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Trading Blog Monday, August 29, 2022

8/29/2022

MARKETS UPDATE (5:30 pm EDST)

The broad stock market moved down in today's early morning trading, then it rallied into the afternoon, but it finished the day back down. This demonstrates a nervous and indecisive market. Our sub-cycle corrective bottom is due this week, and our current reversal zone ends this Wednesday. We need to see this market turn up soon to confirm our view that equities will give us another significant rally into September (that may or may not make new all-time highs). The DOW and S&P 500 are approaching the lower end of our target ranges for a sub-cycle bottom (32,000 - 33,000 for the DOW, 4,000 - 4,200 for the S&P 500. and 12,400 - 12,700 for the NASDAQ), but the NASDAQ has fallen well below its target range. Because all three indices made new lows today, we will not get an intermarket bullish divergence signal this week (which we like to see at cycle and sub-cycle bottoms). We would like to see more signs of a sub-cycle bottom to buy by Wednesday, but if the DOW and S&P 500 also break below their target ranges, and these indices continue to fall past Wednesday, we will refrain from buying and will have to prepare for this medium-term cycle turning bearish. We are still on the sidelines of the broad stock market.

Gold and silver both made new weekly lows today, so the only way we will get a bullish divergence signal in this market this week is if silver moves below the start of its current medium term cycle (i.e. below its $18.15 low from July 14) without gold doing the same. Silver is close to doing that. Gold prices seem to be stabilizing around $1735 which is a comfortable distance from its medium-term cycle's starting point ($1681 on July 21). If this week's early general reversal zone (ending Wednesday) does not turn prices up, there is another short-term potential "turning point" for the precious metals on Thursday and Friday. We note that gold is still below its 15-day moving average. We need to see prices close above there soon to confirm this medium-term cycle is still bullish. Silver can also stay bullish as long as it doesn't break and close below its $18.15 low. We are now out of both metals, but we will watch carefully this week for potential buy spots in both gold and silver. We are currently on the sidelines of both metals,

The U.S. Dollar Index made a new high at 109.48 today, and that could be a double-top to its high from July 14 (109.29). This high is happening in the center of a reversal zone specifically for currencies (Aug. 23 - 31), so there's a good chance we could see a reversal back down now. If that happens, it would support a rally in the precious metals.

After Friday's corrective dip, crude oil prices rallied back strongly today, breaking above $95 and closing at $97.01 (October contract chart). While it's still possible for prices to make a new low by Sept. 6 (today's high is in the center of our general reversal zone), it seems more likely that the Aug. 16 low at $85.37 was the end of an old medium-term cycle and the start of a new one. If that's the case, we will wait for the next sub-cycle correction for a potential spot to buy. We are still on the sidelines of crude.

Trading Blog Friday, August 26, 2022

8/26/2022

MARKETS UPDATE and COMMENT ON POWELL'S SPEECH (2:15 pm EDST)

A highly anticipated speech by Federal Reserve Chairman Jerome Powell today sent a heavy wave of disappointment across Wall Street. Many investors had hoped he would soften his hawkish stance on fighting inflation and moderate his interest rate increases later this year. Instead, Mr. Powell dug in his heels and declared there would be more interest rate hikes which would likely cause pain for Americans in the form of a weaker economy and job losses. Whoa! That's not what investors wanted to hear. Not surprisingly, the broad stock market tumbled on this news, with the DOW losing over 700 points at the time of this writing (2:15 pm EDST). Of course, as always, we will have to wait to see how long the effect of Mr. Powell's words will last. Wall Street has a tendency to be short-sighted and will sometimes shrug off bad news rather quickly.

Today's drop tells us that our sub-cycle correction in equities isn't over yet. I wrote in Tuesday's blog:

"Good general target ranges for this correction would be 32,000 - 33,000 in the DOW, 4,000 - 4,200 in the S&P 500, and 12,400 - 12,700 in the NASDAQ. We are now inside those ranges, so we should be looking to buy soon. It is early in our reversal zone (the mid-point is Friday and it ends next week on Wednesday), so there is plenty of time for these indices to push lower."

We are nearing the end of this reversal zone, so that sub-cycle bottom may be imminent. If these indices stabilize now or early next week, we will probably be looking to go long. If this market continues to fall past next Wednesday, however, it could mean the market is turning bearish, and we would refrain from buying. We remain on the sidelines of the broad stock market for now.

Gold and silver prices also tumbled today suggesting their sub-cycle corrections could go lower. If gold or silver makes a new low next week without the other, that could be a good buy spot for both metals. We took a small profit on our gold long position this week, so we are on the sidelines of both metals for now.

