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Trading Blog Monday (evening), July 31, 2023

7/31/2023

MARKETS UPDATE (8:30 pm EDT)

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.

Trading Blog Thursday, July 27, 2023

7/27/2023

MARKETS UPDATE (7:00 pm EDT)

Today the DOW and S&P 500 edged to new weekly highs into mid-day trading while the NASDAQ remained below its high from last week (bearish divergence), and then all three indices collapsed and dropped sharply into the closing bell at 4 pm. This is bearish behavior and 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" for the broad stock market 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, and they may correspond to a significant bottom instead of a top. We will hold our short position in the DOW for now with our stop loss based on the NASDAQ making a new weekly high or the DOW closing above 36,000 (whichever comes first).

Gold and silver prices fell sharply today which means both metals haven't finished their corrective drop from last Thursday's highs which were near the center of our reversal zone for these metals. Today both metals made new weekly lows so our bullish divergence signal has been negated. The timing is right for a significant sub-cycle correction now, but prices shouldn't go too low as long as the current medium-term cycle in both metals is bullish (very likely). We also note that there is a strong potential "pivot point" for gold today, tomorrow, and especially next Monday, so a bottom to this corrective drop could be imminent. Gold is also testing its 45-day moving average today as silver approaches its 45-day moving average, both of which could act as support. As long as gold remains above $1900, it should be bullish. We also want silver to stay above $23 to maintain our bullish outlook. We continue to hold our long position in gold (entered on June 30), and we may look to go long in silver if it finds support near its 45-day moving average this week or next.

Not surprisingly, today's plunge in precious metal prices corresponded with a strong surge in the U.S. Dollar Index.
We note that a reversal zone specifically for currencies ended today, so today's high could easily be a top, and a downturn could be imminent. If so, it could help kick gold and silver prices back up.

Crude oil prices edged higher today and continue to test resistance at $80. A sub-cycle top is now due (overdue) in crude's current medium-term cycle and we expect it this week or possibly in next week's extended reversal zones. This current cycle seems very bullish, so we are looking to buy any significant sub-cycle corrective bottom that may end up somewhere between the 15-day and 45-day moving averages (now at $76 and $73, respectively, and rising). For now, we remain on the sidelines of crude.

Trading Blog Wednesday (late night), July 26, 2023

7/26/2023

BRIEF COMMENT ON THE FED MEETING and the BROAD STOCK MARKET (11:30 pm EDT)

The FOMC meeting concluded today with another expected quarter point interest rate hike; however, the Fed's statement as well as Fed Chairman Jerome Powell's post-meeting press conference seemed to suggest that this hike may NOT be the last one this year. That was not expected (many analysts were suggesting it would be the last for 2023), and this cast a hawkish shadow onto late afternoon trading. Equity markets surged a bit into Powell's press conference but then fell sharply and lost all their gains by the market's closing bell.

Today was technically the last day of our strong reversal zone(s) for most markets. The DOW and S&P 500 made new weekly highs, but the NASDAQ stayed well below its high from last week, maintaining our strong bearish divergence signal in this last day of our reversal. This is strong evidence of a significant top forming now, but we will have to wait and see if it happens by Friday. Our stop loss for our current short position in the DOW is now based on the NASDAQ making a new weekly high (i.e. breaking above 14,447) or the DOW closing above 36,000 (whichever comes first). We note that if this market wants to rally some more, a top (which is now overdue) could spill over into next week's minor reversal zone that is centered around August 4. For now, we are still holding our short position in the DOW.

Trading Blog Monday, July 24, 2023

7/24/2023

MARKETS UPDATE (4:00 pm EDT)

We have yet another FOMC meeting this week (Tuesday and Wednesday) when Fed officials will gather for another decision on interest rates. Most analysts are expecting another hike - to 5.3% - but the general consensus is that this will be the last increase for some time. It looks like the Fed's strategy will be to maintain this interest rate indefinitely in an effort to create a "soft landing" for the economy, i.e. curbing inflation without causing a deep recession). Only time will tell if this is going to work.

