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Trading Blog Friday, August 30, 2013

8/30/2013

END OF WEEK MARKETS UPDATE (4:15 pm EST)

We are now at the end of the late August reversal zone (it may extend a little into early next week) and it appears we are getting significant reversals in the major financial markets followed on the website:

Gold and especially silver are now falling from peaks on the 28th (Wednesday). This is likely to be a short-term correction and prices may get down to the $1300 area in gold and $22 in silver. We will be looking to buy this bottom as the medium-term and long-term picture for gold and silver remains very bullish. Standing aside and waiting to buy.

The broad stock market (especially the S&P 500 and NASDAQ) formed a small peak on the 26th (Monday) before news about "imminent" military strikes in Syria sent it plunging into Tuesday. Delays in this military action (and the lack of support from the UK) seems to have calmed the market over the last few days, and we may see the indices rise a bit more into next week. I suspect, though, that this correction isn't over yet, and any definitive military action now by the U.S., as well as a negative unemployment and payroll report in early September, could send the market back down into a deeper correction. The alternative possibility (less likely in my opinion) is that the correction is over and the market is reversing from a bottom now. Technical factors are mixed (but slightly more bearish than bullish). I am still holding my short position in this market until I see stronger bullish signals.

Crude oil is reversing (as we suspected it would this week) and is falling steeply from a peak on Wednesday when the intraday price shot up to $112. This "blow-off" peak was driven by the news of possible U.S. military strikes in Syria. Of course, this possibility is still present, so the current correction may not get very far. Since momentum is remaining very bullish, we will probably be looking to buy the bottom of the correction. On the sidelines for now.

Trading Blog Thursday (morning), August 28, 2013

8/28/2013

MARKETS UPDATE (2:00 am EST)

The threat of U.S. military intervention in Syria this week has apparently spooked the broad stock market into a continuation of its downtrend, and the DOW could therefore be forming a bottom instead of a top into the final days of August (which is a major reversal zone for all markets). This has been good for our short position in this market, but we need to watch now for a possible reversal to the upside this week or early next week. The possibility of a military strike on Syria has now become a "wild card" factor affecting the broad stock market, and how the market reacts will depend on how serious this situation becomes over the next several days (especially as Russia and China are expressing strong opposition to any type of military intervention). If investors choose to ignore the Syrian conflict and the market does reverse up here, any rally still may not get very far before turning down again if the unemployment and payroll report in early September proves dissappointing. Technical signals are currently mixed between bullish and bearish so we will have to wait and see how all of this plays out. I am going to continue to hold my short position in the broad stock market until I see stronger bullish signals as the possibility of a more severe correction remains.

Crude oil, of course, has been soaring on the news of possible military intervention in Syria, and (unlike the broad stock market) crude prices are making a new high into August's final days. Based on this late August reversal zone we should be seeing a turndown now, but again, the "wild card" factor of a conflict in the Middle East may interfere with normal market timing. Momentum in this market is now almost 100% bullish, so if prices do turn down here we will probably be looking to go long at the bottom of the correction. Still on the sidelines of this market.

Gold and silver prices have also been rising into these final days of August but are now pausing at resistance levels around $1420 for gold and $25 for silver. Based on short-term cycles and timing we should be seeing some sort of correction now, but the Syrian conflict may be affecting this market as well and giving it some extra lift. Note that we have only stepped temporarily out of our long positions in precious metals and will be looking to get back in at the bottom of any correction. The medium and long-term picture for gold and silver continues to be very bullish. On the sidelines of this market for now.