Crude oil prices dropped today, but they will have to drop a lot more to challenge last week's low at $85.37. If they can't do this by next week, we will assume the new medium-term cycle started last week and will start looking for a good spot to buy as crude could rally significantly. We are currently on the sidelines of crude.

Trading Blog Wednesday, August 24, 2022

8/24/2022

GOLD TRADE ALERT (2:30 pm EDST)

Gold prices are edging up a bit today, but they seem reluctant to rally strongly. There are several short-term technical signals that are remaining bearish right now that are suggesting gold (and silver) could move lower. I am going to sell my long position in gold today. We are still above our buying price from July. 21 ($1719), so we can get out with a small profit. We are still out of silver. If gold and silver move below their July lows, their cycles will turn bearish. Otherwise, we may look to re-enter our long position on any corrective low that hold above $1681 in gold and $18.15 in silver.

Trading Blog Tuesday, August 23, 2022

8/23/2022

MARKETS UPDATE (7:00 pm EDST)

In Friday's blog on the broad stock market I wrote:

"...it looks like we are seeing a significant sub-cycle correction in progress, so we will be watching for a bottom to buy, perhaps in next week's reversal zone (Aug, 23 - 31)..."

The market is continuing to push down as it now enters that reversal zone. This sub-cycle correction has already broken below the 15-day moving averages in all three of our market indices (DOW, S&P 500, NASDAQ), which is what we want to see on a significant corrective dip. Good general target ranges for this correction would be 32,000 - 33,000 in the DOW, 4,000 - 4,200 in the S&P 500, and 12,400 - 12,700 in the NASDAQ. We are now inside those ranges, so we should be looking to buy soon. It is early in our reversal zone (the mid-point is Friday and it ends next week on Wednesday), so there is plenty of time for these indices to push lower. We don't want to see them push TOO low, however, as this could mean the cycle is turning bearish. Once a sub-cycle low is in, we will expect another strong rally into September where these indices could challenge their all-time highs. Let's stay on the sidelines for now and be alert for a good buy spot this week or early next week.

We went long in gold on July 21 around $1720 with the idea that it was the start of a new medium-term cycle (and possibly even the start of a new longer-term 16 month cycle). Prices rallied strongly from there confirming the new cycle. A sub-cycle peak was reached on Aug. 10 ($1805), and a corrective dip has been in progress since then. This "dip" has gone a little too far and could be indicating that this medium-term cycle is peaking early and turning bearish. If that's the case, prices could be headed lower to break below the start of the cycle (i.e. below $1681). But we are still inside a reversal zone for the precious metals (Aug. 15 - 23) and prices are turning up today. If prices can't break and hold above $1755 over the next few days, or if prices break below yesterday's low ($1728), we will likely sell our long position in gold (it is still above our buy price), and wait to see if the cycle turns bearish (closes below $1681).

If gold's cycle is still bullish, we are expecting a strong rally into October with prices at least to $1850, and possibly as high as $1900 - $2000 ! (Hence our interest in going long now. I should note, however, that if and when such a high is achieved - below the all-time high of $2070, at the $2070 high (double-top), or even slightly above $2070 - it will probably be the FINAL top in the long-term 23 year cycle, and prices would fall steeply from there down to the $1000 - $1200 area over the next several years.) We will hold our long position in gold for now.

The U.S. Dollar Index has been rallying strongly, but it may be forming a "double-top" right now near its 109.29 high from July 14. We also entered a reversal zone specifically for currencies today (Aug. 23 - 31). This means a top could be imminent and the dollar could back down (at least short-term). If that happens, it could help push up the price of gold and silver.

Silver's situation is very similar to gold's in that it is fairly clear a new medium-term cycle started in mid July (July 14 at $18.15). This means it is a young cycle, and like gold, the cycle may be peaking early and turning bearish. From a sub-cycle high of $20.87 on Aug.15, silver prices fell to $18.60 yesterday. That is a steep correction. If prices can rally from yesterday's low, we could still have a young bullish cycle ready to make new highs. But if prices continue lower and break below the start of the cycle ($18.01), the cycle will turn bearish and prices will be headed lower for many more weeks. As with gold, if prices instead turn bullish now, we could see some strong rallying into October that would support the idea that July 14 was also the start of a new longer-term (26 month) cycle. If that's the case, silver could rally as high as $37 as we move into 2023. But for that to happen, silver has to rally now and not drop below $18.01. If it can do that, we will be looking to buy - soon. For now, we are still on the sidelines of silver.

In last Friday's blog on crude oil I wrote:

"...prices have been rallying from a low ($85.73 - Sept. contract chart) on Tuesday. That deep low stopped us out of our long position, but the low was in a general reversal zone and may have been the final medium-term cycle bottom. Were we "whipsawed" out of a good trade? Maybe, but we enter another reversal zone next week (Aug. 23 - 31), and technical signals show an ideal cycle bottom could happen between Aug. 18 - Sept. 6, and especially next week (Aug. 22 - 26). Let's wait and see if prices can push lower next week for a final bottom to buy. If not, we may look to buy on any close above $95."

