UPDATES ON THE BROAD STOCK MARKET and CRUDE OIL (11:00 pm EDT)
In last week's blog I speculated about the DOW making a new all-time high without the S&P 500 and/or NASDAQ, but I should have realized the latter two indices were closer to new highs than the DOW. And indeed, both the S&P 500 and NASDAQ made new all-time highs on Friday, but the DOW did not. This creates a strong bearish divergence signal in this market as we approach a strong general reversal zone coming up next week (July 2 -10) and another one the following week (July 9 - 18). They overlap July 9 - 10, so that could be a major pivot point for a top or bottom. Because next week leads into a holiday week-end (July 4th), there's a good chance the market will rally. If the DOW can't make a new all-time high (i.e. break above 45,074), we could get a top inside a reversal zone with a strong bearish divergence signal and possibly a good spot to sell short. We will keep a close watch on this potential development. We are still on the sidelines of the broad stock market.
In my June 12 update on crude oil I wrote:
"It looks like a new medium-term cycle in crude began with the deep low of $54.33 (July contract chart) on April 9, and the cycle's trend looks bullish. It is too late to chase this rally, so our strategy now will be to wait for a significant sub-cycle correction to buy. We may get that soon if this current rally pushes a bit higher into the general reversal zone that starts tomorrow (June 13 -23)."
Well, prices did push higher to a high of $78.40 on June 23, and then they fell that same day to a low of $66.60. The continuation of aggression between Iran and Israel is making this market VERY volatile. Last week prices seemed to stabilize around $65, which is halfway between the 15-day and 45-day moving averages. We are also inside a wide reversal zone specifically for crude that should last at least through July 10. The current medium-term cycle looks bullish, but June's price surge is clearly the result of geopolitical tensions, and the cycle's trend could quickly turn bearish at the drop of a hat. Last week's dramatic plunge in prices is right on time for a sharp sub-cycle correction that often comes near the mid-point of a cycle, and we are inside a reversal zone, so a bottom and sharp rally back up could be imminent.
Any rally that exceeds last week's $78.40 high would keep the cycle trend bullish, but as the war with Iran cools, we might instead see a weak rally that could turn the current cycle bearish. With this geopolitical "wild card" currently influencing crude prices, I am going to refrain from trading crude for now.
In last week's blog I speculated about the DOW making a new all-time high without the S&P 500 and/or NASDAQ, but I should have realized the latter two indices were closer to new highs than the DOW. And indeed, both the S&P 500 and NASDAQ made new all-time highs on Friday, but the DOW did not. This creates a strong bearish divergence signal in this market as we approach a strong general reversal zone coming up next week (July 2 -10) and another one the following week (July 9 - 18). They overlap July 9 - 10, so that could be a major pivot point for a top or bottom. Because next week leads into a holiday week-end (July 4th), there's a good chance the market will rally. If the DOW can't make a new all-time high (i.e. break above 45,074), we could get a top inside a reversal zone with a strong bearish divergence signal and possibly a good spot to sell short. We will keep a close watch on this potential development. We are still on the sidelines of the broad stock market.
In my June 12 update on crude oil I wrote:
"It looks like a new medium-term cycle in crude began with the deep low of $54.33 (July contract chart) on April 9, and the cycle's trend looks bullish. It is too late to chase this rally, so our strategy now will be to wait for a significant sub-cycle correction to buy. We may get that soon if this current rally pushes a bit higher into the general reversal zone that starts tomorrow (June 13 -23)."
Well, prices did push higher to a high of $78.40 on June 23, and then they fell that same day to a low of $66.60. The continuation of aggression between Iran and Israel is making this market VERY volatile. Last week prices seemed to stabilize around $65, which is halfway between the 15-day and 45-day moving averages. We are also inside a wide reversal zone specifically for crude that should last at least through July 10. The current medium-term cycle looks bullish, but June's price surge is clearly the result of geopolitical tensions, and the cycle's trend could quickly turn bearish at the drop of a hat. Last week's dramatic plunge in prices is right on time for a sharp sub-cycle correction that often comes near the mid-point of a cycle, and we are inside a reversal zone, so a bottom and sharp rally back up could be imminent.
Any rally that exceeds last week's $78.40 high would keep the cycle trend bullish, but as the war with Iran cools, we might instead see a weak rally that could turn the current cycle bearish. With this geopolitical "wild card" currently influencing crude prices, I am going to refrain from trading crude for now.
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