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Trading Blog Thursday, June 29, 2023

6/29/2023

MARKETS UPDATE and GOLD TRADE ALERT (5:00 pm EDT)

We are now approaching the center (June 30) of our current strong general reversal zone (June 26 - July 5). All three of our broad stock market indices (DOW, S&P 500, NASDAQ) made new weekly lows on Monday (which was the first day of the reversal zone). All of those lows were below the !5-day moving average but above the 45-day moving average and were not deep enough to qualify as a final medium-term cycle bottom. The market has been rallying from those Monday lows which is not surprising given we are approaching a holiday week-end (Fourth of July in the U.S.) and equity markets are often optimistic and rise into holidays. Although Monday was probably not the final medium-term cycle bottom for all three indices (the DOW may be an exception as it came close to testing the 45-day moving average), it was technically in our reversal zone and could be a significant sub-cycle low.

If equities continue a rally into early next week, and especially if we get a bearish divergence signal (i.e. one, two, but not all three indices making a new weekly high), we will probably be looking to sell short. The alternative would be to see the market fall from here and make new lows by July 5. That could give us a potential buy spot if all three indices test or break below their 45-day moving averages. Right now those moving averages are 33,593, 4,230, and 12,865 in the DOW, S&P 500 and NASDAQ, respectively. We note that because the Fourth of July falls on a Tuesday this year, markets will close early on Monday - around 1 pm EDT - and they will be completely closed on July 4th, so trading may be minimal from now through then. Trading should be back to normal on July 5, and that is technically the last day of our reversal zone. We will remain on the sidelines for now as we wait for a significant high or low to trade.

It looks like gold is completing its final correction down to the end of its current medium-term cycle. The cycle timing is right for this, and we are now in the dead center of not only a strong general reversal zone for all markets but also a reversal zone specifically for the precious metals. Tomorrow is also a potential strong pivot point for gold. Prices today got to $1894 before snapping back up above $1900. That was a new weekly low for gold, but silver hasn't yet gone below its low from last week so we have a case of intermarket bullish divergence between the metals. This looks like a good time to buy gold for the start of a new medium-term cycle. I am going to put in a buy order for tomorrow's market open. We can put a stop loss on this trade based on a close below $1850.

Silver is also most likely at the end of an old medium-term cycle as we come to the center of these strong reversal zones. It's possible that silver made its final cycle bottom last Friday at $22.12 (that was just one trading day outside the reversal zone), but prices are falling again and could easily make another low either tomorrow or early next week. If silver does make a new weekly low tomorrow, it would negate its bullish divergence with gold (see above), but next week could give us another bullish divergence signal if one metal makes a new low without the other. I am going to hold off buying silver for now and wait to see if it can make a new low within these current reversal zones (that end next Wednesday). If silver does go lower, we would like to see prices stay above $21 (even $22) to buy. We don't want to see prices drop below $20 as that would turn silver's general trend very bearish.

This week and next we also have a reversal zone specifically for currencies precisely overlapping our general and precious metal reversal zones (June 26 - July 5). This is significant because the U.S. Dollar Index has been rising into it and is now encountering a resistance area around 104. Thus a top and reversal back down in the greenback could be imminent. If this happens, it could trigger a rally in the precious metals.

Crude oil prices still seem to be stuck in a congestion zone between $67 and $75 (Aug. contract chart), and this week they seem to be having trouble breaking above the 15-day moving average (now at $70). Prices are also trending below the 45-day moving average. Prices made a top in last week's reversal zone specifically for crude and have been falling from there, but we are now in the center of a general reversal zone for all markets. We should be watching for a significant low. In last Thursday's blog on crude I wrote:

"We enter a new general reversal zone for all markets next week, so we could see a significant bottom in that time frame (i.e. through July 5). The labeling of crude's medium-term cycle is still ambiguous, but if we start making new lows in this new reversal zone, it may be a good time to enter a long position in crude, regardless of the cycle labeling... If the medium-term cycle is bearish, prices could fall as low as the $53 - $58 area."