We start this week in the center of our current strong reversal zone (July 18 - 26) that technically ends on Wednesday, coincidentally the day the Fed ends its meeting and announces any interest rate changes and/or changes in monetary policy. Market behavior is always a bit difficult to call around FOMC meetings. We are overdue for a final top in the current medium-term cycles of our three market indices (DOW, S&P 500, and NASDAQ), and this current reversal zone would be the ideal time for it. Today the DOW pushed up to a new weekly high, but the S&P 500 and the NASDAQ did not, and that gives us a strong bearish divergence signal (until the latter two make new highs). So we have a set-up here for a top by Wednesday to be followed by a sharp correction down to the final medium-term cycle bottoms. If the market reacts positively to the Fed meeting, however, we might see a top postponed into the following week where we have a weaker reversal zone centered around Aug. 4. For now we will continue to hold our short position in the DOW as a top and reversal seem imminent. Our stop loss for this trade can now be based on the S&P 500 and NASDAQ both making new weekly highs, especially after Wednesday.

We are also now in the center of a reversal zone specifically for gold and silver (July 18 - 26, same as for the broad stock market). I had expected both metals to rally higher into this week, but instead prices seem to have peaked last Thursday, and they are now falling. This reversal zone ends Wednesday, and there is also a potential "pivot point" for gold Tuesday through Thursday. There's a good chance both metals are taking a sub-cycle corrective dip that will end by Thursday. Today silver is making a new weekly low without gold, so we already have a bullish divergence signal. Both metals are also approaching their 15-day moving averages which could offer some support. I am going to to hold my long position in gold for now and also consider going long in silver over the next few days.

The U.S. Dollar Index is rising steeply into another reversal zone for currencies (July 18 - 27) so it it could easily make a top by Thursday and correct back down. Any sharp drop in the greenback could trigger and give thrust to a reversal back up in the precious metals.

Crude oil prices rallied strongly today to just over $79 (Sept. contract chart). In last Tuesday's blog on crude I wrote:

"After last Thursday's high, crude prices dropped to $74 on Friday, and this week they are edging back up from there. That one day correction on Friday was too brief to be a significant sub-cycle low. This means we could see another top in our current reversal zone (July 18 - 26 - i.e. this week or next) followed by a significant sub-cycle correction, or we could see a deeper sub-cycle corrective bottom in this same time frame (or possibly both)."

Well, we are now in the last few days of this reversal zone, and prices have surged up to a new weekly (and monthly) high. A reversal could be imminent, so let's wait to see if it happens. Any significant sub-cycle correction should at least test the 15-day moving average (now at $74.62 and rising). We may be looking to buy any sub-cycle correction that doesn't go too low (say, below $70), but for now, we remain on the sidelines of crude.

Trading Blog Thursday (evening), July 20, 2023

7/20/2023

BROAD STOCK MARKET TRADE ALERT (8:30 pm EDT)

We are now at the center of our strong reversal zone for the broad stock market (July 18-26), and all three of our market indices (DOW, S&P 500, NASDAQ) have been rising strongly into it. Today the DOW surged to a new weekly high at 35,373 before pulling back and closing at 35,225 with a diminished 163 point gain. The S&P 500 and NASDAQ did not exceed their highs from yesterday and closed the day with losses (especially the NASDAQ). This is all bearish behavior. Furthermore, this week all three indices have hit ideal targets for a final medium-term cycle top, and these cycles are old and due for their final corrective drop to their final cycle bottoms. This looks like a good time to sell the market short again. (We prematurely called the top two weeks ago and were stopped out).

The tops may be in already (today in the DOW and yesterday in the S&P 500 and NASDAQ), but these indices could still push higher into early next week (the reversal zone ends on Wednesday). We might also get a bearish divergence signal early next week if one or two, but not all three indices make new highs which would reinforce the idea of an imminent reversal and correction down. The final corrective drop to the end of our current medium-term cycles could be a sharp 2 - 5 week decline to around 33,500 in the DOW and maybe more. This is a substantial correction and worth trading short. I am going to enter a short position in the DOW (with an index fund) for tomorrow's market open. (The S&P 500 and NASDAQ may have already started their decline). We can place a stop loss on this trade based on the DOW closing above 36,000 and/or ALL THREE indices making new weekly highs next week.

