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Trading Blog Monday, July 31, 2017

7/31/2017

BROAD STOCK MARKET TRADE ALERT (7:00 pm EDT)

Let me again refer back to my blog on the broad stock market from July 13 as it is still valid:

"We are now more than halfway through the medium-term cycles of the DOW, S&P 500, and NASDAQ which means that we should be watching for a top (high) from which a significant correction (to the end of the cycle) will follow. Technical studies are showing that this correction could be in the 8-10% range or possibly more. This top will most likely happen sometime between July 18 and August 23. Timing and reversal studies are pointing to July 21, July 26, Aug.3, and Aug. 21 as possible pivot points for a significant reversal. This means that the likelihood of a top and reversal down will be highest on or near any one of these dates. Our main trading strategy will therefore be to watch those dates for signs of a top and an opportunity to sell short."

OK. We are now entering another reversal zone centered around Aug. 3. Today the DOW rallied and made a new weekly and all-time high while the S&P 500 and NASDAQ did not exceed their highs from last week for yet another case of intermarket bearish divergence in a reversal zone. All three indices closed the day in the lower part of their day's range which is also bearish. This is giving us signs of a possible top and another opportunity to sell short. I am going to enter a short position in the broad stock market tonight for tomorrow's market open. We can set a tight stop loss for this trade based on both the S&P 500 and NASDAQ making new weekly highs. For those who are trading index funds, I would suggest trading the DOW or S&P 500 here as the NASDAQ's correction may already be significantly down from last Thursday's high.

Trading Blog Friday, July 28, 2017

7/28/2017

CRUDE OIL TRADE ALERT and Brief Markets Update (3:00 pm EDT)

In Tuesday's blog on crude oil I wrote:

"It looks like crude oil was not ready to fall from its July 20th high of $47.74 and has rallied higher today to $47.97 (Sept. contract chart). We are still in a reversal zone for crude (it ends Friday) so prices could still turn down this week. Because prices are making new highs, there is a good chance that the June 21 low of $42.27 was the start of a new medium-term cycle and maybe even a longer-term cycle which would mean that crude's trend is turning bullish. Nevertheless, this new high is in a reversal zone so some sort of correction now is likely from a high forming this week."

Crude prices are touching $49.72 (Sept. contract chart) at the time of this writing. It's now even more likely that June 21 was the start of a new cycle that is bullish. Today is technically the last day of the reversal zone for crude, but this time window is blending in with a general reversal zone for all markets that extends into next week so it is possible for crude prices to still push higher. Could prices turn down from here? Yes, but the start of a new cycle is often strongly bullish, and that could give more momentum to this rally into next week. Our short position was entered early on July 21 around $47. Many traders may already be stopped out of this trade from my suggested original stop loss of $48. Today's prices seem to be closing above my second suggested stop loss of $49 so we should now be completely out of crude oil. Any sub-cycle correction now will be viewed as a buying opportunity as soon as we can confirm June 21 as the start of a new long-term cycle.

The broad stock market seems to be leveling off and losing some of its upward momentum as it continues through a long reversal zone that extends through next week. We are still watching for signs of a top to sell short. On the sidelines here.

Gold and silver are rallying strongly today which is a nice thumbs up to our long position in gold that we entered yesterday. We need to see this rally carry through into next week, however, to avert the danger of another turn down in this week's reversal zone. We are long in gold and on the sidelines of silver.

Trading Blog Wednesday, July 26, 2017

7/26/2017

GOLD TRADE ALERT (3:00 pm EDT)

Even though gold and silver charts are giving us mixed bullish and bearish signals (see yesterday's blog), there are several technical factors setting up right now in gold that could make a strong rally imminent. Gold prices have been falling and today dipped to $1244 before closing close to the top of the day's range ($1250). This is bullish behavior, and we are in the center of this week's reversal zone for gold. We are also close to a support area around $1234 - $1240. There are several other bullish factors influencing this market now including the strong support of COT charts that I mentioned in yesterday's blog. For these reasons, I am going to enter a long position in gold right now. We can set a close stop loss for this trade on a close below $1234 (which would be about a 1% loss if triggered). There is some risk here as it is still possible for gold prices to fall. The close stop for this trade, however, minimizes this risk and in my opinion makes this a worthwhile trade as the potential rally could be strong. Silver also has the potential to rally now, but silver's chart is a bit more bearish than gold's at the moment, and silver's high volatility could lead to greater losses if these metals turn south. I am going to stay out of silver for now and enter a long position in gold today.