Yesterday crude made a new weekly low at $67.05. That could be it, but there is still time in this reversal zone (it ends next Wednesday) for prices to go lower. Let's stay on the sidelines for now and wait to see if that happens.

Trading Blog Thursday, June 22, 2023

6/22/2023

MARKETS UPDATE (6:00 pm EDT)

The broad stock market clearly made a significant high last Friday in the center of our current somewhat weak reversal zone (June 13 - 22), which ends today. All three indices (DOW, S&P 500, NASDAQ) have been falling sharply from Friday's high as they now approach potential support at their 15-day moving averages. Below that, there is more support at their 45-day moving averages.

We enter a considerably stronger general reversal zone next week (June 26 - July 5). If this market continues to drop and these indices break below their 45-day moving averages by the the Fourth of July holiday (U.S.), then we will probably look to buy as we could be seeing the final bottom in the medium-term cycle. A good price target for that bottom would be around 32,500 in the DOW and 4,100 in the S&P 500. That would be a long drop from here, so I think it is more likely these indices will find some support above the 45-day moving average and rally some more.before we see that final medium-term cycle bottom. If we get an isolated low well above the 45-day moving average near the end of next week, we may also look to buy for a final rally up (the current medium-term cycle has a very bullish trend). However, holiday week-ends tend to produce optimistic rallies the week before, so we could see a rally into next Friday and even new highs. In that situation, we would probably want to sell short. I realize there are a lot of possibilities here and this may be a bit confusing, but the bottom line is we want to buy or sell according to what we see happening around the center (June 30) of this new reversal zone. If its a rise to a top, we sell short, if a fall to a bottom, we buy. For now, we remain on the sidelines of this market.

In Monday's blog on gold I wrote:

"...Gold's current medium-term cycle (which began with the low of $1807 on Feb. 28) has recently developed a slightly bearish trend. It is also getting old. This means it likely peaked with its $2059 high on May 4 and is now moving down to its final corrective bottom due anytime now over the next 5 weeks...If last week wasn't the bottom, prices could continue lower into our next reversal zone for these metals coming up June 26 - July 5. That would also be a good time frame for the final cycle bottom. If prices do go lower, we don't want to see them go below $1807 as that would turn gold's general trend very bearish."

Well, last week's low ($1928) wasn't the bottom as gold prices got down to $1914 today. It looks like gold is headed lower into next week's reversal zone, so we will watch for a significant bottom to buy in that time frame. A good price target could be around $1870. We would like to see prices remain above $1850. Any price drop below $1807 would probably keep us on the sidelines, which is our position at the moment.

Silver prices have also been falling steeply, and they have now gone below the May 26 sub-cycle low of $22.69. This means the medium-term cycle has turned bearish and is now headed to it's final cycle bottom. As I wrote in Monday's blog:

" ...it's more likely that we are still in an older cycle that is due to bottom anytime over the next six weeks. As with gold, next week's new reversal zone for the precious metals would be a good time for the final bottom, and that could turn out to be a good spot to buy (as long as prices remain above $20."

So we will look for a final bottom in silver between now and July 5 at a price above $20. We remain on the sidelines for now.

Our reversal zone for crude oil ends today. Yesterday crude prices rallied to a new weekly high ($72.72 - July contract chart) just above the 45-day moving average, but today they fell dramatically and closed at $69.51 - below both the 45-day and 15-day moving averages. Yesterday's high was within the reversal zone so it is likely that was a significant top. Prices should move lower from here, but how low will they go? We enter a new general reversal zone for all markets next week, so we could see a significant bottom in that time frame (i.e. through July 5). The labeling of crude's medium-term cycle is still ambiguous, but if we start making new lows in this new reversal zone, it may be a good time to enter a long position in crude, regardless of the cycle labeling. As I mentioned in Monday's blog, if the medium-term cycle is bearish, prices could fall as low as the $53 - $58 area. For now, we will remain on the sidelines and wait to see how low crude can fall into next week.

