Blog Archives

Trading Blog Monday, May 24, 2021

5/24/2021

MARKETS UPDATE (3:30 pm EDST)

We are now approaching the center of our reversal zone for equities (May 21 - June 1). All three market indices (DOW, S&P 500, NASDAQ) are continuing their rallies today with each making new weekly highs. What we want to look for now is for one or two of these indices, but not all three, to make a new all-time high. Right now the S&P 500 is very close to doing this, the DOW is not too far away, but the NASDAQ has to cross some distance (and resistance) to break its all-time high. If we see the DOW and/or S&P 500 make new all-time highs this week or early next week without the NASDAQ, that will be a strong bearish divergence signal and another opportunity to sell this market short. We are still on the sidelines of the broad stock market, but looking to sell short soon.

We are still in a reversal zone specifically for the precious metals (May 17 - 26) that ends this Wednesday. Silver most likely made its top last Tuesday at $28.65, but gold looks like it wants to go higher than its high of $1887 from last Wednesday. If gold makes a new weekly high this week without silver, that would be a strong intermarket bearish divergence signal which could easily be followed by a sharp correction down by both metals into our ideal corrective targets (now between $1790 - $1840 for gold and $24 - $27 for silver). We will watch for buy spots in these ranges over the next week or two. On the sidelines of both metals for now.

Crude oil most likely made a sub-cycle low on Friday at $61.56 (July contract chart). Prices rallied sharply from there today. This abrupt jump from a low in only the first day of crude's reversal zone (May 21 - June 1) has taken us by surprise. Because prices are already nearly back up to last week's high, it's a bit late to buy. A strong rally this week and/or next, however, could lead to another sub-cycle peak and sharp correction which might give us a better spot to go long. We are anticipating prices to eventually get at least up to $75. Still on the sidelines of crude oil.

Trading Blog Thursday, May 20, 2021

5/20/2021

MARKETS UPDATE (2:30 pm EDST)

The broad stock market seems to be recovering today (at the time of this writing) from yesterday's dip, which was likely a temporary scare from a bit of hawkish rhetoric in the recent Fed meeting minutes released yesterday. We still seem to be on track for a rally into our next reversal zone (May 21 - June 1), so we will look for a cycle peak in that time frame (unless this market takes another dive tomorrow). Only the NASDAQ has made a new weekly high so far this week, which does give us an intermarket bearish divergence signal unless the DOW and S&P 500 also make new highs today or tomorrow (they are both close). We will remain on the sidelines of this market for now.

We are now at the center of a reversal zone specifically for the precious metals (May 17 - 25). Both gold and silver prices have been rising into this time frame, so we are watching for a peak and imminent correction. This may have already happened with silver's peak at $28.65 on Tuesday, and gold's peak yesterday at $1887, but prices haven't fallen far enough for us to buy (yet). Let's wait and see if they can go lower for a better spot to go long. We would like to see gold go at least to the $1800 level and silver probably somewhere in the $26 - $27 range. Still on the sidelines of gold and silver.

The U.S. Dollar Index is currently testing a strong support level around 90. As I have mentioned in recent blogs, a clear and strong break below there could spell trouble for the greenback. We are watching this carefully as a bearish shift in the dollar could be bullish for the precious metals. We are now and next week in the midst.of several overlapping reversal zones, so unless the dollar breaks down severely here, there is a good chance of a bounce and recovery from this 90 area of support.

After making a new weekly high on Tuesday, crude oil prices have been falling steeply. It appears crude is taking a more severe sub-cycle correction than we had anticipated. We enter a reversal zone specifically for crude tomorrow (May 21 - June 1, same as for equities). It looks like we could see a corrective bottom happen in this time frame. If so, it could be an excellent buy spot (as long as it doesn't go TOO low). We will watch for this next week. Currently on the sidelines of crude oil.

