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Trading Blog Thursday, June 27, 2019

6/27/2019

GOLD AND SILVER TRADE ALERT (2:30 pm EDST)

We have been waiting for a good buy spot in the precious metals, and it looks like we may have that today. Gold prices have been backing down from last week's high of $1437, and they seem to finding strong support just above $1400. There are also some short-term technical signals suggesting the possibility of a strong rally that could start early next week in both metals. Silver seems to be finding support around $15.20 and also looks set to rally. Let's go long in both metals now with close stop loss points, say at $1370 in gold and $14.90 in silver.

(Note - the technical signals suggesting a rally now have a 75% likelihood; there is also a 25% chance of a steep drop in prices instead. Therefore pay close attention to the stop loss points given above.)

Trading Blog Tuesday, June 25, 2019

6/25/2019

BRIEF UPDATE ON BROAD STOCK MARKET AND PRECIOUS METALS (2:15 pm EDST)

Leave it to the Fed to kick start a corrective dip in equities just when you need one. Today Fed chairman Jerome Powell suggested that an interest rate cut in July may not be a done deal. Because many Wall Street analysts have been expecting one, especially as there was no cut in June, the broad stock market is reacting to Powell's hawkish tone with a dive. Will this "dip" be significant? We hope so as we sold equity markets short last Friday in anticipation of a steep (but likely brief) correction. Let's see if it can follow through to our target areas (around 26,100 in the DOW and 2,850 in the S&P 500). Holding my short position in the broad stock market.

Gold continued its price rally yesterday and today and made a new high at $1437 today before backing down a bit. Silver prices have been rising too, but not so strongly, and silver did not make a new high today. Thus we have a bearish divergence signal, which could mean a corrective dip is imminent. As I mentioned in Sunday's blog, we are waiting for a dip to buy in both metals. Stay tuned. Still on the sidelines of gold and silver.

Trading Blog Sunday (late night), June 23, 2019

6/23/2019

MARKETS UPDATE (11:30 pm EDST)

*CORRECTION* : In last week's blogs I stated that the DOW was making new all-time highs. That was incorrect. The DOW exceeded its April 23 high of 26,695, but stayed below its all-time high of 26,951 from Oct. 3, 2018. The S&P 500, however, did make a new all-time high (without the DOW or NASDAQ) so we still have a case of intermarket bearish divergence (until the DOW exceeds 26,951 and the NASDAQ exceeds 8,176).

We shorted the broad stock market on Friday as we had a bearish divergence signal in the center of a strong reversal zone (as well as all three indices closing in the lower half of their day's range on Friday). We are expecting a corrective dip now that will likely be brief (2 - 8 days), but steep. A good target for this correction would be around 26,100 in the DOW and 2,850 in the S&P 500. We will watch to cover our short position if we see support at those levels. There is a possibility of a longer and deeper correction if this market loses confidence (from "trade war" fears, U.S./Iran conflicts, a hawkish Fed, etc.), but right now it looks like the cycle is bullish, and any corrective dip will be brief. If those target levels are significantly breached, though, we will of course stay short. Holding my short position in the broad stock market with a stop loss based on the DOW and NASDAQ both making new all-time highs.

Gold and silver both began new medium-term cycles recently (gold in early May, silver in late May) and both are looking very bullish. Gold is due for a significant sub-cycle corrective dip now. We want to buy that dip, which may come this week. A good target would be around $1370, but any drop below $1390 followed by a breakout above last week's high ($1415.50) might also be a good signal to buy. A good buy spot for silver would be around $14.80 or any isolated low that corresponds to a corrective bottom in gold. On the sidelines of both metals but looking to buy on a corrective dip.

It looks like we missed the start of a new medium-term cycle in crude oil on June 12 at $51.25 (August contract chart). If we get a correction in the broad stock market this week, crude prices may follow suit with a corrective dip. That could give us a better buy spot in crude. We will watch for it. The price target for the top of this new medium-term cycle is around $75 so we are anxious to get long in crude as soon as possible. Any break below $50 would negate this bullish view. On the sidelines of crude but and looking to go long soon.

