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Trading Blog Tuesday, June 29, 2021

6/29/2021

MARKETS UPDATE (3:30 pm EDST)

As we move towards this Fourth of July holiday week-end, the S&P 500 and NASDAQ are making new all-time highs while the DOW seems reluctant to rally and has not even made a new weekly high (yet). Thus our intermarket bearish divergence between these indices continues. Because we are now entering another strong reversal zone (June 29 - July 9), we are on the lookout for a significant top to sell short - especially AFTER the July 4th holiday (although it could come sooner). As I've mentioned in previous blogs, the NASDAQ is most likely near the end of its current medium-term cycle and is thus most ripe for a steep correction to its final cycle bottom. Today the NASDAQ is breaking through the 14,500 level. Let's see how high it gets by the end of this week. Now on the sidelines of the broad stock market.

After rallying a bit last week, gold and silver prices seem to be turning down again. It is late in the medium-term cycles of both metals, so a final cycle low is due in both over the next several weeks. It could even be this week as we entered a new reversal zone specifically for precious metals today (June 29 - July 15). The question is how low will the final bottom go? Today gold is testing support at the $1750 level (our stop loss for our current long position in gold). It made a new weekly low, but silver did not (yet), so we may have a bullish divergence signal here. If that $1750 line can hold, we might see a cycle bottom forming now. Let's lower that stop loss a bit and base it now on a clear break and close below $1730. We will hold our long position in gold for now and stay on the sidelines of silver.

It is also late in the medium-term cycle of the U.S. Dollar Index. This means a significant top is due anytime now to be followed by a sharp correction. Last week, this index made a new high (92.40) in a reversal zone specifically for currencies. We are now out of that reversal zone, but the greenback seems to be challenging that high this week. Perhaps we will get a "double-top" (bearish signal) now or even next week when we enter another reversal zone for currencies (July 6 - 14). A cycle top and sharp correction in the dollar could coincide with the start of new cycles in gold and silver, so we will watch for this.

Crude oil made a new weekly and cycle high on Monday at $74.45 (which could be a "double-top" to last Wednesday's high of $74.25 - Aug. contract chart). Last week's high was inside a reversal zone for crude, but today's high is also in our general reversal zone for equities and other markets. A top could be forming here. Let's hold our short position in crude for now as a correction could be imminent. If the broad stock market falls, crude could go with it.

Trading Blog Sunday, June 28, 2021

6/27/2021

BROAD STOCK MARKET TRADE ALERT (11:30 pm EDST)

The broad stock market closed very bullish on Friday with all three major indices making new weekly highs on Thursday and Friday. Although only the S&P 500 and NASDAQ made new ALL-TIME highs, the DOW rallied strongly on Friday, and it is getting very close its all-time high of 35,091. It looks like the DOW and/or the S&P 500 may have started new medium-term cycles from their lows on June 18. If that's the case, they could be quite bullish now (at least short-term). The NASDAQ, however, still seems to be near the end of its current medium-term cycle and is thus ready to correct down strongly to its final cycle bottom.

So what does this all mean? Well, it suggests that all three markets could push higher right now. We are coming to the end of a reversal period for equities on Monday, but Tuesday starts another (stronger) one that continues into July 7. This week also leads into a big holiday week-end in the U.S. (Fourth of July). Stock markets are often bullish into holidays. Because these indices seem to have blown through our June 23 "pivot point" without batting an eyelash, it would not be surprising to see them continue their rally into the July 4th holiday before taking any significant correction. The question now is whether or not we should hold our short position in the NASADQ which we entered in last Wednesday. Although it is late in the NASDAQ's cycle, we could still see a strong and steep rally to its final top (unless it happened last week), and possibly even a "blow-off" top before this index turns south and heads to its final cycle bottom (now due anytime over the next six weeks). Because of the possibility of more strong rallying, I am going to cover (unload) my short position in the NASDAQ now (for tomorrow's market open) with a small loss of less than 1%. We will plan on going short again possibly later this week, or even better, early the following week if we see more intermarket bearish divergence signals (e.g. the DOW NOT making a new all-time high, or if it does, not being accompanied by the S&P 500 and/or NASDAQ).