Trading Blog Tuesday, July 25, 2017

7/25/2017

MARKETS UPDATE (5:30 pm EDT)

We are currently in a trading environment of high volatility which will likely continue at least through the end of August. It is important to be a nimble and flexible trader in such times and not get too attached to one position. This may require us to do short-term trading more than I would like, but this is necessary when technical chart patterns change suddenly and abruptly. (A good example of this is the recent directional shift in gold from bearish to possibly very bullish). It is tempting to just stand aside during such volatile periods (well, we do spend a lot of time on the sidelines!), but we are on the verge of some potentially very substantial moves in several markets so we don't want to be completely out of the trading game. This volatile period could see significant reversals in several markets.

Let me repeat what I wrote in my July 13th blog on the broad stock market as it is still valid:

"We are now more than halfway through the medium-term cycles of the DOW, S&P 500, and NASDAQ which means that we should be watching for a top (high) from which a significant correction (to the end of the cycle) will follow. Technical studies are showing that this correction could be in the 8-10% range or possibly more. This top will most likely happen sometime between July 18 and August 23. Timing and reversal studies are pointing to July 21, July 26, Aug.3, and Aug. 21 as possible pivot points for a significant reversal. This means that the likelihood of a top and reversal down will be highest on or near any one of these dates. Our main trading strategy will therefore be to watch those dates for signs of a top and an opportunity to sell short."

It is even later now in these medium-term cycles. We are past July 21 and approaching July 26 and equity markets are still pushing higher. Today the S&P 500 and NASDAQ both made new all-time highs while the DOW remained a bit below its all-time high from July 14 (21,682) for yet another case of intermarket bearish divergence. Yes, the market could turn down now, but directional momentum in all three indices is still 100% bullish, and the DOW is just a whisker away from breaking that 21,682 high. We are waiting to sell short, but if the DOW does break its high and negates this week's bearish divergence signal, we will probably stay on the sidelines until next week. Still out of the broad stock market.

Gold and silver charts are currently giving us mixed signals. One reason for this is that the cycle patterns in both metals may have to be relabeled so that the July 10 low in gold at $1206 and the July 10 low in silver at $15.23 are representing the starting points of new cycles which could now rally strongly. We had earlier been labeling those lows as only sub-cycle corrections with the final cycle bottoms to come a bit later and lower. This later scenario is still possible, but the bullish, new cycle labeling is also possible and is being supported by recent bullish COT charts (see July 13 blog ). This unresolved ambiguity in cycle labeling is putting us on the sidelines of both metals for now. Yes, we are in a reversal zone for precious metals this week so we could see the current rally turn down, but reversal zones occasionally see rallies breaking out instead of breaking down, and there are reasons to think that might happen here. Our main strategy right now is to look to buy the cycle bottom in both metals. If these are still older cycles then we should see that bottom over the next several weeks at lower price levels, but if new cycles started on July 10 (as stated above) then we may have to scramble and look for a good entry point to go long before prices take off toward new highs. On the sidelines of both gold and silver for now.

Not surprisingly, the chart of the U.S. Dollar Index is also looking ambiguous, at least short-term. The dollar has been plummeting and is now approaching critical support in the 92 - 93 area. If the greenback breaks below there, it could be in big trouble and in danger of going into "free fall" and a severe decline. We are now in the center of a reversal zone for currencies, however, so the dollar could turn up from this support line and rally now. But that rally may not get very far before the dollar drops again to assault that 92 - 93 support. Needless to say, if that support breaks, gold and silver prices could really take off.

