There are two possibilities now for the medium-term cycle in crude oil. If the cycle started with the July 20 low at $64.49 (Oct. contract chart), then crude's trend has turned bearish as prices have now moved well below that low. In that case, this week's rally would only be a short-term surge that won't get above $73.52. But if Monday's low at $61.74 was the start of a new medium-term cycle, then this market could be bullish and could easily challenge or even exceed that $73.52 high. Monday was the center of a reversal zone specifically for crude (Aug. 17 - 26), so this latter scenario is a strong possibility. Let's stay on the sidelines of crude until the trend here becomes more definitive.
BRIEF UPDATE on CRUDE OIL (6:00 pm EDST)
There are two possibilities now for the medium-term cycle in crude oil. If the cycle started with the July 20 low at $64.49 (Oct. contract chart), then crude's trend has turned bearish as prices have now moved well below that low. In that case, this week's rally would only be a short-term surge that won't get above $73.52. But if Monday's low at $61.74 was the start of a new medium-term cycle, then this market could be bullish and could easily challenge or even exceed that $73.52 high. Monday was the center of a reversal zone specifically for crude (Aug. 17 - 26), so this latter scenario is a strong possibility. Let's stay on the sidelines of crude until the trend here becomes more definitive. UPDATES ON THE BROAD STOCK MARKET and PRECIOUS METALS (11:30 pm EDST)
We are now technically at the end of our strong reversal zone (Aug. 17 - 25) for the broad stock market (and others). It looks like the DOW and S&P 500 made significant lows last Thursday (near the center of the reversal zone), which could be the sub-cycle corrections we were anticipating. It is possible, however, to extend this reversal zone into next week, which would allow for another drop to a lower sub-cycle correction. The fact that the S&P 500 and NASDAQ are making new all-time highs this week without the DOW (strong bearish divergence signal) is making me think another drop could happen. The DOW making a new all-time high by Friday would negate this bearish signal. The NASDAQ also appears to be a young cycle that may have started either Jul 19 at 14,178 or Aug. 19 at 14,424. This means the NASDAQ could be quite bullish now and for many more weeks. Even if these indices fall to another low over the next several days, they could all still be bullish as long as their sub-cycle corrections don't go TOO low. I am going to stay on the sidelines for now with the idea that we will see more highs into September and possibly a final top to sell short then. Tomorrow (Thursday) is the last day of our reversal zone for precious metals, although it could be extended into Friday. Gold prices have been falling from a high on Tuesday. This could easily be a sub-cycle correction in progress, and if it is, it could go lower (at least to $1750). Silver may have started a new medium-term cycle with its double-bottom low on Aug. 9 ($23.02) and Aug. 20 ($22.92). If so, prices could be very bullish now. There is also the possibility (still) that silver is completing an older cycle, and we could get one final drop to a new low as soon as this week. Because of the ambiguity in this market, we will remain on the sidelines of gold and silver for now. MARKETS UPDATE (5:30 pm EDST)
The minutes from July's FOMC meeting were released on Wednesday and revealed that several FOMC members were anticipating bond-purchase tapering by the end of this year. That hawkish news sent the broad stock market tumbling. After four days of plunging, equities seem to be snapping back up today and recovering at least some of this week's losses. We had been expecting a sharp correction, but is it over? Our current reversal zone extends into next Wednesday, so this market could fall lower. On the other hand, it's possible the correction is over. We will have to wait until next week to see how the market moves. If yesterday's lows were sub-cycle bottoms, then all three of our market indices (DOW, S&P 500, NASDAQ) would be be bullish now, at least short-term. We will stay on the sidelines for now. It's still not clear if gold started a new medium-term cycle with its deep low on Aug. 9 ($1693) or if a new cycle started on June 29 (at $1752). If the latter, then gold's trend has turned bearish (because prices have already plunged below the start of the cycle), and gold would be moving lower for many more weeks. But if the new cycle started last week (Aug. 9), then gold should be bullish as long as the current corrective dip stays above $1693. The top of the current dip was on Tuesday - the first day of our reversal zone for gold and silver (Aug. 17- 26). There is still time to make a higher top in this reversal zone or, alternatively, if the top is in, to fall some more to a sub-cycle low. We will remain on the sidelines of gold for the moment and wait until the cycle is more clear. Silver plunged to a low of $23.02 on Aug. 9. Today it is testing that low again (it got to $22.92). This could easily be a "double-bottom" to the Aug. 9 low and the start of a new medium-term cycle. We are in the center of a precious metal reversal zone which extends into next Thursday. If we aren't seeing a bottom now, we could see it with a lower low early next week. It looks like