Trading Blog Wednesday, July 19, 2023

7/19/2023

***PLEASE SEE MY NEW 7/19/23 UPDATE ON THE BROAD STOCK MARKET "CRASH" AND 7/19/23 UPDATE ON GOLD ON THE HOME PAGE. (Scroll down the Home page)***

Trading Blog Tuesday (night), July 18, 2023

7/17/2023

MARKETS UPDATE (10:00 pm EDT)

All three of our broad stock market indices (S&P 500, NASDAQ, and recently the DOW) have now exceeded their June 16 highs suggesting that the final tops to their current medium-term cycles are still forming. Today we enter a new strong general reversal zone for all markets (July 18 - 26), so it seems likely the tops will form in this time frame. If a top forms this week, it's possible we could also see a subsequent steep fall to the final medium-term cycle bottoms in this same reversal zone. All three indices are making new weekly highs so we won't see any bearish divergence signal this week, but we might get one next week. If we see an obvious top forming this week or next (preferably next), we may attempt to sell short again. But if we miss the top, we will just wait for a correction and try to buy at the final bottoms to the current medium-term cycles (as long as the bottoms don't go TOO low) as we are expecting another rally (new medium-term cycle) into late summer. (We note, however, that after that rally we are expecting a very severe correction in this market and will be looking to sell short again.) We will remain on the sidelines for now.

Silver and especially gold prices are rallying strongly today. Both metals started new medium-term cycles recently (gold on June 29 and silver on June 23), and cycles are usually bullish in their early phase. Significantly, both metals have now broken and closed above their 45-day moving averages, which is also a bullish sign. But we note that we are now entering a strong general reversal zone that also overlaps with a reversal zone specifically for these precious metals (July 18 - 26). This means a significant top in prices could be imminent with a correction to follow. We may want to take a profit in our long gold position soon. Because both metals are making new highs this week, we have no bearish divergence signal, but we might get one next week if one metal makes a new weekly high without the other. Next Monday is in the center of our reversal zones, and it is also a potentially strong "pivot point" for gold. If we get a bearish divergence signal then, it may be a good place to take profits in our gold trade. For now, we continue to hold our long position in gold.

Unfortunately, we did not get long in silver when we bought gold on June 30 and have missed out on a very strong rally. If we do get a top in this new reversal zone followed by a corrective drop, we will try to find a good spot in silver to buy - as long as the drop doesn't go too far (e.g. below $22 which could turn the cycle bearish). If this new cycle remains bullish, we could still see prices rise into the $27 - $35 range. For now we remain on the sidelines of silver.

LONG-TERM GOLD UPDATE:

We are now at a critical juncture in the longer-term cycle of gold. As I have discussed in past blogs and in my Gold Updates on the Homepage, we may have already started a new 23 year long-term cycle in gold on September 28, 2022 at $1616. If that's the case, gold should be very bullish now and soon make a new all-time high, and prices should continue to be bullish for at least several more years. The other possibility is that gold is still completing the end of an older 23 year cycle that began in 1999 - 2001 (around $280). In this alternate scenario, the long-term cycle high has already happened (at $2070 in Aug. 2020), and gold is now in the process of falling to the final 23 year cycle low which is due in the first half of next year somewhere near $1000.

I am currently favoring the bullish (new 23-year cycle) scenario, but we can't rule out the old cycle scenario just yet. We should know soon enough which cycle labeling is correct. If our current medium-term cycle in gold remains bullish and can exceed $2070, it will confirm that a new 23 year cycle started on Sept. 28, 2022 and gold will be very bullish for some time. However, if the current medium-term cycle cannot exceed $2070 and turns bearish, it will support the idea that we are still in an older 23 year cycle that is falling to its final bottom due next year.