Trading Blog Tuesday, June 20, 2023

6/20/2023

BRIEF UPDATE ON THE BROAD STOCK MARKET (2:30 pm EDT)

The broad stock market today seems to be finally taking a breather from a nearly parabolic rally over the last two weeks off the May 24 and 25 lows of the S&P 500 and DOW, respectively. We watch now to see if today's drop will be just a short-term dip or if it will gain momentum and fall hard into our next strong reversal zone coming up next week (June 26 - July 5). In the latter case we could see a final medium-term cycle bottom by July 5, and that could turn out to be a good spot to buy. My preferred alternative, however, would be to see any corrective drop now hold above the 45-day moving average with a bounce back up to new highs in next week's reversal zone. In that situation we would probably want to sell short at those highs for a sharp fall to the medium-term cycle bottom that would probably be in the last week of July. We remain on the sidelines for now.

Trading Blog Monday, June 19, 2023

6/19/2023

UPDATES ON GOLD, SILVER, CRUDE OIL and the U.S. DOLLAR INDEX (7:30 pm EDT)

Gold's current medium-term cycle (which began with the low of $1807 on Feb. 28) has recently developed a slightly bearish trend. It is also getting old. This means it likely peaked with its $2059 high on May 4 and is now moving down to its final corrective bottom due anytime now over the next 5 weeks. It's possible that last week's low at $1928 was the bottom already as that was inside our reversal zone specifically for gold and silver (which ends today). If so, prices could rally strongly from here. If last week wasn't the bottom, prices could continue lower into our next reversal zone for these metals coming up June 26 - July 5. That would also be a good time frame for the final cycle bottom. If prices do go lower, we don't want to see them go below $1807 as that would turn gold's general trend very bearish.

As I've stated in recent blogs, there is a strong possibility that the long-term (23 year) cycle in gold (which I describe on this website's Home Page) could have bottomed on Sept. 28, 2022 at $1616. If that's the case, gold could be very bullish now and ready to make new highs beyond the all-time high of $2070. But if Sept. 28 didn't end the 23 year cycle, then that cycle is due to bottom next year close to $1000. So how do we know if this is a new or old 23 year cycle? If the current medium-term cycle (as described above) ends soon (if it hasn't already with last week's low) and the new one can rally well above $2070, we will assume a new 23 year cycle has started. On the other hand, if gold prices move lower and break below $1807, it will signify that the older 23 year cycle is still in place and prices will likely fall much lower into next year.

So the reader can see that we are at a significant crossroads in the long-term cycle in gold. I slightly favor the bullish view that a new 23 year cycle has already started. Therefore, we will be looking for another low spot to buy in next week's new reversal zone for the precious metals as long as prices remain well above $1807. If gold rallies this week into next, we will stay on the sidelines as a top could form in that new reversal zone, and we would want to wait and see what sort of correction would follow. We remain on the sidelines of gold for now.

Silver's current medium-term cycle began with its low of $19.90 on March 10, and this cycle is also getting old. Silver made a significant top on May 5 at $26.12 followed by a significant sub-cycle correction on May 26 at $22.69. It's possible that May 26 low could have been the final bottom to the medium-term cycle (although it would have been a little early). If so, silver could be very bullish now. However, I think it's more likely that we are still in an older cycle that is due to bottom anytime over the next six weeks. As with gold, next week's new reversal zone for the precious metals would be a good time for the final bottom, and that could turn out to be a good spot to buy (as long as prices remain above $20). If instead silver ends up rallying this week into that new reversal zone next week, we will stay on the sidelines. Any top forming in the new reversal zone could be followed by a significant correction down. We remain on the sidelines of silver for now.

There is a strong support line for the U.S. Dollar Index around 102, and that is now being tested. Any bounce in the greenback up from this support would put downward pressure on the precious metals.