Trading Blog Wednesday, June 23. 2021

6/23/2021

BROAD STOCK MARKET and CRUDE OIL TRADE ALERTS (3:00 pm EDST)

Today is our June 23rd "pivot point" and the dead center of our reversal zone for equities (and other markets). The broad stock market seems to have lost some of the steam it gained from yesterday's "dovish" rhetoric given by Fed Chairman Jerome Powell in his congressional testimony. The NASDAQ touched a new record all-time high (14,317) this morning, but now it seems to be backing down a bit from there. The S&P 500 came very close to breaking its all-time high this morning, but it too is backing down now. The DOW is significantly below its all-time high, and as I pointed out in yesterday's blog, it has most likely already topped out and is headed down to the final bottom of its medium-term cycle. Thus we now have a strong bearish divergence between the DOW and the other two indices, as well as what seems to be a bearish "double-top" in the S&P 500. This looks like a good time to go short in the broad stock market. I am going to enter a short position now in the NASDAQ because it appears that this index is poised to take the deepest correction. We would like to see the NASDAQ close back below 14,250 by Friday (it is now at 14,287), so we can use that as our initial stop loss parameter.

Crude oil also seems to be topping out now. Early today crude made a new cycle high at $74.25 (August contract chart), and it is now backing down from that top. Our ideal target for this rally was $75, but today is the last day of a reversal zone specifically for crude (June 15 - 23), so it looks like a good time to sell this market short for some sort of correction. I am entering a short position in crude today. Let's make our initial stop-loss warning based on crude closing above $75 this week.

Trading Blog Tuesday, June 22, 2021

6/22/2021

UPDATE ON THE BROAD STOCK MARKET, GOLD, and SILVER (4:30 pm EDST)

We are now in the center of our current reversal zone for the broad stock market (and other markets), and close to our June 23 "pivot point" - i.e. likely time for the market to turn. The NASDAQ is pushing to a new all-time high today without the S&P 500 and DOW. While the S&P 500 is close to a new all-time high and could achieve this over the next few days, the DOW is well below its all-time high, and its cycle has turned bearish. The DOW is unlikely to make a new high before its medium-term cycle makes a final bottom several weeks (or more) from now. This means we have a strong intermarket bearish divergence signal in the center of a reversal zone. I was tempted to sell short today, but the S&P 500 and NASDAQ were very bullish and closed near the top of their day's ranges (most likely due to Fed Chairman Jerome Powell's "dovish" comments made in a testimony before Congress today). We will watch this market carefully tomorrow. We may enter a short position early in the day, so traders should be alert. We will most likely short the NASDAQ (with an an index fund or ETF tied to this index) as it is the most ripe for a steep correction. We remain on the sidelines for now.

Yesterday silver made a new weekly low, but gold prices held above last week's low giving us a small bullish divergence signal. The U.S. Dollar Index also seems to be peaking now in the center of a reversal zone specifically for currencies (June 18 - 28). This suggest the possibility of more rallying in these metals. Let's hold our long position in gold with a close stop loss on a close below $1750. We are still out of silver.

Trading Blog Sunday (late night), June 20, 2021

6/20/2021

MARKETS UPDATE (11:00 pm EDST)

At Friday's market close, the S&P 500 finally broke and closed below its 15-day and 45-day moving averages. This means that it, along with the DOW, have likely made their final medium-term cycle tops and are in the process of correcting down to their final cycle bottoms. The NASDAQ, however, still looks short-term bullish as it stays poised above a support line at 14,000 and comfortably above its 15-day and 45-day moving averages (so far). It would be nice to see the NASDAQ make another new all-time high early this week in our reversal zone and near our June 23 potential "turning point".