a good time to consider going long in silver. I may give a trade alert to buy this week-end, or we may try to buy early next week at a lower price. Stay tuned. Remaining on the sidelines for now. In my last blog on crude (Aug. 9), I wrote: "Prices today at $65.15 could be making a double-bottom to that $65.01 July 20 low. That would be bullish and would confirm a new cycle. But if prices go lower from here, they may be moving down to the final bottom of an older cycle - maybe in the upcoming reversal zone for crude Aug. 17 - 26..." It looks like this is an older cycle moving to its final bottom. Prices closed the week at $62.32 (Sept. contract chart). Let's see if the go any lower next week and give us a possible spot to buy. Staying on the sidelines for now. UPDATE ON THE BROAD STOCK MARKET (11:45 pm EDST)
Yesterday the DOW and S&P 500 made new all-time highs, but the NASDAQ did not for another case of intermarket bearish divergence. Today we enter another strong reversal zone (August 17 - 26) and all three indices are taking a dive. It's possible the DOW and S&P 500 topped out yesterday (a day before the actual reversal zone) and are starting their sub-cycle corrections (unless they pop higher this week or next). If so, they are still young medium-term cycles which means we can't be sure they have made their final tops yet. That will depend on how low the sub-cycle corrections will go. (To stay bullish with possible new highs ahead, the DOW should not break below 33,741 and the S&P 500 not break below 4,233). As I've pointed out in earlier blogs, the NASDAQ could still be an old medium-term cycle about to take its final correction to the final cycle bottom. It that's the case, its final cycle high and top could have been on Aug. 5 (at 14,896) - in the center of our last reversal zone. The minimal correction we would expect would be to test the 45-day moving average. It is doing that today, but it could also go quite a bit lower (and there is plenty of time left in this new reversal zone to do that). An alternative scenario would be that the NASDAQ is a new medium-term cycle that started with its July 19 low at 14,178. In that case, a modest correction now would just be the first sub-cycle dip, and as long as it doesn't break below 14,178, the cycle would stay bullish and likely make new highs over the next several weeks. If that 14,178 low breaks, however, it would mean the older cycle is bottoming OR the newer cycle is turning very bearish. I realize this is all a bit complicated, but the bottom line here is that we are waiting to sell short at the top of a LONG-TERM cycle and ride a very substantial, long-term correction (crash?) down. Analyzing the medium-term cycles will give us clues as to when a long-term top is in and when we should go short. The strength and depth of any corrective drops now (or from highs later this week or next) should help us determine if that long-term correction has started already (NASDAQ), is starting now, or if it is going to start from higher highs into September. We will stay on the sidelines of the broad stock market for now and wait to see if today's correction can gain any legs over the next few days. There is plenty of time left in this new reversal zone (which ends Thursday next week) for these indices to make new highs. MARKETS UPDATE (4;30 pm EDST)
We are now technically out of our reversal zone for the broad stock market (it ended yesterday), and the DOW and S&P 500 are pushing up to new all-time highs. The NASDAQ, however, has not made a new high this week and is edging down. This, of course, is a strong intermarket bearish divergence signal. Nevertheless, I am reluctant to sell short right now. The new highs in the DOW and S&P 500 are being made outside of our reversal zone (although a top only a day or two out of the "zone" is possible). The DOW looks especially bullish at the moment and could easily be in "break-out" mode and surging into the next strong reversal zone coming up next week (Aug. 17 - 25). Both the DOW and S&P 500 are early in their medium-term cycles, which is another bullish sign. The NASDAQ could also be a new cycle and bullish, but if it's an older cycle, it could fall steeply now to its final bottom. There is a possibility here of the NASDAQ taking its deep final older cycle correction with the DOW and S&P 500 taking only sub-cycle corrections, but if the NASDAQ is a new cycle, it too would only take a moderate sub-cycle correction. I am going to stay on the sidelines for now with the idea that the DOW and S&P 500 could keep this market bullish, at least into next week's reversal zone, and possibly also into September. If the S&P 500 does correct down and breaks clearly below 4,233, we will have to change our bullish view and consider the possibility that a MAJOR long-term correction has started in the broad stock market. Gold and silver seem to be recovering a bit from Monday's dramatic plunge, but they don't look especially bullish at the moment. Monday's low was in the center of our reversal zone for the precious metals (which ends today), but there's another one coming up next week (Aug. 17 - 26). One or both of these metals could make another low (or double-bottom) in that new reversal zone. If gold is a young medium-term cycle that started on June 29 (at $1752), then the cycle has turned VERY bearish and prices will be down