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Trading Blog Thursday, June 30, 2022

6/30/2022

MARKETS UPDATE and GOLD AND SILVER TRADE ALERT (4;30 pm EDST)

Despite the upcoming Fourth of July holiday in the U.S., the broad stock market has been falling this week, although it seems a bit hesitant in its movement down (perhaps buoyed by the anticipation of fireworks and barbecue festivities coming up this week-end). We are still in a reversal zone through next Wednesday (I may even extend that to next Friday because of the holiday interruption). If this market continues down past its lows from June 16-17, it will make the case of an older medium-term cycle moving to its final bottom. But if we get a bottom this week or next well above those lows, we will likely switch to the idea of a new, young cycle that would be at least short-term bullish. We note that after next week, the rest of the month of July has no significant reversal zones, so any trend (up or down) established now or next week will likely continue into early August. We are still on the sidelines of the broad stock market.

Gold and silver prices have also been falling this week, and this has been good for our short positions in both metals.
It is starting to look like these metals are falling into the final bottoms of older medium-term cycles. This is especially the case for silver, which has now broken below its $20.52 low from May 13. We are now at the dead center of a reversal zone specifically for these metals (June 27 -July 5) and they are both falling steeply. This means a reversal back up and at least a short-term rally could be imminent. I am going to cover (unload) my short positions in gold and silver now (i.e. set up trade for tomorrow's market open). Since we entered these short positions on June 6, we should have a decent profit, especially in silver (around 9%).

Crude oil prices got to $114 yesterday, but they have backed down sharply from there today. There is a resistance line in crude now around $115, so a pullback from there is to be expected. We entered a long position in crude last week around $104, and today's drop to $105 has erased most our gain. Nevertheless, there is some support between $104 - $105, so I am going to hold my long position for now and maintain my stop loss for this trade on a break below $102. If crude can overcome that resistance at $115, there's still a good chance we could see a strong rally that could go as high as $145.

Trading Blog Monday, June 27, 2022

6/27/2022

MARKETS UPDATE (7:00 pm EDST)

It's still possible that the DOW's low of 29,653 on June 16 was the start of a new medium-term cycle, and it's also possible the S&P 500 and NASDAQ started new medium-term cycles on June 16 and June 17 (at 3,637 and 10,565, respectively). If this is the case, all three indices could rally strongly now (for at least a few more weeks - possibly longer). This week leads into the July 4th holiday this week-end in the U.S,, and equity markets tend to rally into holidays, But we are still in a reversal zone through July 5, so a peak and a reversal down could begin anytime over the next six trading days. That could put us back on track for a fall to the final bottoms of older medium-term cycles in these indices. Today's downturn in the broad stock market is supporting this view. We will just have to wait to see which trend - bullish or bearish - will take over.

If all three indices roll over now and break below their June 16 -17 lows, we can assume they are moving to the final bottoms of older cycles. Those final bottoms could be this week or early next week and could be a good place to go long. If one or two of these indices (but not all three) make a new low (below the July 16-17 lows), we could get a bullish divergence signal, which would be an even stronger signal to buy. On the other hand, if this market rallies this week and next and exceeds its early June highs (33,272 in the DOW, 4,177 in the S&P 500, and 12.293 in the NASDAQ), then we'll have to assume the new, younger cycles are in effect and will rally for at least several more weeks. We will remain on the sidelines for now as we watch which direction the market will take this week.

Lest we lose track of the "forest for the trees", I should mention here that our longer-term view of this market is still bearish, and it still looks like equities are in the first stage of a serious long-term correction and that they are headed lower for several more years (see "Crash Update" on the Home page). If the markets turn (short-term) bullish now, we could get some sort of relief rally before they turn down again and continue their plunge to a long-term cycle bottom that could see losses exceeding 50% from the all-time highs of late Nov. 2021 (NASDAQ) and early January 2022 (DOW and S&P 500). The only thing that would negate this idea now would be for all three market indices to make new all-time highs. That doesn't appear to be likely at this point, but of course, things can change, and it seems that anything is possible in the volatile and crazy political and economic times we find ourselves in these days. For now, we are long-term bearish and will be looking to sell short the top of any significant bounce that does not exceed those all-time highs.