Trading Blog Wednesday, May 19, 2021

5/19/2021

BRIEF BROAD STOCK MARKET UPDATE (5:00 pm EDST)

The broad stock market was spooked today as the minutes from the last Fed meeting were released. They showed Fed officials debating inflation risk as well as discussing the future tapering of current QE policy (oops...I'm not supposed to say "quantitative easing "...sorry about that). The DOW actually made a new weekly low. That low may replace last week's sub-cycle bottom OR it may continue lower into the upcoming reversal zone (May 21 - June 1). All three indices (DOW, S&P 500, NASDAQ) recovered sharply from their early day plunges, however, so we may see them resume their rally from here. If not, we will have to abandon our short-term bullish outlook. Still on the sidelines of this market and waiting for clear signals of an imminent MAJOR downward correction in equities.

Trading Blog Monday, May 17, 2021

5/17/2021

MARKETS UPDATE (3:30 pm EDST)

Right now it looks like the DOW could be either a young medium-term cycle or an older medium-term cycle ready to move down to its final bottom. If it is an older cycle, it most likely made its final top with last Monday's all-time high at 35,091 and has started its final descent to the cycle bottom (due sometime over the next several weeks). But the DOW's cycle could also be young (11 weeks). That would be more bullish, and we could see last Monday's high tested or even significantly exceeded before the final top is in. I am favoring this bullish view at the moment. Our next strong reversal zone is coming up at the end of this week (May 21 - June 1), so we probably won't have to wait long to see which scenario - bullish or bearish - is going to unfold. Let's watch for a rally into this time frame and also for intermarket bearish divergence signals (i.e. one or two of our major market indices - DOW, S&P 500, NASDAQ - making new all-time highs, but NOT ALL THREE), which could be another opportunity to sell short. If this does turn out to be an older cycle, however, we could instead see a final cycle bottom in this upcoming reversal zone (and a possible spot to buy).

Unlike the DOW, it seems fairly clear that the S&P 500 and NASDAQ are both young cycles (11 weeks). Both these indices made significant sub-cycle lows last Wednesday and are rallying from there. The S&P 500 is close to testing or exceeding its all-time high of 4,238 from May 7, but the NASDAQ has a lot more distance (and resistance) to overcome before exceeding its all-time high of 14,207 from April 29. Of course, if the S&P 500 and/or DOW exceed their highs without the NASDAQ in our upcoming reversal zone (May 21 - June 1), that would give us a very strong intermarket bearish divergence and another good opportunity to short this market.

It's important for us to remember that our main concern for the rest of this month and into June (and possibly July) is to identify a long-term cycle peak from which a potentially very severe correction in the broad stock market could follow. And yes, this could be the "big one". The minimal correction we are expecting would be about 10%, but there is a possibility of a much more severe drop of 70% or even more by 2023 - 2024. This is why we are focusing now on calling this top and selling short. Any traders uncomfortable with short selling should obviously be looking to get out of equity markets soon.

We are now on the sidelines of the broad stock market.

In my last post on precious metals (May 9) I wrote:

"There is a good chance that gold will rally strongly now to at least the $1900 level and possibly even to test or exceed the all-time high of $2070 from last year. This means we should be looking to buy any significant corrective lows. Prices are now approaching the $1850 level where there is considerable resistance. Perhaps we'll see a turn back from there with a corrective dip to buy....Silver is also looking very bullish right now, but there is still a chance prices could make a short-term corrective sub-cycle drop to the $25 area. That would be a good buy spot if it happens."

Well, both metals did drop down a bit last week, but not enough to make me want to buy. Prices are rising again and making new highs today. Did we miss an opportunity to buy? Maybe. But we are now entering a reversal zone specifically for precious metals (May 17 - 26), and this reversal zone also overlaps with our reversal zone for equities coming up Friday (May 21 - June 1). The point here is that if gold and silver rally strongly into either one of these reversal zones, there is a good chance of a significant top forming and then a subsequent correction down. That might give us another chance to buy. We will continue to watch both metals for significant corrections. Still on the sidelines of gold and silver.

