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Trading Blog Thursday, July 29, 2021

7/29/2021

MARKETS UPDATE (10:00 pm EDST)

The Fed announced yesterday that interest rates would remain unchanged at near zero and that there would be no changes to its bond-buying program - yet. Fed Chairman Jerome Powell did hint in his rhetoric that the clock on bond-purchasing was ticking with tapering likely on the horizon. That slightly hawkish tone may have had a dampening effect on the broad stock market as the DOW closed with a 127 point loss yesterday. The DOW did recover all of that loss with today's 153 point gain, so maybe the markets are now shrugging off yesterday's pessimism. The DOW and S&P 500 both made new all-time highs today, and the NASDAQ made a new all-time high on Monday, so we have no bearish divergence signal this week. Tomorrow starts our new strong reversal zone (July 30 - Aug. 10). If this market is going to fall into it, it has to start falling now. Otherwise, it is likely we will see a significant top form within this time frame. We are still not sure if the NASDAQ is an old cycle or new cycle. If it is an old cycle, it is ready to take a steep correction - perhaps from a new high in this new reversal zone. We will watch for this. For now, we remain on the sidelines.

Crude oil is making a new weekly high today, but it is still not exceeding its July 6 high at $76.07 (Sept. contract chart). Like the broad stock market, crude could be ready to turn down now, unless it wants to push higher into this new reversal zone. We are still not sure if crude started a new medium-term cycle with last Tuesday's low at $65.01. If it did, prices should be bullish now, and that July 6 high should be taken out soon. Let's stay on the sidelines of crude for now.

Gold and silver prices shot up strongly today. Apparently the Fed's slightly hawkish statements from yesterday were not enough to boost the U.S. Dollar Index. The greenback fell today, and this boosted the precious metals. Our long position in gold benefited from this, but now we have to be concerned that prices are rising sharply into an upcoming reversal zone specifically for these metals (July 30 - Aug.11, same as for equities). That means a top could be imminent. Let's see if this rally can gain some legs before we think about selling our long position. Silver may have started a new medium-term cycle with Tueday's low at $24.49, but this upcoming reversal zone (it starts tomorrow) makes me reluctant to chase this rally. If silver makes a top soon, we may watch for a modest sub-cycle correction to go long. Let's stay on the sidelines of silver for now.

Trading Blog Tuesday, July 27, 2021

7/27/2021

MARKETS UPDATE (4:00 pm EDST)

Today is the first day of this month's FOMC meeting. It will conclude tomorrow afternoon when the Fed releases a statement on changes (if any) in their monetary policy. As usual, financial analysts, traders, and investors will be waiting with "bated breath" for the Fed's statement and any dovish or hawkish statements or signals it may contain. Equity markets are, of course, very overbought right now and would likely be sensitive to any hawkish rhetoric from the Fed. Of course, the Fed is aware of this and will likely be careful in the wording of its statement (unless it wants to plunge the market).

It looks like we covered our short position in the NASDAQ too soon yesterday as all three broad stock market indices (DOW, S&P 500, and NASDAQ) took a steep dive today. We are probably seeing a brief and moderate early sub-cycle correction in the young DOW and S&P 500 medium-term cycles, and possibly the same thing in a young NASDAQ cycle that could have started with last week's low at 14,178. If this is the case, we shouldn't see the NASDAQ get below that low. If it does, we will know the NASDAQ is an older cycle moving to its final bottom closer to 14,000 or even lower. Any trading this week could be tricky as we have the "wild card" factor of the Fed's meeting and how markets react to the Fed's statement on Wednesday. We also have another strong reversal zone for equities (and most other markets) coming up on Friday (July 30 - Aug. 10). That time frame could see an important high or low in equities (and other markets). But which will it be - high or low? We will have to wait and see how markets react to the Fed tomorrow to better answer that question. We are now on the sidelines of the broad stock market.

It still looks like gold started a new medium-term cycle with its low of $1752 on June 29. If so, it is probably bullish now, and prices should stay above $1752. Silver, on the other hand, appears to be completing an older cycle as it plunged to a new weekly and cycle low today ($24.49). This is giving us a strong intermarket bullish divergence signal between the two metals. We already have a long position in gold, so we will hold on to that for now. We may look to buy silver over the next several days as it seems to be forming its final medium-term cycle bottom. We enter a reversal zone specifically for the precious metals June 30 - Aug. 11 (same as for equities), so we might see a bottom in that time frame. Of course, this week's Fed meeting could make prices volatile, so we need to be careful with any trading. We are still on the sidelines of silver.

