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Trading Blog     Wednesday (night),  June 27,  2018

6/27/2018

 
GOLD TRADE ALERT and MARKETS UPDATE  (9:00 pm EST)

Today gold prices dropped to $1254 and silver broke below its May 1 low of $16.06 and made an intraday low at $15.98. This is a bearish warning for these metals. Since our gold stop loss was based on gold breaking below $1264 and silver breaching that $16.06 low, some traders may have sold their long positions in gold today. If not, they should place an order tonight to sell at tomorrow's market open (or just wait to sell early tomorrow). There is still a chance of a bounce here as today was the last day of the reversal zone, but that seems far less likely now. As I mentioned in yesterday's update, there is a good chance gold and silver are now aborting their massive bullish inverted "head and shoulders" chart formations and are therefore turning bearish. We should be out of both silver and gold now.

Today's dip in prices was triggered by a sudden surge in the U.S. Dollar Index to a new high of  95.29. We are just leaving a reversal zone for currencies (June 14 - 26), and it looks like we had two reversals in this period -a significant drop from last Wednesday's high and a strong bounce from this week's low on Monday- which is a bit unusual but demonstrates just how volatile markets are recently. Some precious metal analysts are speculating that a severe correction in the broad stock market looks imminent and that gold and silver prices could go down with it as they did in the 2008 - 2009 crash when frightened investors liquidated equities and commodities and fled to the perceived safety of the U.S. dollar. This scenario is quite possible, especially since the Federal Reserve's new chairman, Jerome Powell, seems to be considerably more hawkish than the the Fed's previous chairwoman Janet Yellen. We need to keep in mind, however, that gold (and silver) bottomed considerably ahead of equities in that crash, and gold prices rapidly shot back up from $700 to an all-time high of $1900 in less than three years. My point is that even if precious metals fall with equities again, they will be a very good buy at their bottom, especially when investors realize that equity markets won't be able to be coaxed back up by the lowering of interest rates (they are already low).

Speaking of a falling stock market, the broad stock market was down again today. We are now leaving our recent reversal zone for equities, and it looks like this market still wants to go lower. We are quite late in the medium-term cycles of the S&P 500 and NASDAQ and their bottoms are due soon. Unless this market reverses up right now, it looks like we could see the final bottoms in our next reversal zone coming up July 4 -13. We enter that time period next Wednesday so we won't have to wait long for another potential buy spot. We are already close to our suggested target bottom for the S&P 500 around 2,680. Unlike the S&P 500 and NASDAQ cycles, the DOW's normal medium-term cycle is not due to bottom soon, but it could easily contract and synchronize its bottom with the other two indices in this upcoming reversal period. We will look for that.  Still on the sidelines of this market.


Our long position in crude oil (entered on June 5) is doing extremely well. In Monday's blog I wrote:

"
The low at $63.40 (August contract chart) on June 18 appears to be the start of a new medium-term cycle in crude. Directional momentum in crude's chart is now 100% bullish so we should at least see a rally to test the last cycle high of $72.70 on May 22."

And indeed we are seeing that high tested today. It's a little too early in the cycle to see a significant top and correction (and we are not in a reversal zone) so I suspect prices will continue higher, perhaps after a brief dip (there is resistance around $72). If prices can clear the May 22 high, we could see them move to $75 or even higher. Holding my long position in crude oil.






Trading Blog       Tuesday,  June 26,  2018

6/26/2018

 
GOLD AND SILVER UPDATE  (1:00 pm EST)

Today gold prices are breaking below $1264, which is not a good sign, but silver remains above $16.06 so we still have a valid bullish divergence signal in this market, and we are still in a reversal zone for precious metals (it ends tomorrow). Both metals are also close to support levels, and the U.S. Dollar Index is looking at least short-term bearish. A rally in these metal prices is still possible, but it must start now as both gold and silver are close to breaking down from their massive inverted head and shoulder chart patterns (see
June 17 blog post). We currently have a small loss on our gold long position (about 2%), but our recent profits in silver and crude oil are more than making up for this. (We are out of silver but still long in crude). Conservative traders may want to unload gold long positions now, but I still think there is a chance of a rally which would allow us to sell our gold at a better price (or even a profit). Holding my long gold position for now. If silver drops below $16.06 or these metals move lower after Wednesday, we will sell our gold. Tight stop losses on any gold long positions would be appropriate at this juncture at any point below the current price to guard against a sudden price plunge.