The dilemma of newer cycle vs. older cycle is also presenting itself in the precious metals market. I am still favoring the idea that both gold and silver are bearish older cycles moving down to their final medium-term cycle bottoms. But they could also be newer cycles and at least short-term bullish and ready to rally back up again. This conflict should be resolved this week or early next week as we just entered a reversal zone specifically for gold and silver today (June 27 - July 5), and an imminent top or bottom should be forming and followed by a reversal (up or down). We are still holding short positions in both metals, so we are hoping the metals will fall some more and a bottom will form. A break below $1792 in gold would confirm the bearish view, and a break above $1877 would confirm the bullish view. In silver, a break below $20.52 is bearish, and a break above $22.49 is bullish. We will continue to use those upper limits in both metals as stop loss points for our short positions. If we get any new lows in this week's reversal zone, we will probably look to cover these positions. We will hold our short positions in gold and silver for now.

Crude oil prices have rallied smartly off of last Tuesday's low of $101.53 (Aug. contract chart), and that low was near the center of two reversal zones. This is good news for the long position we entered on Wednesday around $104. Prices closed just above $109 today. We can hold this long position now with a stop loss based on prices closing back below $102. If crude can now close back above $115, we could see a rally take prices as high as $145.

Trading Blog Wednesday, June 22, 2022

6/22/2022

CRUDE OIL TRADE ALERT and MARKETS UPDATE (3:00 pm EDST)

Today crude oil hit our target for a significant sub-cycle bottom (which was around $104 - Aug, contract chart). Prices dropped to $101 early in the day but then snapped back sharply and are closing near $106. This is bullish behavior. Our timing in crude's current medium-term cycle is also right for a sub-cycle bottom, and we are now near the center of a reversal zone specifically for crude (June 20-28). This looks like a good buy spot in crude for at least a short-term rally and possibly a longer-term surge up that could exceed the recent high at $120. We are entering a long position in crude oil today. We can set our initial stop loss for this trade on a weekly close below $100.

The broad stock market is rallying weakly today. There's a small possibility that last Friday's low in the DOW was the end of an old medium-term cycle and thus the start of a new one, but that seems unlikely for the S&P 500 and NASDAQ. It is more likely that all three indices are old cycles that are bottoming now and that this week's rally will roll over and head down below those lows from Friday for a final bottom to their medium-term cycles this week or next. We may consider buying that bottom if it approaches the targets I gave on Monday (around 28,500 - 29,300 in the DOW, 3,200-3,600 in the S&P 500, and 8,500-10,000 in the NASDAQ). Let's remain on the sidelines for now.

Gold prices were up just a bit and silver prices down a bit today. Both metals appear reluctant to rally which is supporting the idea that these are older cycles moving down to their final bottoms. (Even if they are newer, young cycles, the trend could be turning bearish.) We will hold our short positions in both metals for now. Our stop loss points for these positions are still at their recent highs ($1877 for gold and $22.49 for silver).

The U.S. Dollar Index recently started a new medium-term cycle and is looking quite bullish. After a corrective dip last week, the dollar seems to be leveling off around 104 and could be poised for another rally. If that rally can break above last week's high of 105.79, the greenback's trend would be very bullish. If this happens, it does not bode well for the precious metals as their prices usually move opposite the U.S. dollar. The Federal Reserve's aggressively hawkish tone over the last several weeks is also helping to boost this index as this may be perceived as the Fed being fiscally responsible.

Trading Blog Monday, June 20, 2022

6/20/2022

MARKETS UPDATE (5:30pm EDST)

Today is a holiday (Juneteenth Day) and stock markets are closed in the U.S.

It appears that all three of our broad stock market indices (DOW, S&P 500, NASDAQ) are near the end of their current medium-term cycles and are ready to hit their final cycle bottoms. We are now within several overlapping reversal zones that essentially create one huge general reversal zone from now through July 5. The likelihood of these indices making their final cycle bottoms this week or next is very high. Good targets for these bottoms could be around 28,500 - 29,300 in the DOW, 3,200-3,600 in the S&P 500, and 8,500-10,000 for the NASDAQ. If we get a case of intermarket bullish divergence (one or two but not all three indices making new yearly lows) near these ranges this week or next, we may consider going long for a brief rally that would kick off the new cycles. However, I don't think any new rally will make new all-time highs as this market is looking very bearish. We may just wait to sell short the top of any rally off the bottoms that could be forming over the next two weeks. A major long-term cycle correction may already be underway in this market (see my "Crash Update" on the Home page). We are currently on the sidelines of the broad stock market.