It looks like crude oil was not ready to fall from its July 20th high of $47.74 and has rallied higher today to $47.97 (Sept. contract chart). We are still in a reversal zone for crude (it ends Friday) so prices could still turn down this week. Because prices are making new highs, there is a good chance that the June 21 low of $42.27 was the start of a new medium-term cycle and maybe even a longer-term cycle which would mean that crude's trend is turning bullish. Nevertheless, this new high is in a reversal zone so some sort of correction now is likely from a high forming this week. We entered a short position early last Friday around $47 which looked good until today's rally which puts us a bit in the red. Our original stop loss for this trade was a close above $48. Because of the current reversal zone, I am going to raise that stop to $49. Traders may still use $48 as a stop depending on their loss tolerance. Holding my short position in crude for now.

Trading Blog Sunday (late night), July 24, 2017

7/23/2017

MARKETS UPDATE and IMPORTANT UPDATE and TRADE ALERT ON PRECIOUS METALS (11:30 pm EDT)

Last week we entered a short position in gold with the idea of taking advantage of an imminent correction in both gold and silver from a potential top in this week's reversal zone. There are some very bullish short-term technical signals suddenly appearing in the charts of both gold and silver right now that make holding this short position dangerous.
I am therefore going to recommend covering (unloading) this gold short position and standing aside both metals this week. On Thursday I suggested shorting silver on Friday on the condition of the spot price closing under $16.50. It closed at $16.52 so traders should be on the sidelines of silver. Gold and silver prices could still back down as we are in a reversal zone and they are both pushing against resistance areas in their charts, but there is now a more than small chance of these metals "breaking out" and suddenly exploding to new highs. (Recent COT- Commitment of Traders- charts are showing "smart money" to be unusually bullish on these metals right now). I am going to place an order to unload my gold short position at tomorrow's (Monday's) market open. At the current price that gives us a small 1% loss. We should now be on the sidelines of both gold and silver.

On Thursday evening I also suggested going short in crude oil (for Friday's market open) with a stop loss based on prices closing above $48. It looks like we may have caught the start of the correction as prices dropped steeply on Friday. Let's hold this short position and see if we can ride it down to at least the $43 area. Holding my short position in crude oil.

In Thursday's blog on the broad stock market I wrote:

"We are now approaching July 21 (tomorrow), and the S&P 500 and NASDAQ are both making new all-time highs while the DOW remains a bit below its all-time high (21,682 from last week). We are therefore seeing intermarket bearish divergence, and we are in a strong reversal zone. Could the market turn down here? It is possible, but there aren't many other technical signals pointing to a top yet, and if the DOW rallies a bit more tomorrow it could easily breach its all-time high and negate its bearish divergence with the other two indices."

Well, the DOW did not breach its high on Friday and all three indices closed in slightly negative territory so our bearish divergence signal is still valid. Is a correction starting? Maybe, but all three indices closed near the top of their Friday range, which is not very bearish, and directional momentum remains nearly 100% bullish in all three. They could push higher next week for another case of bearish divergence (if one or two, but not all three, make a new high). I am going to hold off selling short for now and see how these indices move early this week.

Trading Blog Thursday, July 20, 2017

7/20/2017

MARKETS UPDATE and SILVER and CRUDE OIL TRADE ALERT (7:00 pm EDT)

NOTE: I will be traveling tomorrow (Friday) and probably won't have time to post another blog until Sunday. Depending on how the markets move tomorrow, I may have trading recommendations on Sunday.

In last week's blog on Thursday I wrote:

"...we should be watching for a top (high) from which a significant correction (to the end of the cycle) will follow. Technical studies are showing that this correction could be in the 8-10% range or possibly more. This top will most likely happen sometime between July 18 and August 23. Timing and reversal studies are pointing to July 21, July 26, Aug.3, and Aug. 21 as possible pivot points for a significant reversal."