Trading Blog Friday, June 21, 2019

6/21/2019

BROAD STOCK MARKET TRADE ALERT (2:00 pm EDST)

A I mentioned in yesterday's blog on the broad stock market, we are now at the center of a significant reversal zone, and equities are rising sharply into it. Yesterday the DOW and S&P 500 made new all-time highs while the NASDAQ did not - giving us an intermarket bearish divergence signal. That signal is persisting today as the DOW and S&P 500 push even higher with the NASDAQ remaining below its all-time high (8,176). At the time of this writing (around 2pm EDST) these indices appear to be rounding over. It looks like a good time to sell short. We can base our stop loss here on the NASDAQ breaking its all-time high or all three indices making new all-time highs next week. Note that we expect any correction now to be short-term (but likely steep) and not go below the June 3 starting points of the new medium-term cycles in all three indices (24,680 in the DOW, 2,729 in the S&P 500, and 7,292 in the NASDAQ), but there is a small chance the market will turn bearish and breach those lows. This is another good reason to be short right now. Selling short the broad stock market today.

Trading Blog Thursday, June 20, 2019

6/20/2019

MARKETS UPDATE (4:30 pm EDST)

Today President Trump and Iranian officials are "saber-rattling" over an unmanned U.S. surveillance drone that was shot down by Iran's military. This is following last week's news of a pair of oil tankers attacked near the coast of Iran which the U.S. blamed on Tehran. Earlier this morning, Mr. Trump's cryptic reply to the press asking him if we are going to retaliate for the drone strike was "you'll soon find out". But now he is saying that he feels it was just a mistake by someone "loose and stupid". The broad stock market opened dramatically higher this morning until Trump's original comment caused it to plummet. His later comment tempered the first one and halted the plunge. The DOW then snapped back, regained its upward momentum and closed the day with a near 250 point gain.

We are now in the center of an overlap between two reversal zones (June 7 - 24 and June 18 - 27) and all three major market indices (DOW, S&P 500, NASDAQ) are rising sharply. The DOW and S&P 500 both made new all-time highs this morning while the NASDAQ did not. This gives us a bearish divergence signal in the center of a reversal zone which means we could see a top here followed by a significant correction down. Nevertheless, today's rapid snap-back in the DOW (and the S&P 500) is bullish behavior so I am not comfortable selling short today. If the NASDAQ stays below it's all-time high tomorrow, I will consider short-selling this market. Even if we miss this short sell, any correction here will likely be short-term (but possibly steep), and we will be looking to buy the bottom of the correction as the new medium-term cycles in all three indices are still looking bullish. Still on the sidelines.

After Monday's slight price dip in gold and silver (which was not low enough to encourage us to buy), yesterday's dovish rhetoric from the Fed punished the U.S. dollar and dramatically kicked precious metal prices up. This week is the end of a reversal zone for these metals so the new highs we are seeing today could easily be a top to be followed by a sharp sub-cycle correction (due now in gold). If we get this, we will use it as buying opportunity as both metals recently started new medium-term cycles and are bullish. Still on the sidelines of gold and silver and looking to buy.

This morning's news of a U.S. military drone shot down by Iran and Mr. Trump's cryptic reply to the press caused the price of crude oil to shoot up dramatically as traders were reminded of the current tensions between Iran and the U.S. I have recently mentioned on this blog the possibility of a U.S./Iran conflict being the trigger for a strong rally in crude due to the fact that crude is now starting a new medium-term cycle and looks very bullish. We may be seeing this now as it looks like this new medium-term cycle started with last week's low of $51 (July contract chart) on June 12. If the "saber-rattling" between Trump and Iran settles down, we may see prices back down a bit for a good spot to buy. On the sidelines of crude for now.

The U.S. Dollar Index dropped sharply after yesterday's Fed statement and is also down today. Tuesday's peak at 97.76 may have been a significant top (in a reversal zone), but the greenback is now at a support level around 96.60. It could make a short-term relief rally here before resuming a deeper correction. If that happens, it could depress gold and silver prices into a good spot for us to buy. We will watch for that.