Well, prices continue to rise sharply from that bottom ($85.37 - October contract chart) last Tuesday, so that still could have been the cycle bottom. But crude is now rising into a new reversal zone (Aug. 23 - 31). It could top out here and reverse down again and still make a final cycle bottom in our ideal time band Aug. 18 - Sept. 6. We'll watch for that. If it doesn't happen, we'll probe the long side on any short-term dips. We are still on the sidelines of crude.

Trading Blog Friday, August 19, 2022

8/19/2022

MARKETS UPDATE (4:30 pm EDST)

All three of our broad stock market indices (DOW, S&P 500, NASDAQ) have been falling from the new weekly highs they made on Tuesday. Although we had no bearish divergence signal on Tuesday, it looks like we are seeing a significant sub-cycle correction in progress, so we will be watching for a bottom to buy, perhaps in next week's reversal zone (Aug, 23 - 31). This market seems short-term bullish, and we are still anticipating more rallying into September. Nevertheless, if any corrective dip goes too low, the market could turn bearish and we could see a major sell-off with no new September highs. We will keep this in mind as we watch for a corrective low. We are still on the sidelines of this market.

Gold and silver prices are also falling this week, as we expected. Gold's drop has not been as steep as silver's drop, and this could mean that silver is an older medium-term cycle moving to its final corrective bottom (below $18.15). If not, and silver is a newer cycle starting on July 14 (at $18.15), silver prices should stabilize now and start to rally again. Gold is likely a new cycle that started on July 21 (at $1681), so we expect the current correction to be modest. If gold prices continue to fall next week and approach that $1681 low, however, it would mean that gold is also completing an older cycle. We are currently in a reversal zone for these metals that ends next Tuesday. Let's see if we can get a bullish divergence signal early next week (i.e. one metal making a new low without the other). That would give us the confidence to hold our long position in gold and maybe buy some silver. We are currently long in gold and out of silver.

Crude oil prices have been rallying from a low ($85.73 - Sept. contract chart) on Tuesday. That deep low stopped us out of our long position, but the low was in a general reversal zone and may have been the final medium-term cycle bottom. Were we "whipsawed" out of a good trade? Maybe, but we enter another reversal zone next week (Aug. 23 - 31), and technical signals show an ideal cycle bottom could happen between Aug. 18 - Sept. 6, and especially next week (Aug. 22 - 26). Let's wait and see if prices can push lower next week for a final bottom to buy. If not, we may look to buy on any close above $95. We are still on the sidelines of crude oil.

Trading Blog Tuesday, August 16, 2022

8/16/2022

Crude Oil Trade Alert (3:15 pm EDST)

Crude oil prices are falling again today and are closing below the Aug. 5 low of $87.01. This cycle looks bearish and the final bottom could go lower. I am going to bail out of our long position here with a small loss (about 3%). If prices stabilize here or at a lower level, we may look to buy again as the final cycle bottom would ideally happen between Aug. 18 and Sept. 6. We are selling our long position in crude oil today.

Trading Blog Monday (evening), August 15, 2022

8/15/2022

MARKETS UPDATE (8:30 pm ESDT)

The broad stock market continues to push higher as today all three indices (DOW, S&P 500, NASDAQ) made new weekly highs. This negates any chance of a bearish divergence signal this week; however, we are still in a reversal zone at least through Thursday, so we could still see some sort of top form this week. All three indices are still well below their all-time highs. It will be interesting to see which, if any, index can challenge or even exceed its all-time high as we move into September. We are still on the sidelines of this market until we see a significant corrective dip to buy. If we don't get that soon, we may just wait to sell short at the final top of this new medium-term cycle.

Gold and silver seem to be correcting down as we move into a reversal zone specifically for the precious metals (Aug. 12 -23). If prices don't push higher this week, we should be watching for a significant low, and perhaps a spot to buy silver (we are already long in gold). If prices DO push higher, we will reverse our strategy and possibly take profits in our long gold position. As long as gold can stay significantly above $1700, we will try and ride out any corrective dips. We are currently long in gold and still out of silver.

Today crude prices dropped briefly just slightly below the Aug. 5 low of $87.01 (which we had labeled as the start of a new medium-term cycle). That could be a bullish "double-bottom" low as we are still in a reversal zone and the final medium-term cycle bottom is due. If prices start closing below today's low ($86.82), and especially below $85, we will unload our long position in crude and wait for a new bottom. For now, we are still holding our long position in this market.