We are now approaching July 21 (tomorrow), and the S&P 500 and NASDAQ are both making new all-time highs while the DOW remains a bit below its all-time high (21,682 from last week). We are therefore seeing intermarket bearish divergence, and we are in a strong reversal zone. Could the market turn down here? It is possible, but there aren't many other technical signals pointing to a top yet, and if the DOW rallies a bit more tomorrow it could easily breach its all-time high and negate its bearish divergence with the other two indices. I am going to stay on the sidelines for now and see if these markets (especially the DOW) can push higher tomorrow.

Gold and silver prices are pushing a bit higher today as we approach another reversal zone specifically for these metals (July 21-31) so it looks like we may get a top in this time period. We shorted gold yesterday with a stop loss at $1270. Today's high of $1247 is still well below that stop. Silver is now pushing against resistance in the $16.30 - $16.50 range. I won't be able to post any trade suggestions tomorrow so I will now recommend entering a short position in silver tomorrow as long as the spot price closes below $16.50. Still holding our short position in gold.

Crude oil's chart and cycle pattern is a little ambiguous right now. It is possible that crude started a new medium-term and longer-term cycle from its $42.05 low on June 21 (Aug. contract chart). If that is the case then crude could be quite bullish and ready to push much higher over the next several weeks or even months. The other possibility is that crude is still finishing its old medium-term and long-term cycle and will bottom over the next several weeks, probably around $40. Even if we have started a new bullish cycle, prices are rising into the center of a reversal zone for crude (July 14 - 28) right now so some sort of correction is likely imminent. In the bullish scenario (new cycle), that correction may not be severe, but if this market is still bearish (old cycle), the correction could be substantial. Today crude prices got to $47.55 but then dropped and are closing around $46.80 near the low of the day's range. This is a bearish sign. Prices are also testing resistance around $47. I am going to enter a short position in crude oil tonight for tomorrows market open. We can set a very close stop loss for this trade on a close above $48.

Trading Blog Tuesday, July 18, 2017

7/18/2017

GOLD TRADE ALERT (2:15 pm EDT)

Gold and silver have been rallying strongly from the deep bottoms they made on July 10 (gold at $1212 and silver at $15.22) that may have been triggered by market manipulation (silver actually plunged to $14.34 intraday, but this data point has now been eliminated from most silver charts as it was considered to be an "aberration" caused by a single trader). The current rally is a typical rebound rally, but prices may not get far before turning down again. As I wrote in last week's blog on July 10:

"Gold and silver have now broken below the lows that started their current medium-term cycles (that was $1214 on May 9 for gold and $16.07 on May 9 for silver) which means that their cycles are likely pointed down for at least several more weeks and possibly longer. It is possible for gold prices to get as low as the $1150 area so we will watch for any short-term rallies now to possibly sell short."

We may be getting a short-term rally now that could be giving us a good spot to sell short. Gold is now testing significant resistance around $1240, and silver is approaching resistance in the $16.30 - $16.50 range and current directional momentum in both metals is mostly bearish. The U.S. Dollar Index has been falling over the last several days, but we are now entering a reversal zone for currency, and the dollar is approaching an important low it made last year in August which could offer at least temporary support for a weak rebound rally. Such a rally could push the precious metals lower. I should also note here that the Euro and Swiss Franc, two currencies that usually move in sync with gold and silver (as opposed to the U.S. Dollar which usually moves opposite these metals) are very close to cycle peaks and are making new highs as we move into this reversal zone for currencies. A reversal and correction in these two currencies would likely accompany a reversal in the precious metals. I am going to enter a short position in gold today and hold off shorting silver for now as it may move a bit higher. We can set a stop loss for this trade on a close above $1270. Conservative, longer-term traders may wish to avoid this trade and just wait for a final corrective bottom in the current medium-term cycles of both metals to buy (see July 13 blog).

