Blog Archives

Trading Blog Thursday, August 31, 2023

8/30/2023

MARKETS UPDATE (4:00 pm EDT)

All three of our broad stock market indices (DOW, S&P 500, NASDAQ) have been rising strongly from last Friday's lows. Does this mean the final medium-term cycle lows (possibly Aug. 25 in the DOW and Aug. 18 in both the S&P 500 and NASDAQ) are in, and have we started new cycles? Possibly, but we note that our current strong reversal zone could extend into Sept.8, and any new highs through then could be a potential top for another reversal back down to an even lower medium-term cycle bottom. Either way, it was probably a good idea to take profits and cover our short positions early on Monday.

All three indices have now closed back above their 15-day and 45-day moving averages, which is a bullish sign. If these are new medium-term cycles, they will have to break above the highs of their last cycles to maintain a bullish trend. Those highs would be 35,679 in the DOW, 4,607 in the S&P 500, and 14,446 in the NASDAQ. Although we like to go long early in any new cycle, I am uncomfortable buying now as we are making new highs inside a strong reversal zone (and especially before we can confirm that any new cycle is bullish). This market's upward momentum this week may be due to the upcoming holiday week-end (Labor Day on Sept. 4). Equity markets tend to rally into major holidays, so we might have to wait until next week before we see a possible turn down. We are staying on the sidelines of the broad stock market for now.

We are still not sure if gold started a new medium-term cycle with its low of $1894 on June 29 or its low of $1885 on Aug. 21. If the cycle started on June 29, it has technically turned bearish because it has already moved below the start of the cycle. If Aug. 21 began the cycle, it could be bullish. Any break above $1987 would confirm the younger (Aug. 21) cycle. I think this could happen as the rally from the Aug. 21 low has been strong and has now broken above the 15-day and 45-day moving averages. Regardless of the cycle labeling, we are not going to chase this rally as it makes new highs in the current reversal zone for precious metals (Aug. 21 - Sept. 4) as well as the general reversal zone for all markets (Aug. 23 - Sept. 8). Let's stay on the sidelines and wait for another significant correction to clarify the cycle labeling before we make another trade in this metal.

The current medium-term cycle in silver is less ambiguous than gold's cycle. We are still going with the labeling that silver's current medium-term cycle started with the low of $22.12 on June 23. From there, silver rallied strongly to a high of $25.26 on July 20. Prices then fell sharply back to $22.31 on August 21, very close - but not below - the start of the cycle. From that low, silver has been rising strongly again and is now close to its $25.26 high from July 20. So what does all this mean?

Even though this cycle's initial rally into July 20 was strong and steep (bullish), the fact that it turned back down and made a significant sub-cycle correction very close to the start of the cycle was bearish. (We note, however, that the cycle trend didn't technically turn bearish because that sub-cycle low did not break BELOW the start of the cycle.) So we are getting mixed signals about the trend of this cycle. If prices start closing above $25.26, the trend will be bullish with new highs ahead; but if prices roll over before exceeding $25.26, the trend will turn bearish with prices headed lower. We are still in the reversal zone for precious metals (it ends next Tuesday), and Friday-Tuesday is also a very strong potential "pivot point" for silver. This means a top could be imminent. Prices are backing off today after touching a strong resistance line around $25 yesterday, so a turn down could already be starting. As with gold, it is best to remain on the sidelines of silver for now as we wait to see if this rally will top out and turn back down over the next several days.

It looks like the U.S. Dollar Index topped out last Friday within a reversal zone specifically for currencies (Aug. 24 - Sept. 4), and its fall this week has helped drive up gold and silver prices. We note, however, that this reversal zone may extend into Sept.8, so if the greenback can find a support level and stabilize between now and then, it may reverse back up, and this could put more downward pressure on the precious metals. The dollar may find support around 102, which is also close to the current 45-day moving average. We will watch this carefully over the several trading days.

Crude oil may have ended its old medium-term cycle and started a new one with last Thursday's low at $77.59 (Oct. contract chart). No, prices did not get down to the 45-day moving average which we like to see tested or broken at cycle bottoms, but they came close. We also like to see a 2 - 5 week fall in prices to confirm a cycle bottom, and last Thursday's low was exactly 2 weeks from the previous high of $84.16 on Aug. 10. So we have satisfied at least one requirement for a medium-term cycle bottom (and start of a new medium-term cycle). That may be enough because crude oil's general trend is looking VERY bullish.

