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Trading Blog        Wednesday,  July 31,  2019

7/31/2019

 
MARKETS  UPDATE  (5:30 pm EDST)

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

"If the Fed cuts (probably 1/4 point), equities will likely rally, but that also may depend on Powell's press conference statements.... if Powell suggests a "cut and wait" philosophy, it might take the wind from the sails of any rally."

Well, the market was relatively flat as a 1/4 point rate cut was announced, but as the press conference began, it started to fall - a lot. The DOW dropped over 400 points by 3:00 pm (EDST) but recovered a bit and ended the day with a 335 point loss. Mr. Powell did indeed suggest that this quarter point rate cut was NOT the start of a series of cuts as many had speculated, and the market reacted with a bit of a tantrum. We will have to wait and see if this was just a short-term tantrum. Because the rate cut was widely expected and markets have been buoyant over the last week or so, we may be seeing a case of "buy the rumor, sell the news" here. The DOW's plunge did not quite make it to our corrective target of 26,600 (it got to 26,719). If it pushes closer to that level over the next few days, we will consider buying (we are still in a reversal zone). Still on the sidelines of this market.


The U.S. Dollar Index may not have liked today's rate cut, but it seemed ecstatic over Mr. Powell's hawkish attitude toward future cuts. It soared from 98 to 98.68 (intraday) and ended the day at 98.59. The dollar is now making new highs for the year, but we note that we have just entered a reversal zone specifically for currencies (July 31 - Aug. 8). This rally may top soon and reverse back down. Our longer-term outlook for the U.S. dollar is still bearish as long as any rally stays below 100. A close above 100 would make us question this view. If Mr. Powell maintains a hawkish stance from this point on, that is a real possibility.

A bearish dollar longer-term would also support our current bullish view of the precious metals. Today's dollar surge, however, pushed gold and silver prices lower. We were expecting a short-term correction in these metals, and this may be the start of it. Let's see if prices can push lower into the end of this week or early next for a sub-cycle bottom to buy. Good target prices would be around $1400 in gold and $15.20 in silver. On the sidelines of gold and silver for now.

Despite today's dollar surge and plunge in the broad stock market, crude oil prices were fairly stable. Crude has rallied strongly this week which has been good for our long position (entered on July 22), but if today's equity plunge gains legs and the market takes a deeper dive, crude prices could follow. We will watch this closely. If the low of $55.12 on July 19 (Sept. contract chart) was a sub-cycle bottom as we suspect, crude prices could easily rally into the second week of August. Let's hold our long position in crude for now.





Trading Blog         Tuesday,  July 30,  2019

7/30/2019

 
COMMENT ON THIS WEEK'S FED MEETING AND THE BROAD STOCK MARKET (3:00 pm EDST)

Most financial markets, especially the broad stock market, are now waiting with "bated breath" for the end of this week's FOMC meeting and Fed Chairman Jerome Powell's rate cut (or not) announcement as well has his comments on rate policy going forward. These comments will be delivered at a press conference to follow the meeting Wednesday afternoon. There is no doubt that economic markets are now influencing the Fed's interest rate decisions. Powell's hawkish policy tone in late 2018 and his plan to aggressively raise interest rates resulted in an equity market plunge. Powell then did an about-face and adopted a "patient" attitude toward raising rates earlier this year, and this has helped propel stock markets higher.

As my previous blog noted, the broad stock market is ambiguous at the moment, and we are waiting for it to make either a definitive top or bottom in our current reversal zone(s) this week or next. Reaction to the Fed may be the decisive factor here. Most analysts are expecting a rate cut (the first in a decade) so if the Fed doesn't deliver, equities will likely drop. If the Fed cuts (probably 1/4 point), equities will likely rally, but that also may depend on Powell's press conference statements. If he hints at more cuts this year and next, stock markets could soar. But if Powell suggests a "cut and wait" philosophy, it might take the wind from the sails of any rally. We will remain on the sidelines as we wait and see how this plays out this week.






Trading Blog         Sunday,  July 28,  2019

7/28/2019

 
MARKETS  UPDATE  (5:00 pm EDST)

The broad stock market is looking very ambiguous right now so it is good that we are on the sidelines. The current strong reversal zone for this market ends early this week (on Tuesday), but this overlaps with another minor reversal signature so a strong reversal potential will extend well into Friday. Last week on Friday the S&P 500 and NASDAQ both made new all-time highs, but the DOW did not and remains below its July 16 high of 27,398. That was a strong bearish divergence signal. If the DOW cannot exceed that high this week then all three indices could be headed down into at least the first or second week of August. If that happens, we will look for a spot to buy (as long as the correction doesn't go too low). Also, if this market drops sharply this week (say, to around 26,600 in the DOW), we could be looking to buy. More rallying, however, and especially a new high in the DOW could alternatively give us a top over the next week or two and a possible opportunity to sell short. These multiple possibilities keeps us on the sidelines as we watch for a clearer pattern to develop, hopefully this week.