The U.S. Dollar Index appears to be falling from last week's high, but it could find a bottom soon as its medium-term cycle is old, and we are moving into a strong reversal zone on Friday. After the last Fed meeting, Fed Chairman Jerome Powell surprised the markets with some hawkish rhetoric that strongly boosted the U.S. dollar. We will therefore be watching carefully to see how tomorrow's Fed statement affects the greenback.

Crude oil may have started a new medium-term cycle with last week's low at $65.01 (Sept. contract chart). If this is the case, crude would most likely be bullish, and prices could start moving up into the $80s or even low $90s. But alternatively, crude may also be nearing the end of an older cycle. If that's true, then this current rally could end shortly, and crude could fall steeply to its final cycle bottom. As I've said before, crude's direction now could follow the broad stock market. If equities push higher (very likely), then crude could rally too. Let's stay on the sidelines of crude for now. A close above the July 6 high ($76.07) would support the bullish view.

Trading Blog Monday, July 26, 2021

7/26/2021

BROAD STOCK MARKET TRADE ALERT (3:00 pm EDST)

The DOW finally broke its all-time high last week (just by four points), and the S&P 500 and NASDAQ also made new all-time highs. This was our stop loss parameter, so some traders may have covered their short NASDAQ positions. All three indices are also edging up to new all-time highs today, so our bearish divergence signals are negated. As I've mentioned in past blogs, it seems like the S&P 500 and DOW have started new medium-term cycles recently and are therefore potentially bullish. There is now a possibility that the NASDAQ started a new medium-term cycle with last Monday's low at 14,175. This is not certain as the target for a low should have been closer to 14,000, but it is possible. If so, the NASDAQ could be very bullish from here. If any traders did not cover their short positions in the NASDAQ on Friday, they should do so now. Covering my short NASDAQ position today.

Trading Blog Thursday, July 22, 2021

7/22/2021

MARKETS UPDATE and GOLD TRADE ALERT (2:30 pm EDST)

Gold most likely started a new medium-term cycle with its low of $1752 on June 29. This means it is a young cycle and probably bullish. Silver, however, seems to be completing an older cycle and may have formed the final bottom to that cycle yesterday at $24.78. If it did, then it too is now bullish. Last Thursday we unloaded our long position in gold and I wrote:

"Both metals could take a correction now with silver making a new low and gold staying above its June 29 low ($1752). Let's use this opportunity to reclaim much of our loss from our June 16th long position in gold. If gold does drop and stays above that $1752 low, we will go long again soon. We may also go long in silver if it moves to its final medium-term cycle bottom over the next few weeks."

Well, both metals did correct down with silver making a new low (yesterday) while gold seems to be leveling off around $1800. This is giving us a strong bullish divergence between the two metals, and there is also a mild short-term reversal zone for the precious metals in effect this week. This looks like a good time to go long in gold again. Silver may have bottomed yesterday, but there's a chance it could push a little lower, possibly into next week. Another major reversal zone for the precious metals starts next Friday - July 30-August 11 - so it could bottom then. If silver did start a new cycle yesterday, we should see it close above $25.65 soon, and that would be a good signal to buy.
Let's enter a long position in gold today with an initial stop loss on a close below $1752.
We will stay on the sidelines of silver for now.

The U.S. Dollar Index seems to be encountering resistance around 93 and may be topping out this week. If it falls, it will give a boost to any rally in the precious metals. Will watch for this

The broad stock market seems reluctant to rally this morning and could be ready to turn down again. The S&P 500 and NASDAQ are still below their all-time highs from last week, and the DOW is still below its all-time high of 35,091 from May 10 as well as below its high from last week (at the time of this writing). Let's continue to hold our short position in the NASDAQ with a stop loss based on all three indices making new all-time highs.

Crude oil is rallying some more today, so it was probably a good idea to cover our short position yesterday (with a small profit). Crude is likely starting its third and final sub-cycle within an older medium-term cycle. It could do two things from here. If the cycle is still bullish, prices could soar as high as $84 (September contract chart) to the final top of the medium-term cycle. But if its going to turn bearish, prices may not exceed the July 6 high of $76.07 before falling steeply to the final cycle bottom. What happens may depend on the broad stock market. If equities turn down now, it could put a damper on any strong rally in crude. We are now on the sidelines of crude.

Trading Blog Wednesday, July 21, 2021

7/21/2021

BROAD STOCK MARKET UPDATE and CRUDE OIL TRADE ALERT (3:30 pm EDST)

All three broad stock market indices took a big dive on Monday. This suggests that the correction we've been waiting for has started. But Tuesday's and today's strong snap back is calling that into question. A one day correction is really too short to be a significant sub-cycle correction for the DOW. Also, Monday was a bit too early for the NASDAQ's final bottom. That could mean the correction will resume shortly, or all three indices will push to new highs. Right now, I'm favoring the idea of them falling further. The DOW still has not exceeded its all-time high of 35,091 from May 10, so a strong intermarket bearish divergence signal is still in place. Our short trade in the NASDAQ from July 8 is now just a bit above the "break-even" point. I am going to hold this position for now with the expectation of the NASDAQ dropping back below Monday's low.