Trading Blog Thursday, July 13, 2017

7/13/2017

IMPORTANT UPDATE and OVERVIEW of the BROAD STOCK MARKET and PRECIOUS METALS (5:30 pm EDT)

In Monday's blog on the broad stock market I wrote:

"... if these indices (DOW, S&P 500, NASDAQ) can break above those July 3 highs this week (that would be 21,563 in the DOW and 2,439 in the S&P 500) then we could see more rallying into next week. As I have discussed in recent blogs, we are keeping our eyes open for a significant top to sell short as a significant correction (possibly 8-10% or more) is expected soon based on technical and cycle patterns in these charts."

The DOW and S&P 500 did break those highs yesterday, and we are not in any major reversal zone until next week so this market could easily rally some more. We note, however, that while both indices are making new weekly highs, only the DOW has made a new all-time high (the S&P 500 is close to its all-time high of 2,454 and the NASDAQ is also approaching its all-time high of 6,342) so if the S&P 500 and/or NASDAQ cannot break their all-time highs, we will have an intermarket bearish divergence signal and the possibility of this market falling steeply into next week's reversal zone. That scenario is less likely now, but we need to see the S&P 500 and NASDAQ break above those highs before we discard it.

I suspect that my recent analysis of equity markets is getting a bit complex and confusing so let me try and give a general overview of the broad stock market right now:

We are now more than halfway through the medium-term cycles of the DOW, S&P 500, and NASDAQ which means that we should be watching for a top (high) from which a significant correction (to the end of the cycle) will follow. Technical studies are showing that this correction could be in the 8-10% range or possibly more. This top will most likely happen sometime between July 18 and August 23. Timing and reversal studies are pointing to July 21, July 26, Aug.3, and Aug. 21 as possible pivot points for a significant reversal. This means that the likelihood of a top and reversal down will be highest on or near any one of these dates. Our main trading strategy will therefore be to watch those dates for signs of a top and an opportunity to sell short. Note that if this market decides to rally and top near Aug. 21, that rally could be significant (possibly even a "blow-off" top) so we may also try to go long (before Aug. 21) at some point if the technical analysis supports it. At the moment we are still on the sidelines of the broad stock market.

This also seems like a good time to give a general overview of the precious metals market:

In recent blogs I have discussing how gold and silver's medium-term cycles have turned bearish. A cycle turns bearish when prices break below the price that starts the cycle. In the case of gold, the start of the cycle was at $1214 on May 9 and for silver it was $16.07 also on May 9. Last week gold and silver broke below those prices which means that they will likely go lower until the end of both current cycles. These cycles could end with a final low as early as the last week of this month, but they could also drag out into September or even October before hitting a final bottom. An important point I want to make here is that even though these metals are taking a bearish turn, once their final cycle bottoms are in it will be a very good spot to buy. This is because the longer-term charts for both metals still look quite bullish. Gold prices could get as low as $1150 - $1170 without upsetting the bullish chart pattern. Further support for a bullish gold and silver market is coming from the current COT (Commitment of Traders) charts which show that "smart money" investors have recently been increasing their long positions in both metals. The bottom line here is that even though we may attempt a short-term trade any time now to sell short gold or silver's drop to a final cycle bottom, our main strategy is to identify and buy the final cycle bottom in both metals. Still on the sidelines of both gold and silver.

Trading Blog Monday, July 10, 2017

7/10/2017

MARKETS UPDATE (7:30 pm EDT)

The next major reversal zone for the broad stock market begins next week (July 18 - 26), and this sluggish market is still not showing much enthusiasm for either rising or falling into it. For the DOW and S&P 500, their June 29 lows in the last reversal zone were pivot points for a three day rally, but that rally may have topped out on July 3 (also in the reversal zone), and these indices could still fall lower into next week. On the other hand, if these indices can break above those July 3 highs this week (that would be 21,563 in the DOW and 2,439 in the S&P 500) then we could see more rallying into next week. As I have discussed in recent blogs, we are keeping our eyes open for a significant top to sell short as a significant correction (possibly 8-10% or more) is expected soon based on technical and cycle patterns in these charts. Still on the sidelines of the broad stock market.