Trading Blog         Monday (late night),  June 25,  2018

6/25/2018

 
MARKETS  UPDATE  (11:30 pm EST)

The broad stock market continues to fall steeply even as we near the end of the current reversal zone for equities on Tuesday (June 26). Today directional momentum in all three market indices (DOW, S&P 500, and NASDAQ) changed from mixed bullish and bearish to nearly 100% bearish. This is not a good sign for equities and may indicate a serious correction is underway. This market is being spooked by President Trump's ongoing "trade war" policies which are not likely to be going away any time soon. Even if this market's trend is turning bearish, however, we are still near the end of the current medium-term cycle (at least for the S&P 500 and NASDAQ) and in a strong reversal zone so we could see a bottom here and some sort of rally to follow. A good target for a bottom would be around 2,680 in the S&P 500. The DOW could fall as low as 23,500. Any new lows after Tuesday could mean trouble for this market and would keep us on the sidelines. On the other hand, if one or two (but not all three) market indices make new lows for the year, we could have a strong bullish divergence signal to buy. Still on the sidelines.

The reversal zone for precious metals ends on Wednesday. Gold and silver need to start rallying soon if this reversal is going to be valid. Both metals (especially silver) seem to be holding up but are still in danger of breaking support levels that we don't want to see breached ($1264 in gold and $16.06 in silver). Lower prices after Wednesday would also be a bearish sign. A bullish divergence signal from last week is still in effect until silver breaks below $16.06. We are out of silver but still holding our long position in gold.

Our crude oil long positions are looking good. The low at $63.40 (August contract chart) on June 18 appears to be the start of a new medium-term cycle in crude. Directional momentum in crude's chart is now 100% bullish so we should at least see a rally to test the last cycle high of $72.70 on May 22. How high this rally goes will determine the longer-term trend in crude. Holding my long position in crude oil.





Trading Blog              Friday,  June 22,  2018

6/21/2018

 
MARKETS  UPDATE  (1:45 am EST)

I will be unable to post any blogs today (Friday) as I will be traveling so I am giving a brief update of the markets early this morning.

Precious metal prices have moved lower this week, but gold is still closing above $1264 while silver remains above its $16.06 low, and we still have intermarket bearish divergence as we move into the center of the current reversal zone for these metals (it ends next Wednesday). Both metals may be ready to reverse up now. We are out of silver, but let's hold our long position in gold until we see prices close below $1264 and silver break below $16.06.

The broad stock market continues to drop as we move into the end of the current reversal zone for equities. This market is falling steeply, but it still has time to move lower before the reversal period ends next Tuesday. We are still waiting for signs of a bottom to go long. On the sidelines for now.

Crude oil prices are rising this week and also staying above Monday's low of $63.40 (Aug. contract chart). We are hoping that was the start of a new medium-term cycle (it was in a reversal zone). If so, this rally should continue and possibly challenge that $72.70 high from May 22. Let's keep our stop loss for our long position in crude on a close below Monday's low. Holding my long position here.




