MARKETS UPDATE (11:30 pm EDT)
It's most likely the DOW and S&P 500 started new medium-term cycles with their lows on April 7. Both indices rallied from there to highs on May 19 and then corrected modestly down 4 days to last Friday's lows, testing their 15-day moving averages on the last trading day of our strong reversal zone. Today they both shot back up and closed above those moving averages. Friday's low was most likely the first significant sub-cycle correction in the medium-term cycle, which seems to be bullish. The next significant reversal zone is coming up in two weeks (June 13 - 23), so we can anticipate a rally into that time frame that should soon exceed those May 19 highs and possibly test the all-time highs of both indices. This is why I entered a long DOW position earlier today (see trade alert below). Yes, the broad stock market looks bullish now, but we have to be on guard as the market could turn down again. April 7 could have been the start of a new 3-year cycle in the broad stock market, but until that is confirmed, there is the danger of another steep correction before the year is over.
Gold's medium-term cycle is still unclear. Last Monday I wrote:
"If prices fall to a new low this week closer to $3100 inside this current reversal zone, I will take profits in my short gold position. If they edge up, however, we could instead see an isolated high (top) and another reversal back down to new lows."
Prices didn't fall but did edge up to an isolated high on May 23 - the last trading day of a reversal zone for the precious metals - and then edged back down yesterday and today. I am still looking for a deeper longer-term cycle correction to the $3000 level, or even a bit lower before we see gold rally to a new all-time high. For now, I am holding my short position in gold, but if prices rally back up and close above $3400, I may cover this short position.
Silver most likely started a new medium-term cycle on April 7 (at $28.56). After a two week steep rise from that low, prices stabilized and now seem to be caught in a congestion zone between $32 and $33.50. It's not yet clear if this cycle is bullish or bearish, but last Thursday's high was in a reversal zone (now ended), so a significant correction down could be in progress. The depth of any sub-cycle correction may tell us the trend and whether prices are headed lower or higher. For now we are staying on the sidelines of silver.
Crude oil's medium-term cycle is not clear. If it started on March 5, the cycle is bearish and prices are headed lower. But if a new cycle started on April 9 with the deep low at $54.33 (July contract price), prices could be ready to rally significantly. Last week's isolated high ($64.19) was at the dead center of a strong reversal zone which suggests prices could continue lower, supporting the bearish view. I am staying on the sidelines of crude until we have more clarity on the cycle labeling.
It's most likely the DOW and S&P 500 started new medium-term cycles with their lows on April 7. Both indices rallied from there to highs on May 19 and then corrected modestly down 4 days to last Friday's lows, testing their 15-day moving averages on the last trading day of our strong reversal zone. Today they both shot back up and closed above those moving averages. Friday's low was most likely the first significant sub-cycle correction in the medium-term cycle, which seems to be bullish. The next significant reversal zone is coming up in two weeks (June 13 - 23), so we can anticipate a rally into that time frame that should soon exceed those May 19 highs and possibly test the all-time highs of both indices. This is why I entered a long DOW position earlier today (see trade alert below). Yes, the broad stock market looks bullish now, but we have to be on guard as the market could turn down again. April 7 could have been the start of a new 3-year cycle in the broad stock market, but until that is confirmed, there is the danger of another steep correction before the year is over.
Gold's medium-term cycle is still unclear. Last Monday I wrote:
"If prices fall to a new low this week closer to $3100 inside this current reversal zone, I will take profits in my short gold position. If they edge up, however, we could instead see an isolated high (top) and another reversal back down to new lows."
Prices didn't fall but did edge up to an isolated high on May 23 - the last trading day of a reversal zone for the precious metals - and then edged back down yesterday and today. I am still looking for a deeper longer-term cycle correction to the $3000 level, or even a bit lower before we see gold rally to a new all-time high. For now, I am holding my short position in gold, but if prices rally back up and close above $3400, I may cover this short position.
Silver most likely started a new medium-term cycle on April 7 (at $28.56). After a two week steep rise from that low, prices stabilized and now seem to be caught in a congestion zone between $32 and $33.50. It's not yet clear if this cycle is bullish or bearish, but last Thursday's high was in a reversal zone (now ended), so a significant correction down could be in progress. The depth of any sub-cycle correction may tell us the trend and whether prices are headed lower or higher. For now we are staying on the sidelines of silver.
Crude oil's medium-term cycle is not clear. If it started on March 5, the cycle is bearish and prices are headed lower. But if a new cycle started on April 9 with the deep low at $54.33 (July contract price), prices could be ready to rally significantly. Last week's isolated high ($64.19) was at the dead center of a strong reversal zone which suggests prices could continue lower, supporting the bearish view. I am staying on the sidelines of crude until we have more clarity on the cycle labeling.
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