Yesterday was Memorial Day in the U.S. and equity markets were closed.
We are now at the center of a strong reversal zone for equities, but the window for this reversal can extend into this Friday (and possibly even into June 8). The broad stock market has been rising so we should be looking for a top to sell short for a significant correction to the bottom of the current medium-term cycle, especially in the S&P 500. (The DOW's cycle may have bottomed already on May 19 at 17,331.) A good sell signal to see this week would be a case of intermarket bearish divergence between the DOW and S&P 500 where one takes out its yearly high, but not both Those highs would be 18,167 in the DOW and 2,111 in the S&P 500. That could happen early this week as the S&P 500 is now close to its high (it closed last week at 2,099). If both indices take out their highs, we could see more rallying and possibly a top forming closer to June 3 - 8. This Friday's jobs report may be a decisive factor for these markets as the Fed has recently been talking up the idea of raising interest rates soon. Good employment figures would support this idea and could trigger a selloff in equities. On the other hand, disappointing job numbers might ease investor's fears of an imminent rate hike and encourage buying. On the sidelines of the broad stock market for now.
Gold and silver prices both fell steeply last week with gold breaking below an important support at $1,210 (which may be a bearish sign). This week's reversal zone is also applicable to the precious metals market, but we have to be careful here because there are signs that these metals could push lower. If the Fed keeps talking up an interest rate hike, and this week's jobs data supports that, then the U.S. Dollar Index could push higher and put more downward pressure on gold and silver prices. The cycle patterns for these metals are again looking very ambiguous with several possibilities for a bullish or bearish interpretation (i.e. not very helpful at the moment). If gold or silver (but not both) breaks below its low from last week (intermarket bullish divergence), then we may have a good signal to buy in this reversal zone. If they both make new lows, however, we may want to hold off buying as there is a possibility of prices falling into late June before reaching a bottom. Stay tuned as next week may clarify our options for trading this market. Out of gold and silver for now.
We entered a short position in crude oil last week with the hope that Thursday's $50.21 price was the top of a medium-term cycle that will now begin a significant correction to at least the $43 -$44 level. The current reversal zone is very significant for crude, and because it could extend into the end of the week, we might see crude prices edge higher this week before reversing. We will try and maintain a stop loss for our trade at $51, but I may allow for a higher price if it looks like the reversal is imminent. Holding my short position in crude oil.