Crude oil prices continue to remain range-bound between $67 and $75 (July contract chart). We are now at the center of a reversal zone specifically for crude (June 13 - 22) and prices have been rallying from last week to a new high today at $72.02. A reversal back down could be imminent. Prices are now between the 15-day and 45-day moving averages. A sharp reversal down could send them back down below both again.

The cycle labeling of crude is still not clear. We don't know if the current medium-term cycle began on March 20 at $64.66 or May 4 at $63.89. If the cycle began March 20, it has turned bearish because it has already dipped below that starting low. Either way, a sub-cycle low is due this week or next (if it didn't already happen last Monday). Any new low now that falls below $63.89 will turn crude bearish, regardless of which cycle is in place, and prices could be on their way down to the $55 - $ 58 area. If we get a top this week and prices fall into next week's strong general reversal zone for all markets (June 26 - July 5) and remain above $65, we may look to buy. For now, we remain on the sidelines of crude oil.

Trading Blog Wednesday, June 14, 2023

6/13/2023

BROAD STOCK MARKET UPDATE (4:30 pm EDT)

We had yet another FOMC meeting this week that ended at 2:00 pm today with the Fed announcing no change in interest rates this month. The Fed did suggest, however, that there would likely be two more hikes this year to get the benchmark rate between 5.5% and 5.75%. That rhetoric was a bit more aggressive than what analysts and economists had been expecting. The markets didn't respond well to this. Despite the rate pause, equities dropped sharply after the 2 pm announcement, but they rebounded and recovered most of that loss by the end of the day. I suspect today's announcement will have little impact on the broad stock market beyond today's short-term fluctuation.

The labeling of our medium-term cycles in the DOW and S&P 500 are clear now. Both began from lows in mid-March (31,430 on March 15 for the DOW and 3,809 on March 13 for the S&P 500). Both have rallied bullishly from those lows (especially the S&P 500) with significant sub-cycle corrections along the way, and both are now rallying to their final peak which will be followed by a sharp correction down to their final medium-term cycle bottoms. The final bottom in the DOW is due 5 - 8 weeks from now. Depending on the labeling of the S&P's sub-cycles, its final medium-term bottom could be due by the end of this month or possibly the end of July. The big question now is how high will these indices rally before topping out and falling to those bottoms?

The S&P 500 has been making new cycle highs every week over the last several weeks while the DOW just yesterday broke briefly above its May 1 high of 34,258 and closed the day below it (at 34,212). If the DOW can close above that May 1 high, its cycle will officially turn bullish (like the S&P 500) and we could see more rallying. But all three of our indices DOW, S&P 500, and the NASDAQ have been rising steeply and may be ready to take at least a small corrective dip. We are entering a relatively weak general reversal zone today (June 13 - 22), so a top and some sort of correction could be imminent. I am going to guess that such a correction (if it happens) will be minor. A more likely time for a significant top would be in a very strong reversal zone coming up at the end of the month (June 26 - July 5).

We will stay on the sidelines of the broad stock market for now as we watch for a possible top in our current weak reversal zone (June 13-22) and a minor correction. if that correction continues to fall into our next strong reversal zone around June 29 (June 26 - July 5), we may look to buy. But a continued rally into June 29 would probably have us selling short.

Trading Blog Friday, June 9, 2023

6/9/2023

GOLD AND SILVER TRADE ALERT (1:30 pm EDT)

We are in the center of a reversal zone for gold and silver, and today silver is making a new weekly high while gold is not. This gives us a bearish divergence signal, and both prices are closing in the lower part of today's range. We are going to exit our long positions in both metals today. The small profit we will get in silver will make up the small loss in gold.