Gold and silver have now broken below the lows that started their current medium-term cycles (that was $1214 on May 9 for gold and $16.07 on May 9 for silver) which means that their cycles are likely pointed down for at least several more weeks and possibly longer. It is possible for gold prices to get as low as the $1150 area so we will watch for any short-term rallies now to possibly sell short. In the same way gold prices may have been manipulated two weeks go by someone placing a large sell order "by mistake", it appears that a similar situation occurred around 7pm EDT last Thursday after normal market hours when another large sell order was put in for silver that quickly caused the price to briefly plummet from $16 to $14.34. It recovered quickly, but that low around $14 could end up being a significant point in silver's cycle analysis (although it is not showing up on most spot price charts). We will also now watch for any brief bounces in silver's price to possibly sell short for a final cycle bottom that could be as soon as three weeks from now but may also come later in the summer or early fall. Silver's final bottom price will not likely get below that $14 area. On the sidelines of gold and silver for now.

Considering gold and silver's sudden bearish turn, it is not surprising to see the chart of the U.S. Dollar Index looking somewhat bullish. It looks like a baseline of support for the dollar may be developing around 96 from which a rally could start. It may be a difficult climb, however, as there is significant resistance for the dollar all the way up to 100. Nevertheless, even a moderate rally would help push the precious metal prices lower.

Crude oil prices edged lower today so we are still on track to buy a final cycle bottom somewhere within crude's next reversal zone (July 18 - 29). Prices could get to the $40 area, but could also stay above $42. We will wait and see how low they go next week. If prices start to rally and rise into next week's reversal zone, we will consider selling short the top of that rally. Otherwise, we will wait for that bottom to buy. On the sidelines of crude.

Trading Blog Friday, July 7, 2017

7/7/2017

MARKETS UPDATE (12:30 pm EDT)

The broad stock market's direction is still unclear. The DOW and S&P 500 have not made new lows for the week while the NASDAQ did break below last week's low yesterday so we now have a case of intermarket bullish divergence. The NASDAQ's low is only one day out of our reversal zone so it could reverse here (the DOW and S&P 500 made their lows on June 29 - last Thursday- which was in the center of the reversal zone). The next reversal zone is only one week away. If today's bullish divergence signal is valid, this market could rise into it, but directional momentum in the S&P 500 and NASDAQ is still mixed bullish and bearish so we can't rule out the market falling lower next week. It is best to remain on the sidelines of this indecisive market for now.

In Wednesday's blog on precious metals I wrote:

" If gold can stay above its low from May 9 ($1214), we may have a good bullish divergence signal and buy spot here, but if gold breaks that low (it is close) then both metals are likely turning bearish and will move lower for at least several more weeks (probably longer)."

Today gold is breaking below $1214 so it looks like this market is turning bearish. Silver is also breaking below its important support level of $16.07. We may switch our trading strategy to short selling any short-term bounce until these metals find a new bottom. The next reversal zone for gold and silver is the last week of July. These metals thus have plenty of time to move lower before we can expect a reversal back up. Let's stay on the sidelines for now.

In Wednesday's blog on crude oil I wrote:

" If prices can edge back up tomorrow and Friday and stay below that $47 high, we may get another chance to sell short; otherwise, we will wait for another bottom to buy in another reversal zone for crude coming up in the third and fourth week of this month. Ideally, that could be close to $40 and the bottom of a long-term cycle (very good spot to buy), but if prices stay above $42, it could still be a good buy spot as the new long-term cycle may have started at that $42 low on June 7."

Yesterday crude oil prices rose briefly to $46.53 (Aug. contract chart) before falling back to close the day near $45.
I was not quick enough to short sell that top (we are not day traders). Prices are falling steeply today so unless we see another significant bounce, it looks like we will wait for that bottom to buy in the second half of this month. Still on the sidelines of crude oil.

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