Longer-term, we can now confirm that the deep low on May 4 ($64.58) was most likely the start of a new 3 year cycle in crude. That means crude prices should be rising steeply into the end of this year to at least to $100, and eventually they could go as high as $130. This is why we've been looking to buy the start of any new medium-term cycle. Did we miss it last week? Well, maybe, but prices are making new highs now and we are still within two reversal zones relevant to crude, and we enter another one specifically for crude tomorrow (Sept. 1 - 11). Prices could reverse back down again and form a lower low next week that could test or even break below the 45-day moving average and give us a better candidate for a medium-term cycle bottom. If that happens, we will be looking to buy. Otherwise, we may have to wait for the first corrective dip in a new cycle that could have started last week. We remain on the sidelines of crude for now.

Trading Blog Sunday (evening), August 27, 2023

8/27/2023

BROAD STOCK MARKET TRADE ALERT

On Friday the DOW made another new weekly low while both the S&P 500 and NASDAQ remained above their lows from the previous week, and all three indices closed strongly in the upper part of their day's range. This gives us a strong bullish divergence signal between these indices, and it is happening inside our strong reversal zone (Aug. 23 - Sept. 8). Although the DOW and S&P 500 have not yet touched our ideal targets (33,500 and 4,200, respectively), they (and the NASDAQ) have all penetrated well below their 45-day moving averages and have satisfied the requirements for a final medium-term cycle bottom. We may have just seen that bottom in the DOW on Friday, and the previous week's lows in the S&P 500 and NASDAQ may also have been cycle bottoms. While one, two, or even all three indices could fall further by Sept. 8, I think it would be prudent to take profits and cover our short position in this market right now. I am therefore going to to place an order to cover (unload) my short position in the broad stock market at the opening of the market tomorrow. We went short on July 21, so at this point we have a profit of almost 3% on the DOW (or more if one chose a leveraged index fund).

Another reason to cover our short position now is because we are looking to go long in this market once we are a little more confident that a final medium-term cycle bottom is in. Assuming the final bottom doesn't plummet too low over the next two weeks, we are fairly confident that another strong rally will follow that could end up testing the all-time highs in this market. (We should note, however, that if those highs are tested but not exceeded in ALL THREE indices, it will be "look out below" for a potentially very strong correction to follow.)

Trading Blog Thursday (late night), August 24, 2023

8/24/2023

MARKETS UPDATE (11:30 pm EDT)

After a few days relief rally, the broad stock market turned back down strongly today. It looks like equities may be resuming their plunge down to a final medium-term cycle bottom which is ideally due anytime between now and Sept. 8th. We are still looking for price targets around 33,500 in the DOW and 4,200 in the S&P 500, but because all three market indices (DOW, S&P 500, NASDAQ) have now gone well below their 45-day moving averages, we can accept a bottom above (or below) these targets as long as it is inside our current reversal zone (Aug.23 - Sept. 8). The DOW is already breaking below last Friday's low. Let's stay short in this market for now and see if the other two indices will follow. If they don't, we may have a bullish divergence signal for the week.

Gold and silver prices have been rallying sharply from last week's lows, but they may also be ready to turn back down as they are both making new weekly highs as we approach the center of a reversal zone specifically for the precious metals (Aug. 21 - Sept. 5). Silver's rally has been especially strong, but today and tomorrow (Friday) is also a potential pivot point for silver. Today and yesterday (Wednesday) was/is a strong potential pivot point for gold. A top could therefore be imminent in both metals. We are still uncertain about the medium-term cycle labeling of gold. If silver started a new medium-term cycle with its low on June 23 ($22.12), then it has to break above $25.26 to maintain a bullish trend. Gold's trend could be bullish or bearish depending on its cycle labeling. We are staying on the sidelines of both metals until their cycle labeling is more clear.

Crude oil prices are now approaching the 45-day moving average, and we expect a final bottom in its medium-term cycle to test or break below that average anytime by Sept. 8. We remain on the sidelines of crude as we wait for that bottom.