Trading Blog           Tuesday,  June 19,  2018

6/19/2018

 
BRIEF COMMENT ON THE BROAD STOCK MARKET  (12:30 pm EST)

It appears that U.S./China "trade wars" are spooking equity markets and pushing the DOW, S&P 500 and NASDAQ indices down into this week's reversal zone. It's very possible that the medium-term cycles in the S&P 500 and NASDAQ topped out last week and are now falling to their final cycle bottoms. If so, we could see more steep plunging for the rest of the week and even into early next week.
 That seems to be the pattern unfolding, but because this reversal zone extends into next Tuesday, there is still time for the market to rally some more and make a new top before the reversal period ends. We will have to wait and see how these indices move into the end of the week. As I stated in Sunday's blog, new highs would give us a good shorting opportunity, but more than likely we will be looking to buy at the bottom of these cycles this week or early next week. Still on the sidelines of the broad stock market.




Trading Blog          Monday,  June 18,  2018

6/18/2018

 
CRUDE OIL UPDATE  (2:30 pm EST)

Crude oil
seems to be rebounding from last night's low of $63.59 and is closing the day around $65.80 (July contract chart). This is a bullish sign. We entered the current reversal zone for crude (June 15 - 26) on Friday so Sunday's low could be the final medium-term cycle low. There is still time for it to go lower (through Tuesday next week), however, so we will still keep a close eye on our stop loss point which we can now move down to $63.59.  Holding my long position in crude.



​

Trading Blog     Sunday (late night),  June 17,  2018

6/17/2018

 
MARKETS UPDATE and IMPORTANT UPDATE ON PRECIOUS METALS  (11:30 pm EST)

Friday's strong rally in the U.S. dollar and plunge in gold and silver prices was a potentially serious development that could alter our recent bullish view of these precious metals. As readers may recall, I recently discussed the fact that both gold and silver charts are showing the near completion of giant inverted "head and shoulders" chart patterns that have been forming since 2013 (see blog on gold and silver from April 30). While this is a strong bullish pattern, like all chart patterns, it can abort. Last week's drop in gold and silver is taking prices close to important support levels that, if broken, could lead to those head and shoulders formations aborting. We really don't want to see gold break and close below $1264 or silver break and close below $15.60.
​
Fortunately, we took profits in our silver long positions just before prices fell, but we are still holding long positions in gold. Although there now seems to be an increasing danger of those head and shoulders patterns aborting, they don't have to, and if they hold, our bullish view of the precious metals will remain intact. Next week is a strong reversal zone for precious metals so we may be near a bottom, and a reversal back up in prices may be imminent. As I mentioned on Friday, we also have a strong intermarket bullish divergence signal until silver breaks below its $16.06 low from May 1.  I am going to hold my gold long position for now with a stop loss on a close below $1264, especially if silver moves below $16.06.

What could be the cause of this sudden turnaround in the precious metals? Well, there are some analysts speculating that we could now be on the verge of a giant selloff in many markets, especially equity markets, very similar to the "crash" of 2008 -2009 when frightened investors liquidated commodities and equities and fled to the U.S. dollar for safety. Because the new Federal Reserve chairman Jerome Powell appears to be more hawkish than the previous chairwoman Janet Yellen, investors could see this as a signal to liquidate risky assets and buy U.S. dollars. This is all pure speculation, of course, and we will have to wait and see how this plays out. We note, however, that our cycle analysis of the broad stock market is warning us of a severe correction that could be coming later this year or early next year.

Speaking of the broad stock market, last Monday I wrote:

"...the DOW and S&P 500...will likely be rallying into next week's reversal zone (June 15 - 26)... If equities take a minor dip this week, we may consider going long for a short-term rally into the target areas [25,500 - 26,200 in the DOW and 2,800 - 2,900 in the S&P 500]..."

​Well, equities did take a dip - right into Friday. This opens up the possibility of a low forming in next week's reversal zone instead of a high. As I mentioned last week, the S&P 500 and NASDAQ are both late in their medium-term-cycles and are due to top out and fall to their final cycle bottoms any time now. It's possible one or both could have topped out last week and will fall steeply this week. If so, we will wait for the bottom to buy. It is also possible we could see one or two (but not all three) indices (DOW, S&P 500, NASDAQ) make a new high next week for a case of intermarket bearish divergence in a strong reversal zone. If that happens, we will look to sell short for a steep correction to the cycle bottom.  Stay tuned for trade alerts next week. On the sidelines for now.