for at least nine more weeks. But if gold is moving down to the final bottom of an older cycle, we could see that bottom this week or next (it could have even happened Monday). If the older cycle is valid, we want to see prices stay above $1750, and especially above $1700. Any break below $1677 means that the younger cycle is in place and the market has turned very bearish. This is a strong possibility now. Silver is definitely an older medium-term cycle that is now correcting down to its final bottom. That bottom could have been with Monday's low at $23.02, but prices could still go lower into next week's reversal zone and bottom then. This bottom could be a good buy spot (the start of a new cycle is always bullish), but if gold turns bearish (as described above), then any bullish rally might be dampened by gold's bearish trend. We will remain on the sidelines of both gold and silver for now. MARKETS UPDATE (11:30 pm EDST)
We are nearing the end of our current strong reversal zone for equities (and other markets) - July 30 - Aug. 10. All three broad stock market indices made new all-time highs last week in this reversal zone, so that could be a top, and this market could be turning down now. However, there was no intermarket bearish divergence signal last week. If one or two of these indices (but not all three) makes a new high, we could see a bearish divergence signal this week, and that might be a good place to sell short. But if all three make new highs (they are all close to doing that), there will be no bearish divergence this week either. I suspect this market is bullish and will make new highs. If that happens, it could be a case of a reversal zone corresponding to a "break-out" instead of a reversal (this is not common, but it does happen). Let's wait and see if these indices can push higher past Tuesday. If they do, we may have to wait until our next reversal zone coming up Aug. 17 - 25 before we see a significant top and then a significant reversal. We will also watch for bearish divergence over the next few days and a possible opportunity to sell short (it's still possible that the NASDAQ is completing an older cycle, and it could fall sharply to that cycle's final bottom). Still on the sidelines of the broad stock market. In last Wednesday's gold trade alert, I was worried that gold was about to take a significant correction: "It seems like that correction could happen now, and there is a chance it could fall below $1752. Because our long position is now at a break even point, I am going to sell it today (no loss) and wait to see how far any correction will go." Well, unloading our long position (with no loss) on Wednesday turned out to be a VERY good decision. On Friday, gold prices plummeted from $1804 to $1759, and today they dropped to $1693 intraday before closing around $1730. Wow. It looks like the $1752 low from June 29 is not holding. If that June 29 low was the start of a new medium-term cycle (as we have been thinking), it means this market's trend is turning VERY bearish. The alternative could be that gold is completing a much older cycle, which may not be so bearish (unless prices start closing below $1677). This is not good news for gold and COULD mean that the top to the long-term 23 year cycle in gold is in with the August 2020 high of $2070 and that gold has begun its long-term descent to the 23 year cycle low due around 2023 -2024. But I am getting ahead of myself. For now, we will wait and see how low prices go before we jump to any conclusions about gold's longer-term cycle. Silver prices also plummeted Friday and today with today's intraday price getting down to $23. Silver is most likely an older medium-term cycle that is finding its final bottom now. We are still in a reversal zone for the precious metals (it ends Wednesday), so this week could see the bottom. But gold's sudden bearish turn has me worried that both metals could go lower - perhaps into the next reversal zone for gold and silver coming up Aug. 17 - 26. Let's stay on the sidelines of both metals for now. In last Tuesday's blog on crude oil I wrote: "Crude may have started a new medium-term cycle with its July 20 low at $65.01 (September contract chart) or it could be completing an older cycle that is getting ready to fall sharply to its final cycle bottom (below $65.01). In either case, crude could still rally higher short-term. If this is a new cycle, it could rally much higher - possibly to the low $90's. Crude and the broad stock market will likely be moving in the same direction, and that direction is not clear in either market right now." All of this still applies except crude prices haven't rallied and have fallen significantly since last Tuesday. Prices today at $65.15 could be making a double-bottom to that $65.01 July 20 low. That would be bullish and would confirm a new cycle. But if prices go lower from here, they may be moving down to the final bottom of an older cycle - maybe in the upcoming reversal zone for crude Aug. 17 - 26 (same as for gold and silver). We will remain on the sidelines of crude until it becomes more clear which cycle is playing out. GOLD TRADE ALERT (3:30 pm EDST)