The U.S. Dollar Index fell strongly last week but now seems to be finding some support around 99.5. The new general reversal zone we entered today also overlaps with a reversal zone for currencies (July 18 - 27). If the greenback edges lower this week or next, we could see a significant bottom form followed by a rally back up. It is early in this reversal zone, however, so we can't rule out the possibility of the dollar forming a top instead of a bottom (or both) in this same time frame. As usual we expect gold and silver prices to move opposite the dollar, so we will keep an eye on the greenback's movements this week and next.

Crude oil rallied strongly last week and made a high on Thursday at $77.33 (August contract chart). In last Wednesday's blog on crude oil I wrote:

"Crude prices have been rallying, and It's about time for another sub-cycle top and correction. A good time for a crest would be in next week's strong reversal zone, but we might instead see a top this week leading to a corrective low in next week's reversal window. We will be looking to buy any significant sub-cycle correction now as long as the correction doesn't go TOO low (i.e. below $67, and especially below $64)."

After last Thursday's high, crude prices dropped to $74 on Friday, and this week they are edging back up from there. That one day correction on Friday was too brief to be a significant sub-cycle low. This means we could see another top in our current reversal zone (July 18 - 26 - i.e. this week or next) followed by a significant sub-cycle correction, or we could see a deeper sub-cycle corrective bottom in this same time frame (or possibly both).

We are currently on the sidelines of crude. We still may want to buy any significant corrective low we see this week or next for another sub-cycle rally up, but if we do that and the next rally cannot break through resistance around $77 - $80, the cycle could be turning bearish and we would want to get out. But right now, crude still looks bullish. As I stated in last Wednesday's blog:

"As long as prices remain above $64, there's a good chance that May 4 was also the start of a new long-term 3 year cycle. If that's the case, crude prices could be very bullish into the end of this year. If prices can get above $85, we could see crude getting back up to $128 - $130 by the end of the year."

Trading Blog Thursday, July 13, 2023

7/13/2023

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

In yesterday's blog on the broad stock market and our current short position in it, I wrote:

"We can have a stop loss for this trade now based on the DOW exceeding its June 16 high (34,589), the S&P 500 closing above 4,500, and the NASDAQ closing above 14,000. "

Well, today the S&P 500 is closing above 4,500, and the NASDAQ is closing above 14,000. The DOW, however, is acting bearish and seems to be staying below its June 16 high. Both the S&P 500 and NASDAQ are rallying strongly today, but the DOW is not, so we are getting mixed signals in this market. I am tempted to stay short as a correction could be imminent, but it seems like there is now a good chance this rally could continue with a high into next week's reversal zone (July 18 - 26). I am going to cover (unload) my short position in the broad stock market now with a small loss. We may be able to recover this loss by selling short any new highs in this new reversal zone over the next two weeks.

Trading Blog Wednesday, July 12, 2023

7/12/2023

MARKETS UPDATE (10:00 pm EDT)

We had been using a "bearish island reversal" chart formation in all three of our broad stock market indices (DOW, S&P 500, NASDAQ) to support the idea of this market falling to a final medium-term cycle low in the upcoming strong reversal zone (July 18 - 27). But today all three indices "gapped" UP to produce "bullish island reversal" formations, so now "the shoe is on the other foot", so to speak.

Today's equity surge was apparently caused by excitement over the release of the June CPI (Consumer Price Index) figures which were only VERY SLIGHTLY better than what had been anticipated. OK, inflation is easing a bit this month, but the following comment from Richmond Fed President Barkin puts things in perspective as he said, "...[inflation] is still too high. Our target is 2%. If you back off too soon, inflation comes back strong, which then requires the Fed to do even more."

The strong reaction by the broad stock market indicates just how sensitive, nervous, and volatile the market is right now - i.e. not very confident. Could today's "irrational exuberance" send equities to a new high into next week's reversal zone? Yes, it could. But we also note that the DOW is forming a bearish "triple-top" today with its recent highs from June 16 and July 3. Also, today's high in the DOW did not exceed its high from June 16 while today's highs in the S&P 500 and NASDAQ did exceed their June 16 highs. This gives us a bearish divergence signal which also is happening within a potentially strong "pivot point" for equities today and tomorrow.