Trading Blog Monday, August 21, 2023

8/21/2023

MARKETS UPDATE (5:30 pm EDT)

After falling steeply last week, the broad stock market was entitled to a small relief rally, which it seems to have taken today. The S&P 500 and especially the NASDAQ rallied smartly today, although the DOW lagged behind and was much less enthusiastic. We don't enter our strong reversal zone until Wednesday (Aug. 23 - Sept. 8), so I don't think this market has found its bottom yet. The DOW and S&P 500 are still far from our ideal targets (33,500 and 4,200, respectively) for their final medium-term cycle bottoms, and there is plenty of time for them to move closer over the next three weeks. Let's hold on to our short positions in this market for now.

Gold prices are up just a bit, but silver prices are surging today. Despite this bullishness, however, silver is making a new weekly high and gold is not, and that sets up a bearish divergence signal. And this is happening as we enter a reversal zone specifically for the precious metals (Aug. 21 - Sept. 5, which is also overlapping with our general reversal zone mentioned above). This could put a damper on any rally in both metals as any new highs this week or next could also be significant cycle tops. There are also a lot of potential "pivot points" for both metals in this time frame. Tuesday and Wednesday we have one for gold, and Thursday and Friday, one for silver. Sept. 1 - 4 is also a potentially strong pivot point for silver. We may see a lot of volatility and price movement- both up and down - over the next several weeks in the precious metals, so it may be best to stay on the sidelines, especially as we are a little uncertain about the current cycle labeling of gold. My guess at this point is that the trend in both metals may be turning bearish and that any rally now will be short-lived, but we shall see how this plays out over the next three weeks. We remain on the sidelines of both metals for now.

The U.S. Dollar Index is down from Friday's 103.68 high which was just one day out of a reversal zone specifically for currencies. This means the greenback can fall now and give an upward thrust to precious metal prices, but we note that we enter yet another currency reversal zone on Thursday (Aug. 24 - Sept. 7), so we could also see a bottom in that time frame and the dollar turn back up. As I mentioned above, there may be quite a lot of volatility in these markets over the next several weeks.

Crude oil prices made a low last Thursday as it entered a reversal zone specifically for crude (Aug. 17 - 25). Prices rose Friday and again today as they tested the 15-day moving average before falling to close below it. We are in the center of this current reversal zone, so a top could be imminent and may have happened today. Last Thursday's low was not low enough for a final medium-term cycle bottom (which is due anytime now in this market), so I expect prices to go lower. We also like to see prices fall 2 - 5 weeks before we declare a final bottom. Thursday will be two weeks from the last high in crude ($84.89 on Aug. 10, Sept.contract chart). But we also have another reversal zone for crude Sept. 1 -11, so that would also be a good time for a final medium-term cycle bottom. A test or break below the 45-day moving average would be another desirable characteristic of a final cycle bottom. That average is now around $76.60 and rising slowly. We'll remain on the sidelines of crude for now as we wait for lower prices. Crude oil continues to look very bullish, so we will be looking to buy the bottom of this current cycle.

Trading Blog Thursday, August 17, 2023

8/17/2023

MARKETS UPDATE (3:00 pm EDT)

The broad stock market continues to fall this week (although reluctantly) towards a final medium-term cycle bottom that is now due in all three of our market indices (DOW, S&P 500, NASDAQ), and the very strong reversal zone beginning on Wednesday next week (Aug. 23 - Sept. 8) seems to be the ideal time frame for it to happen. Today the DOW is finally testing its 45-day moving average (the S&P 500 and NASDAQ are already well below their 45-day moving averages), so all three indices have now fulfilled a minimum requirement for a corrective low. Could they now turn up from here? Yes, but we are not in any reversal zone, and we are still far away from our ideal targets (33,500 in the DOW and 4,200 in the S&P 500). I think these indices can drop closer to those targets by next week (or even the week after). Let's continue to hold our short positions in this market.

Our decision to sell our long position in gold early yesterday was a good one as prices are now falling and breaking below the June 29 low we thought was the start of a new medium-term cycle. That may still be the case, but if it is, it would mean the cycle has turned bearish with prices headed much lower. A second possibility is that June 29 was not the start of a new cycle and we are still in an older (expanded) cycle that is getting ready to make its final bottom - probably in the reversal zone for precious metals coming up Aug. 21 - Sept 5 (and overlapping with our previously mentioned general reversal zone for all markets). If this bottom can stay above $1800, the general trend in gold could still be bullish, and we could still see a new all-time by the end of this year. A close below $1800, however, would be a warning sign that a more serious sell-off could be imminent, and a break below $1600 would mean a serious corrective drop is in progress that could take prices down towards $1000 very quickly. But I'm getting ahead of myself here. For now, we are favoring a more bullish scenario in gold, and we may be looking to buy again in the upcoming reversal zones somewhere between $1800 and $1875.