Trading Blog Wednesday, June 7, 2023

6/7/2023

MARKETS UPDATE (3:30 pm EDT)

We are currently at a crossroads in the longer-term picture of the broad stock market. Our premise that we have already started a severe long-term correction or "crash" in equities from the all-time highs of 36,953 in the DOW (Jan. 5, 2022), 4,819 in the S&P 500 (Jan. 4, 2022) and 16,212 in the NASDAQ (Nov. 11, 2021) is still intact. This correction could exceed 70% by next year. A correction of this magnitude does not happen overnight, and it usually proceeds in down waves with periodic up-swings. A significant wave up was in mid-August 2022 when the DOW went up to 34,821, the S&P 500 got back up to 4,325, and the NASDAQ rose to 13,181. These highs were followed by another wave down into October 2022, but the market has climbed back up since then to challenge those mid-August highs. The DOW already slightly exceeded it's Aug. 2022 high in Dec. 2022 before backing down again. The NASDAQ is now testing and challenging its Aug. 2022 high of 13,181 (today's high got to 13,362). The S&P 500 is also very close to its Aug. 22 high.

My point here is that those Aug. 22 highs are important resistance. If all three indices break clearly above those highs, it might distort the normal chart pattern of a severe long-term correction and bring it into question (or at least delay the final bottom). We need to watch this carefully now. If the S&P 500 cannot break above 4,325 soon, we will have bearish divergence with the DOW and NASDAQ (as both have broken their Aug. 2022 highs). Another bearish divergence signal is in place now as the S&P 500 and NASDAQ continue to make new yearly highs while the DOW remains well below its yearly high from January this year. If we were inside a reversal zone, I would give these bearish divergence signals more weight; but the next strong reversal zone for this market is not until the end of this month into the Fourth of July holiday. For that reason, I think this market could do some more rallying and possibly negate these bearish signals. We will stay on the sidelines for now as we watch how this unfolds.

Gold and silver prices are down today, but gold remains above last week's low and silver is staying above its 15-day moving average. Let's hold our long positions in both metals for now.

The U.S. Dollar Index seems to be finding strong support at 104, but there are some bearish technical signals suggesting it might break below that line soon. If it does, that would give a lift to gold and silver prices. But if instead the greenback rallies from this support, gold and silver could be in trouble.

Crude oil prices have been giving us a roller coaster ride over the last two weeks. Last week's low at $67.03 (July contract chart) may have been a "triple-bottom" to the lows of May 4 and March 20. If that's the case, crude could be very bullish now as it starts a new medium-term and even longer-term (3 year) cycle. But after a strong rally on Monday that broke briefly above the 45-day moving average, prices are falling today and testing the 15-day moving average. The medium-term cycle labeling for this market is still not clear. There is a reversal zone specifically for crude coming up next week (June 13 - 22). Let's wait and see if it will correlate to a new low or new high. if it's a low, we may be looking to buy. We remain on the sidelines of crude for now.

Trading Blog Tuesday (late night), June 6, 2023

6/6/2023

UPDATES ON THE BROAD STOCK MARKET and PRECIOUS METALS (11:00 pm EDT)

Well, the debt-ceiling "crisis" is over (for now), and not surprisingly the massive relief rally from Friday seems to have lost some of its steam. The S&P 500 and NASDAQ made slightly new weekly highs yesterday (the DOW did not - bearish divergence), and all three indices are correcting down a bit today. Yesterday was a potential "pivot point" for equity markets, but for the rest of the week this market is free of any reversal zones or pivot points.

Both the DOW and S&P 500 have been rallying up strongly from significant sub-cycle bottoms made on May 24 and 25, but we are now in the second half of their medium-term cycles. This means we should be anticipating a final top (if it hasn't happened already) and correction to the final (medium-term) cycle bottom sometime over the next 2- 11 weeks. The S&P 500 medium-term cycle made a new cycle high yesterday, but the DOW is still below its current medium-term cycle high from May 1 (34,258) - another bearish divergence signal. Yesterday's "pivot point" could be a signal for the market to turn down now, but equities seem reluctant to sell-off today. The DOW is testing support at its 45-day moving average, and the S&P 500 and NASDAQ are well above their 45-day moving averages (all three are above their 15-day moving averages). If this market can push higher over the next several days, it will not encounter much resistance in terms of reversal zones until the end of this month. There is a rather weak reversal zone coming up next week (June 13 - 22), but a much stronger one June 26 - July 5.