It is not clear at the moment if gold and silver are starting new medium-term cycles or if they are near the end of older medium-term cycles. The difference is important. If the cycles are new (i.e. gold starting with its $1,792 low on May 16 and silver starting with its $20.52 low on May 13), then gold could exceed last week's high at $1877 and even go much higher, and silver could exceed its high of $22.49 from June 6 and also rally strongly from there. But if one or both of these cycles are older, they are bearish with prices headed lower because both have now gone below the start of their cycles ($1892 for gold and $24.02 for silver - both on March 29). Some traders (like me) were stopped out of their short gold position a little over a week ago. Others may still be short. We all should still have a short position in silver. I am recommending holding these short positions in both metals for now with stop losses set at their recent highs ($1877 in gold and $22.49 in silver). Traders should be ready, however, to cover these positions quickly if we see start to see signs of a bullish rally. Let's hold any short positions in both gold and silver for now.

Last week crude oil prices fell steeply. A corrective dip was due in this market, and prices are definitely moving into a significant sub-cycle low. This week we move into the center of a strong reversal zone specifically relevant to crude (June 20-28), so it is a good time for a sub-cycle bottom. A good target for this bottom could be around $104 (August contract chart), and that might be a good place to buy if prices stabilize there. A weekly close below $102 (and especially below $100), however, would be a bearish sign and would keep us on the sidelines. If we get a bounce near $104, prices could rally and exceed last week's high of $120.88 and even go much higher. For now, we remain on the sidelines of crude.

Trading Blog Thursday, June 16, 2022

6/16/2022

MARKETS UPDATE (5:30 pm EDST)

Yesterday the Fed did what some analysts had predicted - it raised interest rates 75 basis points. This was the highest single rate raise given by the Fed since 1994, and it exceeded last month's 50 point hike (which the Fed had hinted would be the same for this month). At first equity markets panicked. The DOW plunged nearly 400 points after the announcement of the hike at 2:00 pm, but an hour later (after some explanatory rhetoric from Fed Chairman Jerome Powell in a press conference) it recovered all of that loss and closed the day in positive territory along with the S&P 500 and NASDAQ.

But it seems that Powell's calming effect was short-lived as today equities took another deep dive. We note that we are now within two overlapping reversal zones (June 14-22 and June 16-27), so a significant bottom could form anytime over the next seven trading days and be followed by a significant rally back up. If investors start to panic, however, it's possible this reversal zone could correlate with a market breakdown instead of a turnaround rally (this happens infrequently). Right now I'm favoring a reversal and at least a short-term rally back up, but anything can happen in our current volatile financial and geopolitical environment. We will remain on the sidelines of the broad stock market for now.

Fear of an equity collapse may be driving some investors into the precious metals as both gold and silver prices rallied yesterday and today. Some of us were already stopped out of our short position in gold on Monday, but silver is still trading below our stop loss price of $22.48. I am going to hold this short position in silver for now with the idea that this rally may be a brief "knee-jerk" reaction to the rate hike and that silver is still moving down to its final medium-term cycle bottom. Traders still holding short positions in gold should also remain short with a stop loss based on Monday's high at $1877.

The Fed's large rate hike did not push up the U.S. Dollar Index (which usually responds favorably to hawkish news), Instead, the greenback is taking a corrective dip which we can interpret as a top forming in our reversal zones. This dip may be short-lived, however, as several other technical indicators in this chart are quite bullish. The dollar remained above 105 for three consecutive days this week which suggests a bullish breakout. After a corrective drop, I think this index could revisit those highs and exceed them. We should also keep in mind that during the 2008-2009 "crash" in equities, investors abandoned gold and silver and instead fled into the perceived safety of the U.S. dollar. If equity markets start to tank, this could happen again.

Crude oil prices also seem to be falling into our general reversal zones, and we also have another reversal zone specifically for crude coming up next week (June 20-28). Let's wait to see if crude can make a new low then. If it does, we may have a good spot to buy as crude's overall trend right now is very bullish. We are on the sidelines of crude for now.