We are still long in crude oil based on the idea that crude made its first significant sub-cycle correction on July 19 at $55.12 (Sept. contract chart). There are two days left to the current reversal zone for crude (July 19-30) and prices are now around $56. It's possible the price could push lower this week and even break below $55.12 to establish a new sub-cycle bottom before it rallies again. But if prices get close to $52 we might have to consider the possibility of this market turning bearish. Let's hold our long position for now with a stop loss on a close below $54.

The precious metals market is also looking a little ambiguous right now and hard to call. We still have a strong intermarket bearish divergence signal from last week when silver made a new high and gold stayed well below its $1494 high from early this month. This and other short-term technical signals are suggesting that both metals could move lower. We entered a new reversal zone specifically for precious metals on Friday (July 26 - Aug. 9) and the center point of this reversal is this Friday. Let's see if we get a corrective dip into the end of the week to buy. Gold may only dip a little below $1400, but silver has the potential to drop more dramatically, perhaps as low as $15.20. Still on the sidelines of both metals.






Trading Blog       Wednesday,  July 24,  2019

7/24/2019

 
MARKETS  UPDATE  (4:00 pm EDST)

We are now at the center of our current reversal zone for equities (July 19 - 30) and it is still not clear if this market wants to make a top or bottom. Today, however, we are seeing intermarket bearish divergence as the NASDAQ and S&P 500 make new weekly (and all-time) highs while the DOW remains below its high from last week. The DOW, however, is not far from a new high so if it pushes a bit higher our bearish divergence signal will be negated. That could happen as all three indices seem to be closing in the upper part of today's range, and directional momentum is still 100% bullish in all three. For these reasons, I am not ready to sell short today. If the bearish divergence persists into the end of the week or even into early next week, I may consider a short position. Even if we miss short selling a corrective drop, we will be ready to buy the bottom of any short-term correction (as long as it doesn't go too deep) as we still anticipate more rallying into the summer. Still on the sidelines of the broad stock market.

This week's reversal zone could also influence the precious metals (i.e. correlate with a strong turning point). Today silver prices are soaring to a new yearly high ($16.63) while gold remains rather sluggish and is staying well below its July 1 high of $1494. This give us a strong intermarket bearish divergence signal that will likely persist into the end of the week (unless gold prices can close a gap of $70 in two days - not likely). Thus we could see both metals take a significant correction down soon. As with the broad stock market, we will be looking to buy the bottom of any significant sub-cycle correction as both metals continue to look very bullish longer-term. Out of both gold and silver for now.

Crude oil
prices are taking a strong dip down today. This week's reversal zone (July 19 - 30) is very relevant to crude. Last week's low on July 19 at $55.12 (Sept. contract chart) could have been a sub-cycle bottom as it was within our reversal zone, but it could also go lower over the next four trading days and still be within the reversal zone. The sub-cycle bottom is due by next week so, yes, there is still time for a new low, but we would expect it to be in by next Tuesday. We went long in this market on Monday with a stop loss on a close below $54. Today's low got to $55.33 so we are still long. Let's stay long for now as our cycle timing is anticipating the final bottom by next Tuesday (if it didn't already happen Monday). As long as prices stay above $52, we are still on track for more rallying into the summer. 






Trading Blog       Monday,  July 22,  2019

7/21/2019

 
CRUDE OIL TRADE ALERT (1:30 pm EDST)

On Friday crude oil  prices dipped a bit below our target for a sub-cycle correction ($55-$56 - Aug. contract chart) and then snapped back up to close around $55.76. Friday was the first day of a long reversal zone that is specifically relevant to crude (July 19-30). In terms of cycle timing, a sub-cycle low was due last week or is due this week, and Friday's low is exactly in our target range so that could easily be the bottom. We could see crude prices rally from here, especially as the "saber-rattling" between the U.S. and Iran heated up significantly at the end of last week. I am going enter a long position in crude oil now. Let's put an initial stop loss for this trade on a close below $54.




​

Trading Blog        Thursday,  July 18,  2019

7/18/2019

 
CRUDE OIL UPDATE  (3:30 pm EDST)

Crude oil
prices are falling steeply today and dipped to $54.72 (Aug. contract chart) intraday. This is a bit below our target area of $55 - $56 for a correction, but prices seem to be closing above $55. I am concerned here because directional momentum in this market changed today from mixed bullish and bearish to 100% bearish. This is the first significant sub-cycle correction for a new medium-term cycle that began with the $51.25 low of June 12. If the correction goes much lower, and especially if it breaks below $51.25, it means the cycle is turning bearish and will be headed lower for many more weeks. We move into a new reversal zone that is specifically relevant to crude tomorrow and next week (July 19-30). If prices can stay above $54 our bullish view of crude will not be threatened, and we may have an ideal spot to buy. But a deeper correction will be a warning that the cycle is turning bearish. We will watch this carefully now. On the sidelines of crude oil.