Silver seems a bit more bullish than gold at the moment as its spot price has not yet dropped below the low on June 23 that likely started a new medium-term cycle. But in silver's nearby contract chart (September), the price HAS dropped below that June 23 bottom, so this is a warning that silver, like gold, may be turning at least short-term bearish. As with gold, we will wait to see how prices move into these upcoming reversal zones and then reevaluate our cycle labeling for both metals. For now, we remain on the sidelines of both gold and silver.

We note that the U.S. Dollar Index has been rising and is making a new high today on the last day of a reversal zone specifically for currencies (Aug. 8 - 17). This means the greenback could turn down now and that could give an upward push to gold and silver prices. But even if this happens, there is yet another reversal for currencies coming up next week (Aug. 24 - Sept. 8), so any relief rally in these metals could be short-lived.

Crude oil prices are falling steeply but may now be finding some support between $78 - $80 (Sept. contract chart). Today we entered a reversal zone for crude (Aug. 17 - 25), so we should be on the lookout for a possible final bottom to the current medium-term cycle. We want to see a 2 - 5 week corrective drop from the final cycle high before we declare a bottom, and it would also be nice to see the 45-day moving average at least tested. So far it has only been one week from crude's $84.89 high on Aug. 10, and prices are still well above the 45-day moving average (now at $76.12 and rising). Let's stay on the sidelines for now and wait to see if prices can go lower - at least into the end of next week - before we think about buying.

Trading Blog Tuesday (late night), August 15, 2023

8/15/2023

MARKETS UPDATE and GOLD TRADE ALERT (11:00 pm EDT)

We are still waiting for the broad stock market to correct down to its final medium-term cycle bottom. Today the DOW finally made a strong move towards its 45-day moving average (which we like to see broken or at least tested at the final cycle bottom). The S&P 500 actually did break and close below its 45-day moving average today, and the NASDAQ continued to stay below its 45-day moving average for the fifth trading day in a row. So the S&P 500 and NASDAQ have satisfied our requirement for a cycle bottom, but they could still go lower. We are coming up to a very strong general reversal zone next week (Aug. 23 - Sept. 8), and this would be an excellent time for these indices to make their final medium-term cycle bottoms. Ideal targets now would be around 33,500 in the DOW and and 4,200 in the S&P 500, but they don't have to go that low. If we see these indices stabilizing anywhere near or below their 45-day moving averages inside this reversal time frame, we will assume the medium-term cycle bottom is forming and will look to take profits and cover our short positions in this market. Let's continue to hold any short positions in the DOW (and S&P 500 and NASDAQ) for now.

As long as these indices stay above their mid-March lows in this current correction, we should expect another rally to follow in a new medium-term cycle that may challenge the broad stock market's all-time highs before falling steeply into the end of this year. That steep correction may turn out to be the serious one we've been waiting for (unless this current corrective drop escalates into a serious sell-off and starts dropping towards the mid-March lows). Assuming the current correction stabilizes around the above mentioned targets for a bottom, we may look to go long again in this upcoming reversal zone for another substantial rally. We need to keep in mind, however, that unless all three indices (DOW, S&P 500 and NASDAQ) make new all-time highs, we are expecting a very serious downward correction to continue in this market (see CRASH UPDATES on the Home Page).

Gold prices were down again today and are now challenging support at $1900 and also the start of our medium-term cycle low at $1894 (on June 29). This relatively young cycle may be turning bearish, but it's also possible June 29 was not the start of a new cycle, and instead we may now be seeing the end of an expanded older cycle moving to its final bottom over the next several weeks. Either way, it's probably a good idea to sell (unload) our long position in gold now. We entered this position on June 30, and prices are now just slightly below our entrance price, so we should be able to get out with very little loss.

If gold prices can stabilize in the $1800- $1875 range within our next reversal zone for the precious metals (Aug. 22 - Sept. 4), we may relabel gold's medium-term cycle and look to buy again, but for now we are going to sell (unload) our long position in gold at tomorrow's market open.