Crude oil made a new low yesterday in the center of a reversal zone specifically for crude, and it is rallying strongly today. A significant cycle or sub-cycle bottom could be forming here. We sold crude short on June 23 and have a small profit despite today's rally. Let's cover this position today and see how far this rally will go from here. Unloading my short position in crude today.

Trading Blog # 2 Thursday, July 15, 2021

7/15/2021

UPDATES ON CRUDE, THE U.S. DOLLAR INDEX, and the BROAD STOCK MARKET (5:00 pm EDST)

The NASDAQ made a new all-time high on Tuesday, and the S&P 500 made a new all-time high yesterday. The DOW is staying below its all-time high (35,091 on May 10) and seems to be finding resistance at the 35,000 line. The S&P 500 and especially the NASDAQ are now dropping from those highs, so this market could be rolling over. As I've discussed in previous blogs, it looks like the NASDAQ is completing and older medium-term cycle and is due to drop sharply to its final cycle bottom. That is why we have sold it short. The DOW and S&P 500 could also take corrections now, but if they are younger cycles, the corrections may be modest. Let's continue to hold our short position in the NASDAQ and see if this correction can continue lower. We would like to see the NASDAQ get at least down to the 14,000 area.

It appears that crude oil could be taking its cues from the broad stock market and correcting down. Because of our short position entered on June 23, I was worried that crude would make another high this week, but it looks like last week's high at $76.98 (Aug. contract chart) is holding as prices took a strong drop today. Let's see if they can drop below last week's low at $70.76 before we think about covering our short position. Holding my short position in crude for now.

The U.S. Dollar Index is late in its current medium-term cycle, so it looks like the "double-top" of yesterday's high at 92.82 and last week's high at 92.84 could be a significant high - especially as both happened in our reversal zone specifically for currencies (July 6 - 14). We are leaving that reversal zone now, so we don't want to see those highs exceeded. Let's see if this index falls now or makes another high. Any significant fall could trigger a rally in the precious metals.

Trading Blog #1 Thursday, July 15, 2021

7/15/2021

GOLD TRADE ALERT (3:30 pm EDST)

Gold prices have been rallying strongly this week and making new weekly highs whereas silver's rally has been sluggish and prices are staying well below last week's high of $26.73. This is setting up a strong bearish divergence signal. We are also at the end of a strong reversal zone for both precious metals (July 7 - 15). Today's high in gold ($1833) and yesterday's isolated high in silver could therefore be a top. Although there's now a good chance that gold started a new medium-term cycle on June 29 (which would make it young and bullish), it looks like silver may be completing an older cycle and is ready to move down to it's final cycle low. Both metals could take a correction now with silver making a new low and gold staying above its June 29 low ($1752). Let's use this opportunity to reclaim much of our loss from our June 16th long position in gold. If gold does drop and stays above that $1752 low, we will go long again soon. We may also go long in silver if it moves to its final medium-term cycle bottom over the next few weeks. Selling my long position in gold today. Staying on the sidelines of silver.

I will post another update later tonight on the rest of the markets.

Trading Blog Monday, July 12, 2021

7/12/2021

MARKETS UPDATE (3:30 pm EDST)

We are technically now out of our recent reversal zone for the broad stock market (and other markets), although it could spill over into this week. As I've mentioned in earlier blogs, it seems there's a good chance the DOW and S&P 500 started new medium-term cycles in late June (especially the DOW). That means they are young and could be bullish. The NASDAQ, however, is most likely an older cycle ready to take its final steep correction down to its final cycle bottom (due anytime over the next several weeks).. This is why we entered a short position in the NASDAQ last week. (The DOW and S&P 500 could also correct down now, but if they are new cycles, the correction might be modest.) Today all three indices are edging a bit higher, but only the S&P 500 and NASDAQ are making new all-time highs. The DOW is still below its all-time high of 35,091 (at the time of this writing), so we still have intermarket bearish divergence between these indices. The NASDAQ opened with a rally, but has now lost about half of that gain. I am going to hold my short NASDAQ position for now. If the DOW manages to break to a new all-time high (above 35,091), I will consider covering this position. Otherwise, we will remain short.

In last Monday's blog on gold I wrote:

"There is also a good chance that gold could have started a new medium-term cycle last week. If that's the case, gold could be very bullish now and could rally beyond $1840. We are currently holding a long position in gold and are in the red from the unexpected dive gold took on June 17. If gold can rally back to the $1840 area, we may have the opportunity to negate most of that loss."