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Trading Blog           Wednesday,  July 17,  2019

7/17/2019

 
MARKETS  UPDATE  (7:30 pm EDST)

The broad stock market seems reluctant to rally (so far) this week. All three indices (DOW, S&P 500, NASDAQ) made new highs on Monday, but then edged down on Tuesday and today (Wednesday). We exit our reversal zone (July 10-17) tomorrow but enter a new stronger one on Friday (July 19-30). If markets continue to fall into next week, we will look for a low to buy. But if they rally to new highs (especially with intermarket bearish divergence - one or two, but not all three, indices making new highs - then we will consider selling short for a brief, but likely sharp, correction down. Currently out of this market.

Silver appears to be in a "break out" mode now as prices are shooting above the late June highs (around $15.50) in a new medium-term cycle that started with the May 28 low of $14.30. This means the new cycle is bullish and we want to buy any significant corrections. We were anticipating one this week, but it looks like that's not happening. Instead, we may get a top into next week's general reversal zone (July 19-30) and then a corrective fall from that top. This could be a very strong set-up for a correction as gold's current rally is not nearly as strong as silver's, and as silver breaks above its June highs, gold is far below its late June highs (bearish divergence). We are now on the sidelines of both metals but are looking to buy again soon.

In Sunday's blog on crude oil I wrote:

"A top may happen early this week...any top followed by a corrective dip down to the $55 - $56 area could be a good place to buy now as this market still looks bullish into the summer."

Well, it looks like the top happened last Friday when prices hit $60.74 (Aug. contract chart) and they have now fallen to $56.21. We enter the new reversal zone this Friday (July 19-30), and it is especially relevant to crude. Let's now be alert for a buy spot in our target range ($55 - $56) in this upcoming reversal period. On the sidelines of crude for now.






Trading Blog      Sunday (late night),  July 14,  2019

7/14/2019

 
MARKETS  UPDATE  (11:00 pm EDST)

We covered our short position in the broad stock market last Thursday close to our stop loss point and were able to avoid another surge up on Friday when the DOW gained another 243 points. The market closed very bullish for the week so we could easily see more rallying this week. Nevertheless, we are now in the center of a reversal zone that ends on Wednesday so we could still see a top by then and the start of a correction down. If that happens, we will wait for the corrective bottom to buy. That bottom (if it happens) could easily fall into our next reversal zone (July 19-30), but I think there's also a good chance of a rally into that time frame instead. If that scenario unfolds, we will be looking for another opportunity to sell short for a steep (but brief) correction down. On the sidelines for now.

Gold and silver are a bit tricky to call right now. We stepped out of our long position in gold last week. (We were stopped out of our silver long position the previous week.)  There is a risk now of a deeper correction in both metals which could take gold to the $1360 area and silver as low as $14.20. There's a chance we might see those lows early this week if prices fall sharply now, but we may instead have to wait until the following week for a final bottom. We will probably be looking to buy again at those target prices as both metals still look bullish. Still on the sidelines of gold and silver.

Crude oil has been rallying strongly from its June 12 cycle start ($51.25 - Aug. contract chart) but is now due for a sub-cycle correction. A top may happen early this week (in the reversal zone mentioned above), but prices could also push higher into the following week when we have another reversal zone (July 19-30) which is specifically relevant to crude, and that might be the top. Either way, any top followed by a corrective dip down to the $55 - $56 area could be a good place to buy now as this market still looks bullish into the summer. Still on the sidelines of crude.





Trading Blog          Thursday,  July 11,  2019

7/11/2019

 
GOLD TRADE ALERT (12:30 pm EDST)

Gold
and silver may be ready to dip lower to accommodate a deeper sub-cycle correction. Because we are almost exactly at our entry point for our long position in gold, I am going to unload this position now with very little or no loss and stand aside the precious metals for now. We were already stopped out of our silver position last week so we are now out of both gold and silver. Selling my long position in gold today.

If we do get a deeper correction, we will be looking to buy again as both metals still look bullish medium-term to long-term.




Trading Blog         Wednesday,  July 10,  2019

7/10/2019

 
BROAD STOCK MARKET TRADE ALERT (1:30 pm EDST) 

In testimony to the U.S. Congress today, Fed Chairman Jerome Powell seemed to signal that a rate cut is coming soon. This news is bolstering the broad stock market. All three indices (DOW, S&P 500, and NASDAQ) jumped to new all-time highs this morning negating any chance of bearish divergence this week. The S&P 500 also broke above our "line in the sand' at 3,100. It looks like it is time for us to cover our short position in this market (with a small loss - a little over 1%). Yes, the market could still fall now (we are making a top in a reversal zone), but Powell's dovish rhetoric could easily push it higher before this reversal zone is over (next Wednesday). And there is another stronger reversal zone that starts next Friday and runs through the end of the month (July 19-30). A strong rally could keep these indices rising to a new top in that time period. If this happens, it will be another shorting opportunity. If the market does fall now, we will look to buy somewhere near our original target of 26,300 in the DOW. Covering (unloading) my short position in the broad stock market now.




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