Trading Blog Sunday (night), August 25, 2013

8/25/2013

MARKETS UPDATE (10:30 pm EST)

It looks like the broad stock market found at least a temporary bottom in the middle of last week and closed the week with a slight uptrend (especially the NASDAQ). Medium-term momentum signals, however, remain bearish for the DOW, S&P 500 and NASDAQ, and there are several technical and cycle factors in place right now suggesting the correction can go further down. A likely scenario here would be for a brief rally into the middle or end of this week and then a resumption of the correction down to significantly lower levels. If the market does rally, we don't want to see it break too far above 15,250 in the DOW or 1700 in the S&P 500 as this would indicate it is turning bullish and the
correction is over. These levels may be used as general stop loss points for our current short position in the broad stock market. My strategy, therefore, is to hold my short position over the next several days and ride out any brief rally (assuming momentum remains bearish) in expectation of a lower bottom. Maintaining our short positions for now.

Gold and silver also rallied into the end of last week with both making new weekly highs. Because this last week of August is likely to see major reversals in market direction, these metals could turn down now, especially as they approach resistance levels around $1420 in gold and $24.50 in silver. Should they do so, we will be ready to go long again as such a correction would present a very good buying opportunity. Still standing aside gold and silver.

Crude oil prices are also rising steeply as we enter the final week of August, so we could see a sharp reversal here as well. Because of political turmoil in the Middle East, I consider it too risky to short sell this market right now. Momentum in crude oil is now both medium and long-term bullish, so if any correction unfolds, we will be looking to go long at the bottom. We are still standing aside this market.

Trading Blog Thursday, August 22, 2013

8/22/2013

MARKETS UPDATE (4:15 pm EST)

Our short positions in the broad stock market have been looking good this week as the market has been falling in line with our expectations for a correction. A few more bearish technical signals have appeared this week and the DOW, S&P 500 and NASDAQ are now all medium-term bearish. We need to keep in mind, however, that we are entering a time period (now through the first few days of September) where significant reversals in market directions can occur. The DOW, S&P 500 and NASDAQ are all approaching support levels in their charts from which they could now turn up, but a break below these supports could push these indices lower into next week. Tomorrow's market behavior may give us a clue as to whether we are making a bottom here or if the correction can go further. Holding our short positions for now.

Gold and silver have been relatively flat since we abandoned our long positions on Monday, but short-term momentum is still bearish and there is still time for prices to correct down as we move into next week. As I stated in Monday's blog, my intention here is to buy any short-term correction now that holds above the $1300 area in gold and $20 in silver. Standing aside gold and silver for now.

Crude oil's correction seems to be reasserting itself as the price has been falling steeply this week, but it is finding some support yesterday and today in the $104 area. As with the broad stock market, I would like to see a deeper correction into next week to be more confident of a significant bottom, but another possibility here is for a brief relief rally into next week (and possibly the first few days of September) and then a resumption of the correction from that high (this applies to the broad stock market as well). My strategy at this point is to go long at the bottom of the correction, especially since the ongoing political/social turmoil in Egypt and Syria make any short positions in crude oil risky at best. Still on the sidelines of this market.

I am going to be traveling all day tomorrow and will not have access to the markets until late evening. Because Friday could see some major turning points in the markets, I will be posting another blog by Sunday that may include some trade alerts to establish at Monday's market opening.

Trading Blog Monday, August 19, 2013

8/19/2013

GOLD AND SILVER TRADE ALERT (2:45 pm EST)

Gold and silver prices seem to be pausing and rounding over a bit today, and since they have reached our upper targets for a short-term trade I am going to take profits here and sell my long positions in both metals today.
I mentioned the possiblility of selling these positions last Thursday because technical signals were indicating the possibility of a very short-term steep drop (correction) in both metals and this risk is still present. There are two possibilities for this market at the moment: a sharp drop into the end of this week/early next week or a continued rise into the week's end and then a sharp drop. As I mentioned in Thursday's blog, the end of August is a strong reversal zone for all markets so prices will likely make a major change in direction then. The potential correction here could go as low as the $1300 area in gold and the $20 area in silver, so I feel it is worth stepping aside now. I want to emphasize that this would most likely be a short-term correction. If prices do fall to these levels (and find support) it will be an excellent buying opportunity and we will want to go long again.

