Significant sub-cycle lows were seen on March 13 (DOW and S&P 500) and March 11 (NASDAQ). An 8 - 9 day rally followed those lows, but it didn't get very far before the market turned sharply down again. Today's market sell-off (triggered by President Trump's tariff announcement) hurled these indices below the March 13 lows which further confirms the bearish trend in the current medium-term cycles. So what does this all mean? It means that these indices will fall lower until they reach the end of their medium-term cycles 2 - 12 weeks from now. Target prices for the cycle bottoms could be around 39,000 in the DOW and 5,200 for the S&P 500. (We are not too far from those levels, so we may see the end of these cycles sooner rather than later.) It's too late to short sell this market, so we will now wait for the final medium-term cycle bottoms for a possible spot to buy. The big question now is whether or not President Trump's tariffs will scare equities into a MAJOR longer-term sell-off. Today's plunge was severe, but recently Wall Street has been able to recover quickly from bad news. We shall have to wait and see how this plays out. We are still on the sidelines of this market. Not surprisingly, the panic sell-off in the broad stock market triggered an equally dramatic plunge in crude oil prices. Crude's medium-term cycle analysis was showing that a sub-cycle correction was imminent as prices were rising steeply into a resistance line around $72 (May contract chart) and we entered a general reversal zone (April 1 - April 8). I wrote in my blog last Thursday: "Crude is in a new medium-term cycle that began with the low of $64.85 early this month (March 5), and that low was also most likely the start of a longer-term (2 year) cycle. So far, this cycle looks bullish...Crude may be approaching a sub-cycle top and getting ready to take its first cycle correction. If this new cycle is indeed bullish, I plan on riding out any modest correction and staying long for at least several more weeks." Because this market's trend was bullish, I had planned to ride out any "minor" correction, but the tariff announcement has caused more than a minor dip. Crude dropped from yesterday's high near $72 to close today near $67. This puts us on alert for a more severe correction, but there is a support line at $66, and until prices break below the start of this cycle ($64.85), I am going to hold my long position in crude. Gold edged up to a new all-time high today ($3164), but it may be topping out and ready to roll over soon as we are in the center of a reversal zone. It is unclear at the moment if gold's current medium-term cycle is young or old, but either way, some sort of correction looks imminent, and we will wait for it before considering any trade. Unlike gold, today silver prices plummeted. It is late in silver's medium-term cycle, so this metal may be dropping into its final cycle bottom now. We should keep an eye out for a good buy spot which may come this week or next. We are currently on the sidelines of both gold and silver. |
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