Right now, the DOW's trend is very bearish, and it may be this index that will lead the broad stock market into a severe long-term correction. The S&P 500 has also turned bearish. Nevertheless, the NASDAQ seems to be bucking this trend, and this index could turn out to be the leader that will push another strong rally into the summer before we see the major downfall in equities that could be just around the corner. The NASDAQ is obviously at this point the best candidate to sell short. If it does make a new high this week, we will likely enter a short position in an index fund tied to the NASDAQ. Let's stay on the sidelines tonight and wait for the markets to open tomorrow before making any trading decisions.

Because of last week's Fed "scare" (i.e. the possibility of an early hike in interest rates), gold prices have turned bearish, at least temporarily. Gold's medium-term cycle is old and should be coming to an end soon (over the next several weeks). Last week's downturn could therefore be the start of this cycle's final correction down to the cycle bottom. Unless gold can start to rally again and make a new high above $1900, we will assume that bearish scenario to be the case. We are still holding our long position in gold from last week. Let's put a stop loss on that position based on prices closing below $1750. There's a chance gold made a sub-cycle low last Friday so we might see a rally this week that would offset some of our current loss on this trade.
If gold prices fall but can stay above $1677 over the next few weeks, we may look to buy again at the final low in this cycle as another rally could take prices back above $1900. Let's remain on the sidelines of gold for now.

Silver's medium-term cycle is similar to gold's right now. It is an old cycle that is due to bottom over the next few weeks. Friday's low (following a severe plunge during the week) may be a significant sub-cycle bottom, and if so, we could see prices rally next week (although that rally may not get too far). Otherwise, we will wait for prices to go lower into the final cycle bottom, and as with gold, possibly go long there. Still on the sidelines of silver.

Crude oil made a new high for its current medium-term cycle last Wednesday at $72.99 (July contract chart) at the start of a reversal zone specifically for crude (June 15 - 23). There are still three days left in this reversal, so prices could edge higher early next week to form a sub-cycle top. If they don't, we expect prices to correct lower to a sub-cycle bottom due one to three weeks from now. This market's trend had been looking bullish, but now it looks like crude's trend could be turning bearish. It all may depend on how the broad stock market trends into the summer. If equities can manage another significant rally, crude may follow suit. Let's stay on the sidelines of this market for now.

Trading Blog Friday, June 18, 2021

6/18/2021

UPDATES ON GOLD AND THE BROAD STOCK MARKET (2:00 pm EDST)

Today St. Louis Federal Reserve President James Bullard said in a public interview that he expects the first interest rate increase the Fed could make could come as soon as 2022. This, of course, is even earlier than the unexpectedly early date of 2023 seen in the Fed's "dot-plot" data released Wednesday afternoon that caused the broad stock market to take a dive. One wonders if these Fed officials are deliberately trying to crash the markets.

Bullard's announcement is being blamed for today's steep drop in the DOW (about 400 points at the time of this writing). Significantly, however, the S&P 500 and NASDAQ are not falling that much at the moment, perhaps indicating this is a temporary "knee-jerk" reaction from the DOW (arguably the most "sensitive" of the three indices). The DOW has now broken clearly and decisively below its 15-day and 45-day moving averages. This means it most likely is in the process of falling to its final medium-term cycle bottom and will not make a new all-time high. The S&P 500 has now broken below its 15-day moving average and is at this moment testing its 45-day moving average. The NASDAQ, however, is well above both its 15-day and 45-day moving averages and seems buoyantly poised above a support line around 1,400. This index hasn't yet made a new all-time high this week (the S&P 500 did so on Tuesday), but it is close. If it does this next week with or without the S&P 500, we will have a VERY strong bearish divergence with the now falling DOW and it will be very close to our June 23 likely "turning point" in this current reversal zone. I will analyze this further this week-end and may issue a short-sell trade alert on Sunday or early next week. Let's remain on the sidelines of the broad stock market for today

Gold and silver prices are remaining stable today (so far) after a steep two day drop. I am going to hold my long position in gold for now with a stop loss based on a clear break below $1750 (the price is currently at $1769. As I discussed in yesterday's blog, there is a good chance that gold is close to a sub-cycle bottom and could rally soon. Silver is also likely finding a bottom here. Let's stay on the sidelines of silver for now.