Trading Blog Tuesday, June 14, 2022

6/14/2022

COMMENT ON THIS WEEK'S FOMC MEETING and UPDATE ON THE U.S. DOLLAR (2:30 pm EDST)

This month's FOMC meeting is today and tomorrow, and market analysts are generally expecting the Fed to remain hawkish and to announce another 50 basis point (1/2 %) interest rate hike. Curiously, there is even speculation that a 75 basis point hike is possible. This talk of a 75 point hike may be a strategy by the Fed to encourage investor relief if a 50 point hike is given instead to avoid a serious sell-off in equity markets which have been plummeting over the last several days. The Fed's announcement is expected at 2:00 pm Wednesday afternoon. Because we are now entering multiple reversal zones, it would not be surprising to see the broad stock market form a significant bottom and start to reverse back up, at least short-term. But sometimes (not often) a reversal zone will correspond to a breakdown (or a breakout if markets are rising - they are falling here) with the market breaking a support line and falling steeply instead of bouncing back up. The announcement of a 75 basis point interest rate hike could potentially trigger such a move. Even if the market tumbles past Wednesday, there is a strong reversal zone next week that could potentially turn it back up. We shall have to wait and see how all of this plays out. We are still on the sidelines of the broad stock market.

We note that the U.S. Dollar Index has now broken and closed just above its 105 top from May 13. As I've mentioned in previous blogs on the U.S. dollar (see blogs from April 9 and April 27), a clear rise above 104-105 would suggest that the greenback is turning bullish and is bypassing its long-term 15-16 year bottom (expected in 2023-2025 in the 55-60 range). However, we are in a reversal zone time frame now (although not one specifically for currencies), so this could turn out to be a bearish "double-top" formation. But if the dollar can stay above 105 and continue higher, we will have to abandon the idea of a bearish 15-16 year cycle moving to its final bottom. A bullish U.S. dollar would support our idea that gold's long-term 23 year cycle has peaked and is in the process of falling to its final bottom in 2023-2024 in the $1000 area.

Trading Blog Monday, June 13, 2022

6/13/2022

MARKETS UPDATE (3:00 pm EDST)

On Friday Gold prices slightly exceeded our stop loss point on our short position set at $1874 intraday (they got to $1874.98), but then gold closed the day below (at $1871). Some traders may have been stopped out of the short position that I had recommended on Monday. (I had set an automatic stop on my own gold ETF trade that was triggered.) The problem with setting very tight stops is that one can get "whipsawed" out of the trade. In this case, gold exceeded our stop by a tiny margin on Friday, and it now seems to be correcting down in earnest. This is classic "whipsaw" action. We may try and short gold again on any significant bounce, but for now, traders that were stopped out should stay on the sidelines. Traders who WEREN'T stopped out should hold their short positions in gold.

Fortunately, we were not stopped out of our short position in silver. Silver did not make a new high on Friday like gold, and therefore our intermarket bearish divergence remained intact. Silver prices are down steeply today, so we will continue to hold our short position and see how low they will go.

In last Thursday's blog I wrote:

"The broad stock market is trending down this week, but it seems reluctant (so far) to take a deep correction."

Well, equities gave up that reluctance Friday and today as all three of our market indices (DOW, S&P 500, NASDAQ) are taking a sharp tumble down. I also wrote in Thursday's blog:

"We've just entered a low level (weak) reversal zone (June 9-15), but we enter another major strong reversal zone next week (June 16 - 27), so if they push higher, equities could make another significant high in these time frames, or they could continue down and make a significant low instead. Right now it looks like it could go either way, but I favor them making a low. (It could also do both - make a new high and then a low, or vice-versa.)"

These indices are making new lows as we move into these reversal zones. We will watch carefully now for some sort of bottom. The likelihood of a reversal back up is strongest near the end of this week and early next week. Because this market is looking very bearish, our strategy now will be to sell short the top of any rally that may result from a bottom that could from within these reversal zones over the next two weeks. For now, we will remain on the sidelines.

Crude oil prices are now taking a dip as we move into this week's general reversal zones (June 9-15 and June 16-27). We also enter another reversal zone specifically for crude next week (June 20-28). Let's see if prices can drop some more and entice us to buy at a significant bottom that could form this week or next. Still on the sidelines of crude.

Trading Blog Thursday, June 9, 2022

6/9/2022

MARKETS UPDATE (3:15 pm EDST)

The broad stock market is trending down this week, but it seems reluctant (so far) to take a deep correction. It looks like it is still possible for it to push higher. We've just entered a low level (weak) reversal zone (June 9-15), but we enter another major strong reversal zone next week (June 16 - 27), so if they push higher, equities could make another significant high in these time frames, or they could continue down and make a significant low instead. Right now it looks like it could go either way, but I favor them making a low. (It could also do both - make a new high and then a low, or vice-versa.) We will remain on the sidelines of this market until its direction becomes more clear.
NOTE: Please see my new update 6/7/22 on the longer-term correction in the broad stock market. It is on the Homepage. It seems that we are back on track for a longer-term correction in this market that could indeed develop into a major "crash."