Well, prices haven't yet reached $1840, but it still looks like this could be a new, bullish cycle. I am going to hold my long position in gold for now and see if we can at least get up to the $1840 price area.

Silver's cycle labeling is a bit more ambiguous than gold's at the moment. It too may be a new cycle, but it could also be an older cycle moving down to its final cycle bottom. Let's stay on the sidelines of silver for now.

It looks like the U.S. Dollar Index made a significant high last Wednesday at 92.84 in our reversal zone specifically for currencies (July 6-14). It is late in the dollar's cycle, so we may see this index moving lower over the next few weeks. That would support the idea of a rally in the precious metals. If this index breaks above last Wednesday's high, however, we may have to abandon this bearish outlook for the dollar.

The current medium-term cycle in crude oil is also old, so a final peak and sharp correction to the final cycle bottom is due anytime now. That peak may have happened with last Tuesday's high of $76.98 (Aug. contract chart). If so, prices should fall lower this week. There's a chance, however, that last Thursday's low at $70.76 was a sub-cycle bottom. If that's the case, we could see prices rally to another new high. Last Thursday was a bit early for a sub-cycle low, so we will stick to the idea of lower prices ahead for now. We entered a short position in crude on June 23 at $73. Today prices are closing a little above $74. Let's keep our short position for now. A close above $75 will make us concerned, and we do not want to see last week's high at $76.98 exceeded.

Trading Blog Thursday, July 8, 2021

7/8/2021

BROAD STOCK MARKET TRADE ALERT (3:30 pm EDST)

Yesterday the S&P 500 and NASDAQ both made new all-time highs while the DOW did not which continues our strong bearish divergence signal into the end of our current strong reversal zone. Today, all three indices dropped significantly. This looks like a good spot to sell short again. We are going short today in the NASDAQ. We can base our initial stop loss on all three indices making new all-time highs tomorrow or next week.

Trading Blog Monday, July 5, 2021

7/5/2021

MARKETS UPDATE (4:30 pm EDST)

Today is a holiday (the last day of the Fourth of July "long" week-end), and financial markets are closed here in the U.S. Last week, as expected, equity markets were bullish, and all three broad stock market indices (DOW, S&P 500, NASDAQ) rose sharply. Both the S&P 500 and NASDAQ made new all-time highs, but the DOW remained below its all-time high of 35,091 from May 10. Thus our intermarket bearish divergence signal persists (at least until the DOW exceeds that high, and it is close to doing that).

The cycle patterns of the DOW and S&P 500 are not clear at the moment. Both may have started new medium-term cycles in late June which would make them both very young and potentially very bullish (at least short-term). The NASDAQ, however, is more clearly an older cycle that is ready to peak and correct down to its final cycle bottom, which is due anytime over the next 4 weeks. This makes the NASDAQ the most "ripe" for a steep correction down compared to the other two indices. Still, if this market continues its bullishness this week, all three indices could push higher. Our current strong reversal zone for equities (and other markets) ends this Friday. Let's see if we get more bearish divergence this week and a good opportunity to sell short the NASDAQ. The DOW making a new all-time high with the other two indices this week would put a damper on our plans to go short.

Gold's final sub-cycle in its current medium-term cycle may be ready to peak and then fall to its final cycle bottom. That peak could be this week as we are now in the center of a long reversal zone specifically for the precious metals (June 29 - July 15). A good target for that peak would be around $1840. There is also a good chance that gold could have started a new medium-term cycle last week. If that's the case, gold could be very bullish now and could rally beyond $1840. We are currently holding a long position in gold and are in the red from the unexpected dive gold took on June 17. If gold can rally back to the $1840 area, we may have the opportunity to negate most of that loss. Let's watch for that. Should prices turn south, we will raise our stop loss back to a clear break below $1750. Holding my long position in gold for now.

Silver may also have started a new medium-term cycle last week, or it may just be starting its final sub-cycle at the end of an older cycle. Either way, we should see prices rally now. We may just see a modest rally, perhaps to $27 before prices start turning down again. But if a new cycle did start last week, prices could easily get to $28 and even higher. Let's stay on the sidelines of silver for now as we are not sure if this is a new or old cycle.

Crude oil seems to be taking its cues from equity markets and has been rallying strongly. It is making a new monthly and cycle high today at $76.39 (Aug. contract chart). This is still within our target for this rally of $73 - $77, and we are in the center of a strong reversal zone for all markets (June 29 - July 9). A top could be forming here, especially since a sub-cycle correction is due this week or next. This rally in crude has put our short position (entered on 6/23) a bit in the red, but I am reluctant to cover it now as a correction could be imminent. Let's set a stop loss for our short position on a weekly close above $77.50. Holding my short position in crude for now.

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