OK. Here we are on the last day of July and the broad stock market still seems reluctant to take a sharp correction down. In my blog last Thursday I wrote:
"...today's highs may be the top we've been waiting for, but we are going to allow for the possibility of a higher top into next week's minor reversal zone centered on Aug. 4. There are also two strong potential "pivot points"...next Tuesday/Wednesday and Thursday/Friday, in other words all next week. If today was the top, however, we could see a sharp decline into next week's reversals."
Well, those highs on Thursday in the DOW and S&P 500 are holding. Our bearish divergence signal is also holding as the NASDAQ still hasn't exceeded its top on July 19, so we can still see a decline this week. But if these indices decide to edge up some more, we might see new tops anytime by Friday, or possibly even into early next week. We may even see another bearish divergence signal this week if one or two, but not all three indices make new highs. A final top to the current medium-term cycles is now due, so we continue to hold our short position in the DOW.
Gold and silver prices rallied today with both breaking and closing above their 15-day moving averages. This is bullish, but we note that Monday-Wednesday is a potentially strong "pivot point" for gold, so we might see prices back down from any highs we get through mid-week. We won't worry too much as long as prices remain above the 45-day moving average in both metals (that would be $1945 in gold and $23.73 in silver - both slowly rising). Gold tested its 45-day moving average last week, but silver did not get low enough to do the same. If prices back down this week and silver tests its 45-day moving average with gold staying above last week's low ($1942), we would have a bullish divergence signal and probably a good spot to buy silver. For now, let's hold our long gold position and stay on the sidelines of silver.
The U.S. Dollar Index made a high on Friday near resistance at 102, one day out of a reversal zone specifically for currencies. That may have been a top as this index is closing below 102 today. If the greenback falls from here, it will help drive up gold and silver prices.
Crude oil prices have been rising steeply and today made a new YEARLY high at $82 (Sept. contract chart). This confirms that the new medium-term cycle that started on May 4 is bullish and also suggests that May 4 low ($64.21) was the start of a new 3-year longer-term cycle. If that's the case, we expect crude prices to rally strongly into the end of the year. We are still waiting for a significant sub-cycle corrective drop to buy somewhere between the 45-day and 15-day moving averages (now $72.89 and $77.32, respectively, and rising). That sub-cycle low is due this week. We remain on the sidelines of crude for now until we see a significant corrective low to buy.