Trading Blog Thursday, June 17, 2021

6/17/2021

UPDATE ON GOLD, SILVER, and the BROAD STOCK MARKET (8:00 pm EDST)

In yesterday's post on Gold I wrote:

"...today's panic in equity markets also had a negative impact on the precious metals. Gold prices, however, did fall closer to our original corrective target of $1835. This puts us temporarily in the red, but this sub-cycle correction is due to end and bottom this week with a possible target low around $1815. If prices can hold above there tomorrow and Friday, I will likely hold this long position with the expectation of a sharp rally next week."

Gold is falling heavily again today. This is most likely the result of the Fed surprising investors and analysts yesterday with the likely "hawkish" prospect of raising interest rates in 2023 instead of 2024. Hawkishness is usually bullish for the U.S. dollar as investors perceive this to be the Fed acting fiscally responsible. Unfortunately, a rising dollar often pushes down the price of gold and silver. Today's fall in gold puts our long position in the red with around a 4% loss. Obviously, this is more loss than we expected. But we need to keep in mind that this sub-cycle bottom is due soon (maybe even this week), so a deep low is expected now and a snap back up could be imminent. Gold is admittedly below our target just above $1800, but silver is actually falling right into our target range (around $24.50 -$26.60). Silver (along with gold) is also in a reversal zone, and a major sub-cycle low for silver is due tomorrow. We should also consider that we enter a reversal zone specifically for currencies tomorrow (June 18 - June 28), so a top in the dollar (and a subsequent correction down) could be imminent (which could boost precious metal prices).

Based on this analysis, we are going to hold our long position in gold for now with a reasonable stop loss below the current low (depending on your loss tolerance) with the idea that a bottom is forming now (or very soon). I may decide to sell this position tomorrow if prices don't close the week above $1800.

Today the DOW continues to plunge (closing with a 210 point loss) while the S&P 500 and especially the NASDAQ seem quite buoyant. The S&P 500 closed with a tiny loss right on its 15-day moving average, and it is still above its 45-day moving average. The NASDAQ made yet another new weekly high and closed with a 121 point gain. It is looking very much like the DOW's medium-term cycle high was on May 10 at 35,091 and this index is now in the process of falling to its final cycle low. The S&P 500 and/or the NASDAQ, however, seem poised to make new all-time highs. Let's see if these last two indices can stay buoyant tomorrow or if a major downturn in equities has begun, Any short-selling will now be done with either the S&P 500 or NASDAQ as the DOW's correction may already be underway. Still on the sidelines of the broad stock market.

Trading Blog Wednesday, June 16, 2021

6/16/2021

COMMENTS ON FED MEETING and UPDATES ON GOLD, SILVER, and the BROAD STOCK MARKET
(5:30 pm EDST)

The Federal Reserve today said it might hike interest rates earlier than it had previously expected, penciling in two interest rate hikes in 2023. There was no mention of tapering its bond-purchasing program anytime soon. These earlier than expected interest rate projections were based on the so-called "dot-plot" data. Although Fed Chairman Jerome Powell stated in a press conference following today's FOMC meeting that the dot-plot data should be "taken with a grain of salt", Wall Street did not expect or appreciate the specter of earlier rate hikes (previous Fed projections were for no hikes until at least 2024), and it showed its displeasure by dropping steeply following the afternoon announcement (at one point, the DOW was down nearly 400 points). Although all three indices dropped sharply after 2:00 pm, the NASDAQ recovered nearly all of its loss by the closing bell, and the S&P 500 recovered about half of its loss. The DOW, however, did not recover by much and closed the day with a 265 point loss.