As I mentioned in my last post on the longer-term situation of the the U.S. Dollar Index (see April 20), the greenback could turn very bearish if it breaks clearly and significantly below the 90 level. This index has been declining thorough April, and this month it is finding support at 90. We need to watch this carefully now. As we are now entering a reversal zone for the precious metals and later this week one for equities, there's a good chance this support will hold and the dollar could start rallying again. That would help push gold and silver prices back down if it happens. We will watch for this.

In my last post on crude oil (May 9) I wrote:

"Last week's low at $63.90 may have been it's first sub-cycle dip, but it only lasted two days, which is a bit short for a significant sub-cycle correction. That means it could push lower this week. If it does, we may look to buy as this cycle is young and looks to be quite bullish. An eventual price target of $75 is not out of the question."

Crude did push a bit lower last week (to $63.09 on Thursday - June contract chart), but we did not buy. Prices are rallying today, so it looks like Thursday was likely the sub-cycle low. I am reluctant to chase this rally now because there is some resistance around $67, and we will be entering a reversal zone specifically for crude on Friday (May 21 - June 1, same as for equities). This suggests that the rally may not get that far before turning back down again (unless it takes off strongly this week). Let's stay on the sidelines of crude for now.

Trading Blog Thursday (late night), May 14, 2021

5/13/2021

BROAD STOCK MARKET UPDATE (11:30 pm EDST)

The broad stock market took another dive yesterday, but then recovered a bit today. Even though the DOW broke below 34,000 yesterday, today it closed above that line. The S&P 500 is holding above 4,000, and the NASDAQ is finding support above 13,000. So far, so good in terms of our favored bullish view of this market (i.e. possibly rallying into the end of the month for a final cycle top). But equities are quite volatile now. If these indices turn south tomorrow and close below these support levels, we may have to change our bullish view and consider the possibility that the broad stock market is starting a major correction now. We are now on the sidelines of this market.

Trading Blog Tuesday, May 11, 2021

5/11/2021

BROAD STOCK MARKET TRADE ALERT (3:00 pm EDST)

The DOW and S&P 500 have now dropped into our target ranges. We can now comfortably cover (unload) our short positions in these indices with very little or no loss as they are now close to (DOW) or below (S&P 500) our April 26 entry points. Our NASDAQ short position has gained even more profit with today's broad stock market plunge and is also in a good position to cover.

Although the DOW and S&P 500 may be taking a short-term dip today, the NASDAQ's drop looks more severe (although it is recovering as I write this), and there is a possibility we may be seeing the start of a major correction in all three indices. If the DOW breaks clearly below 34,000 and the S&P 500 breaks below 4,000, we will have to consider that possibility. The NASDAQ breaking below 12,397 (the start of its medium-term cycle on March 5) would also be a very strong signal that the market is turning bearish.

For now, we will go with the idea that today's drop represents a short-term dip and that all three indices could be pushing higher into the end of this month, with the final tops still ahead of us. With this in mind, we will cover (unload) all short positions in our three indices (DOW, S&P 500, NASDAQ) today, with a profit in two (NASDAQ and S&P 500) and slight loss in one (DOW).

*** Please note that bailing out of these short positions does not mean the broad stock market is out of the woods or is not in danger of a SEVERE correction now. But severe corrections are often preceded by "blow-off" tops, and we do not want to be short if that happens. It is very tricky to call the top of a major correction, and we have to be flexible and nimble in our trading. We are expecting a severe correction to start soon. If it doesn't start now, the next best time for a final top will be coming up at the end of this month or possibly into the end of June. ***

Trading Blog Monday, May 10, 2021

5/10/2021

BROAD STOCK MARKET UPDATE (4:30 pm EDST)

In yesterday's blog on the DOW I wrote:

"Let's watch for a short-term correction from a top early this week as an opportunity to cover any short positions in the DOW. A good target range would be around 34,000 - 34,200, which would take us close to our entry point from April 26 and give us a chance to exit with very little or no loss."