Trading Blog Thursday, August 11, 2022

8/11/2022

MARKETS UPDATE (4:30 pm EDST)

Our bearish divergence signal in the broad stock market from early this week has been negated as all three of our indices (DOW, S&P 500, NASDAQ) have now broken above their June highs. Nevertheless, we are still in a strong reversal zone that ends today but overlaps with another (Aug. 12 - 19) through next week; and yet another reversal zone runs from Aug. 23 - 31. This means we could see a significant high or low (or more than one) anytime through the end of this month. Today equities rose steeply early in the day but then fell sharply and lost their gains by the closing bell. That could signal a top. We are still anticipating some sort of sub-cycle correction in all three indices anytime now, which we may look to buy. For now, we are still on the sidelines of this market.

Gold and silver prices have been correcting down a bit this week as we expected - but so far not by much. We are still holding our long position in gold and intend to ride out any modest correction now. We are waiting to buy silver on any significant corrective dip that doesn't go too low. We enter another reversal zone specifically for these metals on Friday (Aug. 12 - 23), so we could see a corrective sub-cycle bottom in that time frame. We will watch for that. Currently we are long in gold and out of silver.

Crude oil prices have been rallying this week, which is good news for our long position entered on Tuesday. It looks like that low of $87.01 (Sept. contract chart) on Aug. 5 could be the start of a new medium-term cycle in crude, but prices have to start closing above $102 to support that. Because we have reversal zones through the end of this month, we could see some corrective dips in any rally now. But as long as prices stay above $87.01, we will try to ride them out as we hold our long position in crude.

Trading Blog Tuesday, August 9, 2022

8/9/2022

CRUDE OIL TRADE ALERT (3:30 pm EDST)

Crude oil prices seem to be making a significant bottom now with last week's low at $87.01 (Sept. contract chart). We are in two overlapping reversal zones this week, and a medium-term cycle bottom is due in this market. I am going to enter a long position in crude now. Prices may be stabilizing now above $90. We will be concerned if they start closing below $90. Our stop loss can be based on prices closing the week below last week's low ($87.01).

Trading Blog Monday, August 8, 2022

8/8/2022

MARKETS UPDATE (4:00 pm EDST)

We start this week in the center of our current strong general reversal zone (August 1 - 12), but there is another (not as strong) reversal zone (August 9 - 18) that overlaps this one. Thus this week and next represents a wide reversal zone which is especially intense this week Tuesday - Friday.

Today all three of our broad stock market indices (DOW, S&P 500, NASDAQ) made new weekly highs, but only the NASDAQ and S&P 500 are exceeding their early June highs (the DOW got close today but didn't quite make it); and after an early day rally, all three gave back their rally's gain at the the closing bell. We are thus starting the week with a strong bearish divergence signal. We have been anticipating some sort of significant sub-cycle correction in this market which is due anytime now. This would be a good week to see it start, perhaps from today's highs. As I stated in my last two blogs, it looks like all three indices started new medium-term cycles with their lows on June 17 (DOW and S&P 500) and June 16 (NASDAQ), and the trend of these new (young) cycles seems to be bullish. This means we will probably look to buy the bottom of any significant correction (as long as that bottom isn't TOO low) for more rallying into September. For now, we remain on the sidelines as we wait for a corrective drop.

As with the broad stock market, we are also waiting for significant sub-cycle corrections in both gold and silver. Both metals seem to be young cycles that began with their lows on July 21 ($1681 -gold) and July 14 ($18.15 - silver), and they are due for sub-cycle corrections anytime now. We are already long in gold with a profit from the July 21 bottom. Because these seem to be new, bullish cycles, I am going to hold this long position and ride out any corrective dips in gold (unless the correction goes very deep and approaches that $1681 low, which we can use as a stop loss level for our trade). Any correction in silver that stays above $18.15 could be a good place to buy this metal. Today silver made a new weekly high while gold did not, so we have an intermarket bearish divergence signal which may be the start of a corrective drop. We remain on the sidelines of silver for now as we hold our long position in gold.

We've just entered a reversal zone specifically for currencies Aug. 5 - 15. This means we could see a significant top or bottom in the U.S. Dollar Index in this time frame. After taking a significant corrective drop in the last two weeks of July, the greenback edged up a bit last week. If it moves higher into this week's reversal zone and reverses, that could correspond to a bottom and reversal up in the precious metals. We will watch for that.

Friday's low in crude oil at $87.01 (Sept. contract chart) did not hit our $85 target for a final medium-term cycle low, but it may have been close enough. It was in the center of a strong reversal zone, and we just entered a time frame where a final cycle bottom could happen - i.e. anytime over the next several weeks. But that strong reversal zone is in effect all this week, so prices could still push lower. Let's stay on the sidelines of crude for now. If prices start to rally strongly from here, we may look to go long.

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