Trading Blog Wednesday, June 19, 2019

6/19/2019

COMMENT ON THE FOMC MEETING and MARKETS UPDATE (8:00 pm EDT)

The June FOMC meeting is now over and the Fed released its policy statement at 2 PM this afternoon. Interest rates were left unchanged, and the Fed's rhetoric was typically ambiguous, giving us a "mixed bag" of signals, although the overall tone was dovish. It seems that interest rates will not not rise any time soon, and the question now is, how soon will there be a rate cut and how many will there be?

As usual, the Fed emphasized that the economy is doing well (expanding), BUT, of course, there are some reasons for concern lately. The statement references "uncertainties" (trade wars?, currency wars?) over the last six weeks that could damper economic expansion. The Fed also appears to be pulling back from its recent "patient" stance and will be more proactive in its approach to interest rates:

"The FOMC will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion...”

Most analysts now see "acting appropriately" as an impending interest rate cut, significantly the first in over ten years. Wall Street pundits seem to be anticipating two rate cuts this year with the first happening next month, but that may not happen as Fed officials seem a bit divided on the idea of rate cutting. Only one FOMC member, St. Louis Fed President James Bullard, dissented 1 - 9 against holding rates steady this month in favor of a cut, and the "dot plot" data shows nine Fed officials penciling in no rate changes this year and eight indicating one or two rate cuts this year.

Not surprisingly, the broad stock market did not react definitively in any one direction to these mixed signals. The DOW fell into the 2pm time of the Fed's statement, shot up immediately after its release then oscillated up and down until the market's close at 4pm. None of our three major indices (DOW, S&P 500, NASDAQ) made a new all-time high. As usual, we will need to wait another day or two to see if the Fed's statement will have any serious impact on this market. Still on the sidelines.

The absence of a a rate cut did not seem to traumatize equity markets, but the dovish rhetoric from the Fed may have weakened the U.S. dollar. The U.S. Dollar Index dropped significantly today, and since it made an isolated high yesterday (at 97.76) in a reversal zone specifically for currencies (June 11 - 20), this could be a turning point for a significant correction. If true, that could be bullish for gold and silver. The precious metals did rally today, but we will stay on the sidelines until the cycle pattern is a little clearer in both metals.

Crude oil prices remained relatively unchanged today. Crude's reversal zone ends this coming Monday so unless prices fall steeply now, it may be that last Wednesday's low at $51 (July contract chart) was the start of a new medium-term cycle. If so, we should be looking for any short-term dip (that stays above $51) to buy soon. Still on the sidelines of crude.

Trading Blog Tuesday, June 18, 2019

6/18/2019

COMMENTS ON THE FED, TRUMP, INTEREST RATES, THE DOLLAR, and PRECIOUS METALS (2:30 pm EDST)

Today a news story revealed that earlier this year the Trump Administration had considered demoting Fed Chairman Jerome Powell to strip him of his powers to control interest rates. It's important to note, however, that this was being considered six months ago, and that Mr. Powell still has full control of interest rate policy. What's interesting here is that the Fed has recently switched to a "patient" attitude about raising interest rates and may now be even more aggressively dovish as it considers an interest rate cut (is resurrection of QE - quantitative easing - just around the corner?). Regardless of whether Mr. Powell is taking Trump's advice or not, the Fed's attempts to avert an equity market crash through more rate cuts is probably not a good thing in the long-term.

Today also brings us news that ECB (European Central Bank) President Mario Draghi is also prepared to support the eurozone economy with its own interest rate cutting, possibly as early as next month, as well as more bond buying (QE) if necessary. Not unexpectedly, Draghi's statement sent the euro's value down and boosted the U.S. dollar. Mr. Trump was not happy with Draghi's statement as he feels the EU is trying to devalue the euro to gain an unfair global trade advantage. The reason I am mentioning all of this is because we could now be seeing the start of a "currency war" on top of Trump's "trade wars" with a race between the U.S. and Europe to lower their currency values. If this does unfold, it would certainly help drive a bullish rally in the precious metals.