Trading Blog Thursday (Night), August 15, 2013

8/15/2013

MARKETS UPDATE (11:30 pm EST)

There was a lot of significant action in financial markets today (Thursday). Most dramatic of course was the 225 point drop in the DOW that some are attributing to positive reports on the economy which may be raising (once again) fears of early QE tapering. Technical analysis and cycles have been pointing to a significant downturn in August/September and this could very well be it. Today's plunge was accompanied by some more bearish technical signals (most notably the appearance of medium-term bearish momentum in the S&P 500 chart following the recent appearance of a similar signal in the DOW ; the NASDAQ, however, is still bullish). Also significant today was the DOW closing below its 50-day moving average (a bearish sign). These and other signals were enough for me to enter short positions in the broad stock market today as there is plenty of potential for more downside correction. We need to keep in mind that the last week of August is a major pivot point for all markets - a likely time for major reversals up or down - so a likely scenario right now is for this market to fall into that time period to form a bottom and then turn back up to resume its rally.

Gold and silver both rallied strongly today with gold finally breaking and closing above the $1350 mark and silver just clearing $23. This is giving us a decent short-term profit in our long positions (especially silver), but technical studies may be pointing to an imminent short-term reversal as we are approaching our upper target prices for this rally. Although the rally could accelerate into the last week of August to form a peak before turning down, it could also turn down now and instead form a bottom at August's end. Based on this information it may be wise to unload our long positions soon (maybe tomorrow). Should gold and silver correct down into the last week of August, it would set up an excellent buying opportunity, and we would likely go long again (more heavily) in both metals. Traders who are not comfortable with the short-term trading we've been doing recently with precious metals may take heart in knowing we will soon be more confident in gold and silver's final long-term cycle bottoms and I can then recommend holding long-term bullish positions in these metals (see Brief Overview of Financial Markets for Second Half of 2013).

The increasing political instability in Egypt (as well as the ongoing civil war in Syria) has been driving up the price of crude oil since last week, and this seems to have truncated the correction that crude prices had been taking in the first week of August. Nevertheless, medium-term momentum is still bearish and the rising price is now approaching resistance at $108, so the downturn may reassert itself. If prices break though the double top at $108-$109 then we could see more rallying into that reversal zone in the last week of August before any serious correction. Otherwise, crude should turn here and resume its correction down. Due to the current "wildcard" effect of the Middle East on oil prices, I am remaining on the sidelines of this market for now.

Trading Blog Thursday, August 15, 2013

8/15/2013

BROAD STOCK MARKET TRADE ALERT (2:00 pm EST)

The broad stock market is dropping heavily today and medium-term bearish signals are now appearing in the S&P 500 chart. The significant correction in this market that I was expecting appears to be underway and I am going to sell this market short today in anticipation of a further decline. I will comment a little more on this market and the other markets later today or tomorrow, but for now I am entering short positions in the broad stock market. (We are still holding our long positions in gold and silver).

Trading Blog Wednesday, August 14, 2013

8/14/2013

BRIEF MIDWEEK MARKETS UPDATE (3:00 pm EST)

There have been no major market changes since Monday's blog.

The broad stock market continues to be indecisive as to what direction it wants to take. Over the last several days the DOW has been testing support at 15,400 and is now breaking below that level again today. Unless it can rally back up 100 points over the next hour or so, it seems like it will close below this level, which is a bearish sign. As I mentioned in Monday's blog, momentum in the DOW is now medium-term bearish but the S&P 500 and NASDAQ remain bullish. It seems like a major correction from the high of August 2 (at 15,658) has started, but I would like to see momentum changes in the S&P 500 and NASDAQ to confirm this. If instead the market turns up here and starts to make new highs, we will look to the end of August for the peak before a major reversal. We are still out of this market.

Gold and silver continue to look short-term bullish with silver up about 2% since our purchase on Monday. We are currently trading short-term in the precious metals, and it is important now for gold to break the $1350 level and silver the $22 level soon to make this rally worthwhile. We are holding our long positions in both gold and silver.