It looks like the DOW could be putting in a top today as it made a new all-time high around mid-day (gaining 300 points) and then fell into the end of the day, losing all of that early gain and closing in the red. That is very bearish behavior and suggests the DOW will go lower tomorrow. We will wait and see if it can get down into our target range over the next few days. The S&P 500 dropped and closed below 4,200, which brings our short trade in this index to a break-even point. We will probably cover (unload) this position tomorrow if it drops a bit more.

The NASDAQ took a major dive today and is making a new low below last week's 13,439 bottom. It also closed below its 45-day moving average. That's a bearish sign. It looks like instead of last week, we may get a sub-cycle low this week. A rise back above the 45-day moving average would support this idea. Any short trade on the NASDAQ from April 26 now has a profit of about 5%. We will consider covering and taking profits on this trade tomorrow.

We are still short in all three indices, but we are ready to cover any of these positions over the next day or two.

Trading Blog Sunday (late night), May 9, 2021

5/9/2021

MARKETS UPDATE (11:30 pm EDST)

As I mentioned in my last blog, the cycle pattern of the DOW is a bit ambiguous right now, and the medium-term cycles of the S&P 500 and NASDAQ are more clear. Regardless of the cycle pattern, the DOW could be making a significant top now, and especially early this week as there is a minor potential reversal pivot point in effect through Wednesday. Both the DOW and S&P 500 made new all-time highs last week without the NASDAQ, and that intermarket bearish divergence signal continues this week - until the NASDAQ exceeds its all-time high (14,207 from April 29). Let's watch for a short-term correction from a top early this week as an opportunity to cover any short positions in the DOW. A good target range would be around 34,000 - 34,200, which would take us close to our entry point from April 26 and give us a chance to exit with very little or no loss. It's true that we are looking for a "final" top in the current cycle to sell short for a very severe longer-term correction in this market, but right now it's looking like the DOW could go significantly higher before that final top is in. Sometimes a very serious correction is preceded by a "blow-off" top where prices rally quickly and steeply before they plummet down. This kind of volatility makes it difficult to call the exact top. There is a possibility now of the DOW getting as high as 37,000 before it turns down for a serious correction.That is why we are looking to cover our current short position this week.

We will also look to cover our short position in the S&P 500 if this index drops below 4,200 from any high early in the week. This is close to our entry point which should negate any loss on the trade. The NASDAQ most likely made a sub-cycle low last Thursday and looks poised to rally from there, possibly to a new all-time high (or at least a double-top to the 14,207 all-time high on April 29). Nevertheless, this index could also make a short-term dip from a high early this week. As with the other two indices, we will watch for that as an opportunity to cover our short short position. Unlike our short positions in the DOW and S&P 500, our short NASDAQ trade is not "in the red" and has a profit. We may therefore just cover (exit) that position tomorrow and not wait for any dip later in the week.

Still holding short positions in all three indices, but be ready for trade alerts this week.

Gold and silver were VERY bullish last week and did not drop down to the corrective targets we were hoping to see.
There is a good chance that gold will rally strongly now to at least the $1900 level and possibly even to test or exceed the all-time high of $2070 from last year. This means we should be looking to buy any significant corrective lows. Prices are now approaching the $1850 level where there is considerable resistance. Perhaps we'll see a turn back from there with a corrective dip to buy.

Silver is also looking very bullish right now, but there is still a chance prices could make a short-term corrective sub-cycle drop to the $25 area. That would be a good buy spot if it happens.

We are still on the sidelines of both metals and looking for buying opportunities.