Silver is also challenging a support line at $22.50 as well as its possible medium-term cycle start at $22.12 on June 23. There is a possibility of silver turning back up from today's new low ($22.36) or even a new low tomorrow as today and tomorrow are potential pivot points for silver. But even if that happens, prices have now gone down so close to $22.12 that a damper has been put on this cycle's previously bullish trend, so any rally from a reversal may be modest. We are on the sidelines of silver and will remain so until we see how prices move over the next few weeks. At this point we can't tell if that new reversal zone for both gold and silver will correspond to a high or a low.

Crude oil prices have been falling and are now closing below the 15-day moving average (but above the 45-day moving average). It is late in crude oil's current medium-term cycle, and that means that the final top in this cycle is due and may have happened already with last week's multi-month high at $84.89 (Sept. contract chart). After the final top, we expect a 2-5 week corrective decline to the final cycle bottom. We have a reversal zone coming up specifically for crude Aug. 17 - 25 that overlaps with a strong general reversal zone Aug. 23 - Sept. 8. There is another reversal for crude Sept. 1 -Sept. 11. So we could see a final cycle bottom in crude happen anytime between Aug. 17 and Sept. 11 with the strongest likelihood being either next week or the first week of September. If crude makes a new high next week, then it's likely prices will fall to the final cycle bottom in September's first week.

A good target for crude's final medium-term cycle bottom could be around the 45-day moving average (now at $76 and rising), but there is also strong support in the $78 - $80 area. Crude's overall trend right now is very bullish, so the final corrective low may be a little above the normal range. Timing here may be more important than price, so we will watch for a low in the above mentioned reversal zones. We will look to buy this low as this market seems very bullish now and prices could surge as high as $128 by the end of the year. For now, we remain on the sidelines of crude as we wait for a corrective low to buy sometime over the next three weeks.

Trading Blog Wednesday (evening), August 9, 2023

8/9/2023

MARKETS UPDATE (7:00 pm EDT)

We are still waiting for the broad stock market indices (DOW, S&P 500, NASDAQ) to end their current medium-term cycles with corrections down to the final cycle bottoms. Technically, the DOW's final bottom is due this week, although it could expand a week or two. The S&P's bottom is due anytime over the next two weeks (but it could also expand). A typical final correction will fall 2-5 weeks from the final top and should at least test the 45-day moving average.

If we assume the DOW's top was last week (35,679 on Aug. 1), it has only been falling for one week, and it's still well above its 45-day moving average. But this week is the end of a relatively weak reversal zone and could correspond to a bottom. If the DOW is going to make a final medium-term cycle bottom by the end of this week, it has to drop sharply now to test the 45-day moving average (now at 34,543 and rising). Because the DOW seems reluctant to drop, another possibility could see the DOW breaking to a new high this week and then falling steeply to a final bottom at or below the 45-day moving average over the next several weeks. We note that there is a very strong reversal zone coming up at the end of this month (Aug. 23 - Sept. 4), so that would be a good time for the final medium-term cycle bottom.

The S&P 500 has now fallen two weeks from its high of 4,607 on July 27 and is quite close to its 45-day moving average, so technically it could also bottom this week. But like the DOW, it too could move lower into the end of this month. I am still holding hold my short position in the DOW. Traders holding short positions in the S&P 500 and NASDAQ can also stay short for now.

Gold and silver prices continued to fall today, and this is challenging our bullish view of these metals. We don't want to see gold prices below $1900. If prices move below $1894 (the start of the current medium-term cycle), it will mean the cycle is turning bearish. Silver is also getting close to the start of its current medium-term cycle (that was $22.11 on June 23). If that breaks, silver will also turn bearish. We note, however, that both metals are making new lows within a reversal zone specifically for the precious metals that ends Friday, so a reversal back up could be imminent. We are still holding our long position in gold (entered on June 30). Today gold prices are coming back to a break-even point in this trade. We will sell (unload) this position if gold starts closing below $1894. We are still on the sidelines of silver.

We just entered a reversal zone specifically for currencies (Aug. 8 -17), and yesterday the U.S. Dollar Index may have made a "double-top" to last week's high at 102.84. Yesterday's high or any new high this week or next could be a significant top to be followed by a significant correction down. If that happens, it could correlate with a reversal back up in the precious metals.