Both gold and silver prices surged early this morning but then fell dramatically. Silver made a new weekly high but gold did not. This is a strong intermarket bearish divergence signal, and it's happening near the center of our reversal zone specifically for precious metals (July 30 - Aug. 11). In yesterday's blog on gold I wrote: " It looks like gold started a new cycle off its $1752 low of June 29. That would make gold bullish. But it's still possible that gold is completing an older cycle and is ready to fall to the final bottom of that cycle - below $1752. Even if gold is a new cycle (most likely), it is due for a sub-cycle correction soon." It seems like that correction could happen now, and there is a chance it could fall below $1752. Because our long position is now at a break even point, I am going to sell it today (no loss) and wait to see how far any correction will go. We will look to go long in both silver and gold after they take corrective drops. Selling my long position in gold today. Still on the sidelines of silver. MARKETS UPDATE (5:00 pm EDST)
We are now in our new strong reversal zone for the broad stock market (and other markets) - July 30 - Aug. 10. Yesterday we got a strong bearish divergence signal as the DOW made a new all-time high (35,192) without the other two indices (S&P 500 and NASDAQ), and all three fell strongly. They seem to be recovering a bit today, however, so the directional pattern is still not clear. Cycle patterns are also a bit ambiguous at the moment. It is pretty clear that the S&P 500 and DOW are new, young medium-term cycles. The NASDAQ could also be a new cycle started on July 19, but it's still possible it is an older cycle about to move down to its final cycle bottom. Let's examine these indices separately. The young DOW and S&P 500 cycles are both due for significant sub-cycle corrections. They may have started already with yesterday's drop, but one or both indices could rally some more to form a new top in this new reversal zone and then take a significant correction. Either way, these corrections shouldn't fall below the starting points of these young cycles (33,271 in the DOW and 4,165 - or even 4,233 - in the S&P 500), and they may turn out to be good buy spots for more rallying into the summer. (If those lows are breached, however, this market could turn very bearish, and we would be looking to sell short again.) The NASDAQ could still be ready to take a major correction down to its final cycle bottom (if it is an older cycle), but we can't be sure of that as it could also be a bullish young cycle. If the S&P 500 and NASDAQ make new all-time highs this week (they are close), it will negate the bearish divergence signal from Monday, and that would suggest the NASDAQ is a new cycle. We may consider going short again if all three indices DO NOT make new all-time highs this week, or we may do that early next week if we get another bearish divergence signal. For now, let's stay on the sidelines of all three indices. Longer-term, we are still waiting for a final long-term cycle top in the broad stock market which could come this month or possibly next month, to be followed by a MAJOR downturn (possible crash) over the next few years of possibly 50% or more. Gold's medium-term cycle is also ambiguous now. It looks like gold started a new cycle off its $1752 low of June 29. That would make gold bullish. But it's still possible that gold is completing an older cycle and is ready to fall to the final bottom of that cycle - below $1752. Even if gold is a new cycle (most likely), it is due for a sub-cycle correction soon. We are still holding a long position in gold. Let's stay long with a stop loss based on gold breaking below that $1752 low. We are now in a reversal zone specifically for precious metals (July 30 - Aug. 11, same as for equities), so we could see a sub-cycle bottom form this week or early next week, or we could see prices push higher to form a top in this time frame and then a corrective drop. If gold is bullish, this new cycle could eventually rally to challenge the $1900 level and maybe even the $2000 level from 2020. Silver may have started a new medium-term cycle with last week's low of $24.49, but it could also be completing an older cycle and could soon move below $24.49 to form its final cycle bottom. If it's a new cycle, silver should be very bullish now, but this new reversal zone could put a damper on any strong rally and turn it back down. If silver makes a new low this week or early next week, it could be the final bottom in an older cycle and a good buy spot. On the other hand, if this is a new cycle, prices could rally strongly and make a new top in this same time frame and then make a sub-cycle correction that would stay above that $24.49 low. That could also be a good spot to buy. Let's stay on the sidelines of silver for now and see which pattern plays out. As with the other markets, crude oil's cycle pattern is also not clear -yet. Crude may have started a new medium-term cycle with its July 20 low at $65.01 (September contract chart) or it could be completing an older cycle that is getting ready to fall sharply to its final cycle bottom (below $65.01). In either case, crude could still rally higher short-term. If this is a new cycle, it could rally much higher - possibly to the low $90's. Crude and the broad stock market will likely be moving in the same direction, and that direction is not clear in either market right now. Let's remain on the sidelines of crude for now. |
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