I am going to hold my short position in the broad stock market for at least another day. We can have a stop loss for this trade now based on the DOW exceeding its June 16 high (34,589), the S&P 500 closing above 4,500, and the NASDAQ closing above 14,000.

Gold rallied strongly today which strongly supports our idea that a new medium-term cycle began with the low of $1900 on June 29. Today prices closed a little below the 45-day moving average (now at $1972). A close above there will confirm the new cycle. Today is a potential "pivot point" for gold (and silver), so we might see a small pullback over the next day or two, but a more serious concern is the strong general reversal zone coming up next week which is also a reversal specifically for precious metals. If gold rallies strongly into that time frame, we will want to take profits and sell our long position close to the top of the rally. A good target for a top might be around $2000, but it might go higher. We are still holding our long position in gold that we entered on June 30.

We have avoided buying silver recently as we weren't certain it's medium-term cycle had bottomed on June 23 at $22.14. Today silver prices shot up to $24 and closed well above the 45-day moving average. This confirms June 23 as the start of a new cycle. This is a new and young cycle and potentially very bullish. Resistance for the current rally can be found around $24 (we are there now) and $26. A break and close above $26 could lead to prices around $28 and possibly up to $35. We will therefore be looking to buy any significant pullbacks in price. We may get one now as today is a potential "pivot point" for silver and gold. If not, a rally into next week's reversal zones may produce a high followed by a corrective drop that could give us a good spot to buy. We are currently on the sidelines of silver.

Today's rally in precious metals is not surprising given the plunge taken by today's U.S. Dollar Index. The greenback dropped down to 100.51 and is challenging its two lows in this area from April 14 (100.79) and February 2 (100.82). There may be some support around 100, and after that down to 98. We note that next week's reversal zones also overlap with a reversal zone for currencies (July 18 - 27), so that may hold back any serious plummeting of this index and even push it back up.

We can now say with a good amount of certainty that the current medium-term cycle in crude oil began with the low of $63.71 (Aug. contract chart) on May 4. This means this cycle is in its 10th week and getting around its mid-point. Today prices broke and closed above resistance at $75, but they still need to clear the $82 - $85 area to confirm a bullish cycle.

Prices have been rallying and It's about time for another sub-cycle top and correction. A good time for a crest would be in next week's strong reversal zone, but we might instead see a top this week leading to a corrective low in next week's reversal window. We will be looking to buy any significant sub-cycle correction now as long as the correction doesn't go TOO low (i.e. below $67, and especially below $64). As long as prices remain above $64, there's a good chance that May 4 was also the start of a new long-term 3 year cycle. If that's the case, crude prices could be very bullish into the end of this year. If prices can get above $85, we could see crude getting back up to $128 - $130 by the end of the year. We are still on the sidelines of crude oil as we wait for a sub-cycle correction to buy.

Trading Blog Tuesday (late night), July 11, 2023

7/11/2023

UPDATE ON THE BROAD STOCK MARKET (11:30 pm EDT)

We still appear to be on target for a steep correction down to the final cycle lows of our current medium-term cycles in all three of our broad stock market indices (DOW, S&P 500, NASDAQ). However, that scenario is being challenged now by a hopefully temporary bullish surge in equities today. As I mentioned last week, the "gap-down" in prices last Thursday in all three indices created a "bearish island reversal" chart formation that usually portends lower prices - unless prices edge back up and close that gap. All three indices did that today.

Also significant is that the S&P 500 and NASDAQ seem to be finding support at their 15-day moving averages. So far only the DOW had broken below its 15-day moving average, and today it is breaking back above it. We need to watch this carefully. If the market continues to rally tomorrow, there's a chance last week's highs will be exceeded, and we could then see a new high in the upcoming strong reversal zone (July 18 - 27) instead of a low. If that happens, it would mean that we sold this market short too soon as that new high would almost surely be the final top in our current medium-term cycle. Currently our short trade is at a break even point. Let's wait to see if all three indices can close above last week's highs before we abandon this position. We will continue to hold our short position in the broad stock market for now.

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