The question now is whether or not the broad stock market will recover over the next several days from this slightly hawkish news from the Fed (possible rate hikes in 2023 instead of 2024). Today's plunge might be just market "jitters". After all, there was no talk of the Fed tapering its bond-buying program, and the NASDAQ recovered smartly from its afternoon dive. On the other hand, this market is ripe for a serious correction, and we are in a reversal zone with several bearish divergence signals flashing. The DOW did close below its 45-day moving average today, which is not a good sign. If it doesn't get back above that line by the end of the week, we may be seeing the start of a major correction. The S&P 500 briefly went below its 15-day moving average but closed just above it, and it is still above its 45-day moving average, which is more bullish than bearish. The NASDAQ is well above both its 15-day and 45-day moving averages and is the most bullish looking of the three indices.

We will remain on the sidelines of the broad stock market for now and wait to see over the next few days if Wall Street will recover from this slightly hawkish sentiment from the Fed or if it will throw a temper tantrum and collapse. (Yes, Wall Street is indeed like a sensitive child prone to emotional outbursts at the drop of a hat. Sigh!)

Our long position in gold established at this morning's market open got us in around yesterday's closing price. Unfortunately, today's panic in equity markets also had a negative impact on the precious metals. Gold prices, however, did fall closer to our original corrective target of $1835. This puts us temporarily in the red, but this sub-cycle correction is due to end and bottom this week with a possible target low around $1815. If prices can hold above there tomorrow and Friday, I will likely hold this long position with the expectation of a sharp rally next week. Holding my long position in gold for now.

Silver prices also fell sharply today and closed at $26.95 - getting closer to our $26.25 target. If it goes lower tomorrow or Friday, we may see a good buying opportunity as a sub-cycle bottom is due this week. We are out of silver for now.

Trading Blog Tuesday, June 15, 2021

6/15/2021

MARKETS UPDATE and GOLD TRADE ALERT (5:30 pm)

The DOW continues to slump down this week while the S&P 500 and NASDAQ edge higher. Both the S&P 500 and NASDAQ are making new weekly highs, and today the S&P 500 is even making a new all-time high. This is giving us several bearish divergence signals. We have also just entered our new, wide "back to back" reversal zone period, which will be in effect through the first week of July (June 10 - July 7). We especially want to watch June 23 and July 2 for possible major turning points. Basically, this market could turn down for a sharp correction anytime now. The NASDAQ was especially bullish last week and is on the verge of making a new all-time high (actually, the NASDAQ 100 E-mini contract chart for September did make a new all-time high yesterday). We are thus getting VERY strong bearish divergence signals now (until the DOW makes a new all-time high), but there are also some short-term bullish signals that seem to be keeping this market buoyant. Both the DOW and S&P 500 are remaining above their 45-day moving averages, and the S&P 500 is still above its 15-day moving average. Any break below those supports would suggest a major correction is starting.

The Federal Reserve concludes its monthly FOMC meeting tomorrow afternoon, and investors and traders will be waiting with "bated breath" to see if Fed Chairman Powell will make any statements about tapering back its QE (oops...I mean bond-buying program) in light of the recent lifting of Covid-19 restrictions across the country. Most analysts are speculating that he will probably steer clear of any such hawkish rhetoric to avoid a panic on Wall Street. After all, many investors realize that it is mostly QE (sorry...bond buying) and near-zero interest rates that are keeping this equity bubble (sorry...I mean healthy market) perpetually bullish. But the Fed is sometimes unpredictable. If Mr. Powell does turn hawkish, we could see a sudden turn down in a market that is clearly ripe for a big correction.

I generally do not like to trade equities on the cusp of a Fed policy meeting, so let's stay on the sidelines for now and see if those support levels (45 and 15-day moving averages) in the DOW and S&P 500 will hold into the end of the week (which will bring us closer to June 23 - a possible turning point).