Will this "currency war" factor now give the Fed more incentive to announce a rate cut on Wednesday? Maybe, but many analysts still feel that the first rate cut will be put off until next month. Draghi's dovish cooing is lifting global equity markets today, and our major stock indices (DOW, S&P 500, NASDAQ) are all approaching their all-time highs. Nevertheless, we are still in a strong reversal zone. If the Fed disappoints with no rate cut, we could see a top followed by a strong reversal down (see yesterday's blog). We are going to stay on the sidelines until after the Fed makes its policy statement on Wednesday.

Trading Blog (2) Monday,, June 17, 2019

6/17/2019

BRIEF COMMENT ON THIS WEEK'S FED MEETING AND THE BROAD STOCK MARKET (4:00 pm EDST)

This week the Federal Reserve wraps up another FOMC policy meeting on Wednesday. Many investors and analysts, taking their cues from recent dovish rhetoric from the Fed, seem to be waiting with "bated breath" for the first interest interest rate cut in over a decade. Some are even speculating that could come as an announcement on Wednesday after the FOMC meeting. Anticipation of a cut could fuel a rally in equities into Wednesday, but if the Fed doesn't deliver, we could then see a sharp fall in the markets. Since this would be within our current strong reversal zone, it could be the trigger for a significant correction down. We will be watching this situation carefully on Wednesday.

Trading Blog (1) Monday, June 17, 2019

6/17/2019

UPDATE ON PRECIOUS METALS AND CRUDE OIL (3:00 pm EDST)

Both gold and silver made peaks on Friday (in our reversal zone for these metals) before prices pulled back a bit. It looks like both metals are now taking some sort of correction (especially since gold made a new high on Friday while silver did not - i.e. bearish divergence). A modest sub-cycle corrective dip is due this week in gold (but not in silver) that could take prices to the 15-day moving average (now around $1330 and rising). But it's also possible for gold to fall below that (and even get as low as $1290 for a more serious correction). Either way, we are looking to buy the bottom of this correction in both gold and silver. Silver's cycle is only three week's old and not yet due for a significant sub-cycle correction. Silver's dip may go to to $14.50 - $14.70. Gold and silver both started new medium-term cycles recently so they are potentially very bullish now. On the sidelines and looking to go long soon (maybe over the next few days).

Crude oil appears to be making a double bottom to its low from last Wednesday at $51 (July contract chart). That low was in the current reversal zone for crude (June 7 - 24), but it can still push lower this week. Because it looks like we are starting a new medium-term cycle here, we want to buy this low. We will do this if prices edge a bit lower over the next few days. On the sidelines but looking to go long soon.

Trading Blog Sunday (late night), June 16, 2019

6/16/2019

UPDATE ON THE BROAD STOCK MARKET (11:30 pm EDST)

Last week the broad stock market traded within a rather narrow range and remained relatively flat. There was no rally to challenge all-time highs in the DOW, S&P 500 or NASDAQ, and there were also no significant corrections. Thus we were not tempted to sell short at any high or buy any corrective low. Our current reversal zone, however, continues through the end of this week (and maybe even into the following week) so there is still time for a significant top or bottom to form. If this market rallies strongly now to test the all-time highs of these three indices (26,696 from April 23 in the DOW, 2,954 from May 1 in the S&P 500, and 8,176 from April 29 in the NASDAQ) by the end of this week then we will consider selling short, especially if one or two, but not all three indices, make new highs (bearish divergence). If "trade war" worries continue to plague the market, we could also see equities fall to a corrective low and a good spot to buy (as long as that low doesn't break below the June 3 lows that recently started new medium-term cycles in all three indices - i.e. 24,680 in the DOW, 2,729 in the S&P 500, and 7,292 in the NASDAQ). Breaking those lows would indicate that the new cycle is turning bearish very early and the market would continue down well into the summer. A good target for a correction that would keep this market bullish would be around 25,500 in the DOW and 2,825 in the S&P 500. Let's watch for those levels this week as a possible buying opportunity. Still on the sidelines of the broad stock market.

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