We anticipate that strong reversal zone (June 26 - July 5) to be a significant cycle high or low, but right now we can't say which it will be. If the DOW can manage to break above its recent May 1 high (34,258), we could see a final top to these medium-term cycles in that strong reversal zone. On the other hand, if the market falls from here, we could see a cycle bottom into the Fourth of July holiday. Right now I'm favoring a rally into that holiday. We will remain on the sidelines of the broad stock market for now.

Today gold is edging back above its 15-day moving average and silver is staying above its 15-day moving average, but neither one is showing any enthusiasm to rally. Both medium-term cycles are getting a bit "long in the tooth" and need to start rallying soon if they are to remain bullish before turning down to complete their final cycle bottoms. We are entering a new reversal zone specifically for the precious metals tomorrow (June 7 - 19), so we should be looking for a significant high or low in this time frame. As with the broad stock market, however, it's not clear which it will be. If prices rally into next week, we will look to take profits in our current long positions. If prices fall now, we will look to bail out with minimal loss. If gold drops below last week's low ($1932.85) and silver remains above its recent low ($22.70 on May 25), it could give us a strong bullish divergence signal in this new reversal zone. We are maintaining our long positions in both metals for now.

Trading Blog Friday (night), June 2, 2023

6/2/2023

MARKETS UPDATE (11:00 pm EDT)

The U.S. Senate passed the modified debt-ceiling bill today in a strong 63 - 36 vote. Wall Street responded with a great sigh of relief that propelled the broad stock market into a massive rally. The DOW closed with a 701 point gain, the S&P 500 gained 61 points, and the NASDAQ was up 140 points. Investors and traders were clearly happy that a U.S. debt default was averted, but will this euphoria subside next week now that the crisis is over?

Our cycle analysis can now confirm that the DOW and S&P 500 made significant sub-cycle bottoms on May 25 and May 24, respectively. The NASDAQ, however, only made a small 2-day dip into May 24, which technically does not qualify as a significant sub-cycle correction. This makes the NASDAQ the most bullish of the three indices, and its rise over the last 4 weeks has been the steepest. But we note now that both the NASDAQ and S&P 500 both made new highs in their current medium-term cycles today, but the DOW is still below its medium-term cycle high of 34,258 (from May 1). This sets up another bearish divergence signal until the DOW can clear that high. So while the NASDAQ and S&P 500 cycles are now bullish, the DOW's cycle is still bearish.

The strong emotional impact of the Senate vote that triggered today's rally will be gone next week, and other fears (inflation, U.S. political divisiveness, geopolitical tensions, possible stock market crash, etc) will likely reassert themselves. Monday and Tuesday are potential "pivot point" days for equity markets. If market pessimism returns and the DOW cannot break above that May 1 high (34,258) early next week, we could see the broad stock market turn back down. Alternatively, if it doesn't, we could see more rallying into the second half of this month. We will remain on the sidelines of the broad stock market for now.

This week's gold rally closed above the 15-day moving average yesterday, but today prices fell and closed back below. Silver prices also fell a bit but managed to stay above the 15-day moving average. We have to watch these metals carefully now. We don't want silver to fall below last week's low ($22.69) as that might suggest the current medium-term cycle is turning bearish. But if gold falls below this week's low ($1932) and silver stays above $22.69, it could be a good bullish divergence signal - especially if it happens in the second half of next week as there is a new reversal zone coming up specifically for the precious metals then (June 7 - 19). Let's keep holding our long positions in both gold and silver for now.

Like the broad stock market, crude oil prices rallied strongly to news of the resolution of the debt ceiling crisis. Prices stayed above the May 4 low of $63.89 (July contract price) and closed back above the 15-day moving average keeping alive the possibility of May 4 being the start of a new medium-term cycle. Let's stay on the sidelines for now and see if today's relief rally can gain some legs next week to show that it is not just a "flash in the pan".

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