As I stated in my last blog on crude oil, it appears that crude started a new medium-term cycle with its $57.29 low on March 23 (June contract chart). Last week's low at $63.90 may have been it's first sub-cycle dip, but it only lasted two days, which is a bit short for a significant sub-cycle correction. That means it could push lower this week. If it does, we may look to buy as this cycle is young and looks to be quite bullish. An eventual price target of $75 is not out of the question. We are on the sidelines of crude for now,

Trading Blog Thursday (late night), May 6, 2021

5/6/2021

BROAD STOCK MARKET UPDATE (11:30 pm EDST)

The DOW has finally made a new all-time high this week...BUT...the S&P 500 and NASDAQ don't seem to be sharing the DOW's bullish enthusiasm, at least not yet. In Tuesday's blog I wrote:

"Even if the DOW pushes to a new all-time high over the next day or two (it is close and, unlike the S&P 500 and NASDAQ, it seems reluctant to fall), we will still have bearish divergence as long as the S&P 500 and NASDAQ do not make new all-time highs"

Both the NASDAQ and S&P 500 did not make new highs today, so the bearish divergence continues. The S&P 500 is close to a new all-time high, but the NASDAQ is well below its all-time high and would have to jump over 500 points tomorrow to exceed that high (unlikely). We will have to wait until next week to see if our bearish divergence signal. will be negated. The cycle pattern in the DOW is a little unclear now, but the S&P 500 and especially the NASDAQ have likely started sub-cycle corrections from their April 29 highs, and both could go lower.

Anyone who has shorted the NASDAQ has a gain as it has fallen about 500 points from our short trade on April 26. Our short position (from April 26) in the DOW is now a little over a 1% loss. Our S&P short (also from April 26) is about break-even. Traders may cover (unload) any of these indices based on their loss tolerance.

I still think there's a good chance that the S&P 500 and NASDAQ will go lower and the DOW will follow. I am therefore holding my short positions in all three indices for now.

Trading Blog Tuesday, May 4, 2021

5/4/2021

MARKETS UPDATE (4:30 pm EDST)

It appears that the S&P 500 and NASDAQ made significant all-time highs last Thursday and are now in the process of making some sort of correction. The DOW, however, did not make a new all-time high last week, and although it did make a new weekly high yesterday, it is still below its all-time high of 34,257 from April 16. We therefore still have a bearish divergence signal between the DOW and the other two indices. Even if the DOW pushes to a new all-time high over the next day or two (it is close and, unlike the S&P 500 and NASDAQ, it seems reluctant to fall), we will still have bearish divergence as long as the S&P 500 and NASDAQ do not make new all-time highs.

So far, our short position in the broad stock market looks good, especially if you sold short the NASDAQ, which is falling steeply. If you shorted the DOW, a correction may be forthcoming as all three indices will almost always take significant corrections together. One's stop loss on any short DOW position COULD be based on this index making a new all-time high (i.e. closing above 34,257), but unless the S&P 500 and NASDAQ start to rally strongly and make new highs, I would hold my short position in the DOW for now. We will hold our short positions in the broad stock market today.

It is now more certain that gold did start a new medium-term cycle with its low of $1677 on March 8. This means it is a young cycle and could be quite bullish now. Our strategy here will be to wait for a significant sub-cycle correction to buy. Last Thursday's dip may have been one already, but if prices start falling below that low ($1759) this week, we may see a buying opportunity in the $1700 - $1740 range. Still on the sidelines of gold.

Silver is also most likely in a new medium-term cycle that started on March 31 (at $23.80) and is bullish. As with gold, we will now look for corrective declines to buy. Silver made a new weekly high today while gold did not. This bearish divergence may mean a correction is imminent. A drop to the $25 area could give us a buying opportunity. Let's stay on the sidelines of silver for now.

Crude oil most likely started a new medium-term cycle on March 23 at $57.29 (June contract chart). Today it is making a new high for this cycle at $65.84. As with the precious metals, we will stay out of this market until we see a significant correction that gives us a good buy spot. That could come this week or next as a sub-cycle low is now due. A peak this late in the first sub-cycle indicates this market is bullish. We will remain on the sidelines for now.

Archives

LEGAL and DISCLAIMER