We are still long in crude oil based on the idea that a cycle bottom occurred on June 5 at $64.22 (July contract chart). Tonight (Sunday - weekend market) it appears that crude prices are dropping a bit below that low so it looks like the cycle bottom may not have been on June 5 and will form in next week's reversal zone or crude is making a double bottom here (which would be a bullish signal). Because our stop loss is based on a close below $64.22, we may need to bail out of our long position tomorrow (Monday) if it closes significantly below there. There are some strong technical signals suggesting a reversal in crude early next week so I am a bit reluctant to abandon this long position too soon. Holding my long position for now.






Trading Blog            Friday,  June 15,  2018

6/15/2018

 
UPDATE ON GOLD and SILVER  (2:30 pm EST)

It looks like gold and silver are having a delayed reaction to yesterday's strong surge in the U.S. dollar. Both metals plunged dramatically today. Fortunately, we got out of our silver longs on Tuesday, but we remained long in gold with  the idea that the low of $1282 on May 21 was the start of a new medium-term cycle that was bullish. Today gold broke below $1282 so it is likely completing the final bottom of an older cycle. That's the bad news for our long position. The good news is that we are now entering another strong reversal zone for the precious metals next week so it is very likely this older cycle will bottom then. The fact that silver is still above the start of its May 1 cycle bottom of $16.06 creates a strong bullish divergence signal and further supports the idea of a bottom and reversal next week.
I am going to hold my long position in gold for now as we still haven't broken our stop loss parameter of both gold breaking below $1282 and silver breaking below $16.13 and especially $16.07.

I will comment more on the precious metals and other markets this week-end. 




Trading Blog          Thursday,  June 14,  2018

6/14/2018

 
COMMENT ON TODAY'S DOLLAR RALLY  (3:30 pm EST)

It looks like the Fed's hawkish policy announcements yesterday (another interest rate hike and an intention to increase the number of expected hikes this year from three to four) gave a huge shot in the arm to the U.S. Dollar Index today. The dollar soared from 93.5 to 94.76 and is now closing the "gap down" space from its previous high on May 29 which had left a "bearish island reversal" chart pattern earlier this month. That bearish signal will be negated if the dollar can clear 95. The current medium-term dollar cycle is still relatively young and could still be bullish, at least short-term, so this is quite possible.

Curiously, despite today's dollar rally, gold and silver also rallied strongly. Precious metals and the dollar normally move in opposite directions, but under some market conditions they can move in tandem. It appears that the new Federal Reserve chairman Jerome Powell is setting a more "hawkish" tone in Fed policy than the previous chairwoman Janet Yellen (often perceived as "dovish"). Investors will interpret a hawkish Fed as being more fiscally responsible (especially after such a long period of accommodative monetary policy - i.e. ZIRP,  QE) and this makes the U.S. dollar a more appealing investment. When equity markets appear to be volatile and dangerous, gold, silver, and the U.S. dollar could all be perceived as "safe haven" investments. Under these conditions, precious metals and the dollar could rise together. We will keep this in mind going forward as we watch both markets.





Trading Blog        Wednesday,  June 13,  2018

6/13/2018

 
BRIEF COMMENT ON THE FED'S INTEREST RATE HIKE (4:30 pm EST)

Today the Fed announced another interest rate hike and also signaled that there will be four hikes this year rather than the previously expected three. Although the rate hike was expected, equity markets reacted negatively to these announcements near the end of the day with the DOW dropping 119 points after 3:00 pm. We will see over the next few days if this will be just a temporary dip or if spooked markets decide to sell off. A dip down to around 25,000 in the DOW may be a good spot to go long for a potential rally into next week's reversal zone. If the DOW breaks significantly lower than that, we could see a bottom in the reversal zone instead of a top.




​

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