The crude oil market is similar to the broad stock market right now in that it may be starting a major correction from a recent top (actually double top) around $108-$109 (July 19 and August 2). Momentum here is also medium-term bearish. Although the crude chart is looking bearish, prices have been rising from a low around $102 last Thursday to a closing today above $106. The price needs to turn back down soon to confirm the downward trend. Any break above that double top (above $109) would negate the bearish view and would, as with the broad stock market, point to a peak in the last week of August and then a major reversal. Still on the sidelines of this market.

Trading Blog Monday, August 12, 2013

8/12/2013

SILVER TRADE ALERT and BRIEF MARKETS UPDATE (1:45 pm EST)

Some short-term and medium-term technical signals in the price charts for gold and silver are turning bullish again and I am going to buy back the long position in silver I unloaded last Wednesday. I had been a little concerned about silver's break below $20, and I was especially worried over the recent appearance of bearish signals in some contract price charts for silver as well as strong bearish momentum in the charts of gold and silver mining companies. These bearish signals are now being negated and the price of silver has clearly broken back above $20 (which now becomes support and can serve as a stop loss point again). Gold is closing the day above $1325 which is another bullish sign. Note that, unlike silver, we have been maintaining our long position in gold and will continue to hold it. I would like to point out here that although I am putting some funds into gold and silver now, I am not heavily invested (yet) because it is still not certain that the final bottoms in the long-term cycles for these metals are in (although they could be). What we want to see now is for gold and silver to break through more resistance levels. At the moment that would be around $1350 in gold and $22 in silver. There is a potential for a good rally here so we are now long in both gold and silver.

The broad stock market looks like it may be weakening. The DOW is breaking below 15,400 and a medium-term bearish signal appeared in the chart for this index last Friday, although the charts for the S&P 500 and NASDAQ are still strongly bullish. If the S&P 500 and NASDAQ start to turn bearish we may see that significant correction we were anticipating for the end of August starting early. If this turns out to be the case, we will be looking to sell short. On the sidelines for now.

The chart pattern for crude oil is similar to the DOW right now with medium-term bearish momentum. There is a good chance a significant correction is starting here, but the price has to start turning down soon and close below $102 to confirm this. On the sidelines of this market.

Trading Blog Thursday, August 8, 2013

8/8/2013

CRUDE OIL TRADE ALERT and BRIEF MARKETS UPDATE (2:05 pm EST)

We are getting a mixed bag of technical signals from all markets right now which is making our recent short-term trading difficult. Unfortunately, the crude oil market has suddenly turned bearish and is flashing a medium-term bearish signal today as it breaks below our stop loss level of $103 - $104. This means we should sell our long positions now. We are likely seeing that major cycle correction in crude starting now (i.e. without a rally first into late August) with the recent Aug. 2nd high near $109 being a bearish double top to the high of July 19. If this turns out to be the case, I will wait for the bottom of the cycle before going long again.

This sudden bearish turn in crude oil may be a forewarning of bearishness in the broad stock market as well. The DOW seems to be finding support above 15,400, but it needs to close above the resistance (formerly support) area of 15,540 -15,570 and even make new highs before we can think about going long. Momentum is still mostly bullish, but if the DOW breaks lower now (below 15,400) we may see momentum suddenly shift to bearish (as it has for oil). Still on the sidelines of this market.

It looks like I bailed out of silver a little too early yesterday as both gold and silver prices are up significantly today. Gold is closing back above $1300 and silver is again above $20. This may be the start of the rally we want to see, but I am still cautious here because gold and silver mining company stocks are now very bearish, and a medium-term bearish signal is present in some contract price charts for silver (the spot price charts for both gold and silver are still medium-term bullish). I am going to maintain my long position in gold for now, but we need to see the price rally above $1325 and even $1350 soon to negate the danger of a further drop.

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