Yesterday, gold prices got down to $1845 which is pretty close to our target of $1835 for a sub-cycle correction (which is due by the end of this week). There seems to be some support around $1850, so this looks like a good spot to buy. I am going to put a buy order in tonight for tomorrow's market open. If it opens lower, we may even get a better price closer to $1835. If this is a sub-cycle low, we could easily see prices rally back to $1915 and probably higher. Going long in gold for tomorrow's market open.

Silver's cycle is similar to gold's now except that silver may have already made its sub-cycle low back on June 3 (at $27.10), which would explain why prices haven't gone even close to our $26.25 target. There's still a chance it could do that, but it has to happen this week. If silver falls closer to $26 by Friday, we may look to buy; otherwise, we will stay on the sidelines and just stay with our long position in gold. Remaining on the sidelines of silver for now.

Crude oil has overcome a resistance level at $70 (July contract chart) and is now trading near $72. Our target range for this rally was (is) $75 - $78. It is getting there, but today we entered a reversal zone specifically for crude (June 15 - 23). This means a sub-cycle top could be imminent. This market looks very bullish now, so I'm inclined to look to buy the bottom of any corrective drop instead of selling short at a top. However, if the broad stock market starts to head south in a big way, crude may follow suit, and we may have to change that bullish view. Let's stay on the sidelines of crude for now and see how high it can go in this reversal zone.

Trading Blog Wednesday, June 9, 2021

6/9/2021

MARKETS UPDATE (10:30 pm EDST)

There are some technical studies that point to higher than normal market volatility now through the end of this month as well as a possible major turning point possible around June 23rd (which is also the center point of one of our reversal zones this month). We should keep this in mind in planning any trading strategy.

We are still watching for a significant top in the broad stock market to sell short soon. The NASDAQ has been rallying strongly this week, but the DOW and S&P 500 not so much. Both the NASDAQ and S&P 500 have made new weekly highs this week, but the DOW has not (so far). All three indices have not yet exceeded their all-time highs from April (NASDAQ) and May (DOW and S&P 500), but the S&P 500 is VERY close, and the DOW and NASDAQ are also approaching the vicinity of those highs. We are about to enter a very long reversal zone for most markets tomorrow (June 10 - July 7). This reversal zone actually consists of two reversal zones that are back to back. Likely pivot points for any reversals would be close to June 23 and July 5, but significant tops (or bottoms) could occur anywhere within this time frame.

Ideally, I would like to see one or two of these indices (probably the DOW and/or S&P 500) make a new all-time high in this new reversal zone with the NASDAQ not exceeding its all-time high. That would give us a strong intermarket bearish divergence signal to sell short. The idea here is that it is late in the medium-term cycles of at least the S&P 500 and NASDAQ (and possibly the DOW) and a final cycle top is due from which a significant correction will follow. This could also turn out to be a longer-term cycle top, and if so, a VERY significant and deep correction could follow. This is why our main trading strategy now is to sell short. We are on the sidelines of the broad stock market for now.

Gold and silver prices have been rallying from last week's lows of $1861 for gold and $27.10 for silver. Those lows were above our targets for both metals ($1835 and $26.25, respectively), so we did not buy. There is still time for prices to go lower and closer to those targets and be within a time frame for a significant sub-cycle correction. We will watch for that this week or next. If the rallying continues, we may have to wait a bit longer for another significant correction and possible buying opportunity. Still on the sidelines of gold and silver.

The U.S. Dollar Index seems to be holding above a support line at 90. If the greenback can launch a rally from here, we could see precious metal prices drop some more to approach our target levels.

Crude oil prices pushed slightly above $70 today but then closed slightly below (at $69.96 - July contract chart). There is some resistance at this level ($70). There is a reversal zone specifically for crude coming up next week (June 15 - 23). If resistance at $70 holds, there could be a top forming here. But if crude rallies above $70, we might see a top closer to $75 or even as high as $78 in this upcoming reversal zone before any significant correction. Let's stay on the sidelines for now. We might be enticed to go long on any significant sub-cycle correction as this market still looks quite bullish.

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