Gold and especially silver prices are falling today which is good for the short positions we established on Monday. So far our stop loss levels have not been breached ($1874 in gold and $22.49 in silver), and there are short-term technical signals suggesting prices will go lower. We are still favoring the idea that these metals are now falling to the final bottoms of older medium-term cycles, so we are holding our short positions in gold and silver for now.

The U.S. Dollar Index is rallying strongly today which supports our idea that it started a new medium-term cycle with its recent low at 101.30 (May 30). A rising dollar should put downward pressure on precious metal prices.

Crude oil continues to rally with prices hitting $123 yesterday (July contract chart). As we move into our new reversal zones (see above), we could see some sort of top and corrective dip(s) in this market. The next major reversal zone specifically for crude, however, is at the end of this month (June 20 - 28), so we may have to wait a bit before we see any significant top or bottom form in this market. We are still on the sidelines of crude oil.

Trading Blog Monday (late night), June 6, 2022

6/6/2022

MARKETS UPDATE (11:30 pm EDST)

We had been waiting for a rally in gold and silver prices into the recent reversal zone for precious metals (May 27 - June 6). We did get one in both metals, but it fell well short of our targets ($1900 in gold and $24 in silver). Gold hit $1873 last Friday, and silver reached $22.48 today. Gold did not make a new high today while silver did, and both closed in the lower part of their day's range. This gave us a strong intermarket bearish divergence signal in the last day of our reversal zone. This is why I gave a trade alert to sell both metals short (see post below). Our stop loss for both trades can be based on both closing above their recent highs ($1874 in gold and $22.49 in silver).

Our preferred labeling for both metals is that they are older medium-term cycles that have turned bearish and are headed lower to their final cycle bottoms due over the next month or two. If we get a strong rally that breaks above those highs just mentioned, we may have to relabel the cycles. But for now, we are bearish. There's still a small chance that gold could rally and challenge it's all-time high of $2070, but that possibility is looking much less likely now. It's more likely that gold's long-term 15-16 year cycle has peaked and is now correcting down to it's long-term cycle bottom due in 2023-2024 around $1000.

It's still not clear if the broad stock market is now going to correct down to a sub-cycle low or continue to rally. We are out of our strong reversal zone (May 26 - June 3), and all three of our stock market indices (DOW, S&P 500, NASDAQ) made new highs last week (in that time frame). These indices should fall now if this reversal is going to be effective. This is my preference, but sometimes "reversal" zones can correspond to break-outs if the market is very bullish. A rally to new highs from here would confirm that is happening. If this market does move higher, Friday (plus or minus a few trading days) could be another potential reversal point (a weak one). We will stay on the sidelines as we watch how this market moves over the next several days.

It appears that the U.S. Dollar Index made its final medium-term cycle bottom last Monday at 101.30.This means we have started a new cycle, and new cycles usually start off bullish. This reinforces the idea that the precious metals will move down now, at least short-term. The big question is whether or not the greenback can rise above its previous high of 105 on May 13. That will determine if the dollar is going to turn longer-term bullish or continue lower into a final 15-16 year bottom (due in 2023-2025 in the 50-55 range). We shouldn't have to wait long to see that question answered.

Crude oil is most likely in the eighth week of a medium-term cycle that began with the low of $92.14 on April 11 (July contract chart). It made its first sub-cycle low on May 19 at $103.24. This cycle has been very bullish, and this second sub-cycle is now rallying strongly to its top which could be anytime within the next 1 to 4 weeks. Because prices have now cleared significant resistance at $115, we could see more rallying from here. Two weeks from now we enter another reversal zone specifically for crude (June 20 - 28). This would be an ideal time frame for a top. As I've said in previous blogs, this market is highly volatile at this time due to the ongoing Russia/Ukraine war, and I am not comfortable chasing this rally until it makes a significant correction. We will remain on the sidelines of crude for now.

Trading Blog Monday, June 6, 2022

6/6/2022

GOLD AND SILVER TRADE ALERT (3:15 pm EDST)

It looks like gold and silver are at an optimal position and time for us to enter a short position in both metals. We can place a close stop loss on this trade near Friday's high in gold and today's high in silver. We will enter a short position now in both gold and silver. I will comment a bit more in a later post.

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