In Monday's blog on crude oil I wrote:

"It looks like a sub-cycle top could be forming here. A significant sub-cycle low is due this week, so a sharp correction down could be imminent. We will wait for that correction for a possible spot to buy. We would like to see that somewhere between the 15-day and 45-day moving averages (now at $79.81 and $74.36, respectively, and rising).

Crude's overall trend is currently very bullish. Because of this, there is a small possibility that last week's low at $78.69 was a sub-cycle bottom, and prices could continue to rally now without another correction. But that $78.69 low was just a one-day corrective dip. Most sub-cycle corrections drop for 3 - 8 days before bottoming, so last week's low doesn't really qualify as a legitimate sub-cycle. If we don't get another corrective drop this week, however, we may have to assume last week was it."

All of this still applies. Crude prices pushed higher today and are now approaching $85, but this price surge is looking very steep and overdue for a corrective "breather". We will stay on the sidelines of crude as we wait for a significant correction to buy.

Trading Blog Monday (night), August 7, 2023

8/7/2023

MARKETS UPDATE (9:00 pm EDT)

Today the DOW rallied strongly while the other two broad stock market indices (S&P 500 and NASDAQ) also rallied, but not as much. None of these indices made a new weekly high, and the bearish divergence signal from last week (when only the DOW made a new monthly high without the other two indices) is still intact. Even more importantly, the final corrective bottoms to the current medium-term cycles in all three indices are due by the end of this month. That means that the final tops are most likely in with the highs of 14,447 on July 19 for the NASDAQ, 4,607 on July 27 for the S&P 500, and probably 35,679 on Aug. 1 (last week) for the DOW.

The NASDAQ and S&P 500 are staying below their 15-day moving averages, but today the DOW broke back above its 15-day moving average (more bearish divergence). We note that we are still in a relatively weak reversal zone through the end of this week, so the DOW could edge up to a new high (it is close), but it seems unlikely the S&P 500 and NASDAQ will follow and challenge their highs (yet more bearish divergence). So despite today's rally in the DOW, I am going to hold my short position in this index (traders may also keep holding any short positions in the S&P 500 and NASDAQ) as a steep correction to the final medium-term cycle bottoms still seems imminent (if it hasn't already begun). I would like to point out that the DOW's rise over the last three weeks has been steeper than the rally in the other two indices. This means any corrective drop now in the DOW should be greater. We expect any correction to AT LEAST test the 45-day moving average. Right now that would be 34,469 in the DOW and 4,440 in the S&P 500 - both rising.

We are now at the center of a reversal zone specifically for the precious metals (Aug. 1 - 10). Both gold and silver prices have been falling, but today silver dropped more dramatically than gold and made a new weekly low close to $23. Gold stayed above last week's low, so we have a bearish divergence signal between the metals (until gold breaks below $1931). This may be a good buying opportunity in silver. If silver prices can stay above support at $23, a rally back up could be imminent. We will watch for this as a rally to $30 in silver is still possible. We are still holding our long position in gold as a sub-cycle low could be forming in this current reversal zone.

A reversal zone specifically for currencies starts tomorrow (Aug. 8- 17). The U.S. Dollar Index has been falling a bit from last Thursday's high at 102.84. If it continues to fall, we could see a significant bottom inside this reversal period. However, if it rallies back up now, we could see a new top and then a reversal. In the latter case, we might see a new top in the dollar over the next day or two with precious metal prices going a bit lower followed by a reversal down in the dollar and a reversal back up in gold and silver. If the dollar continues to fall over the next several days without making a new top, however, we may see precious metal prices rise immediately. We will watch this closely over the next several days.

Like the broad stock market, crude oil prices continued to push a little higher today with crude touching $83.30 (Sept. contract chart) - barely exceeding last week's high of $83.24. It looks like a sub-cycle top could be forming here. A significant sub-cycle low is due this week, so a sharp correction down could be imminent. We will wait for that correction for a possible spot to buy. We would like to see that somewhere between the 15-day and 45-day moving averages (now at $79.81 and $74.36, respectively, and rising).

Crude's overall trend is currently very bullish. Because of this, there is a small possibility that last week's low at $78.69 was a sub-cycle bottom, and prices could continue to rally now without another correction. But that $78.69 low was just a one-day corrective dip. Most sub-cycle corrections drop for 3 - 8 days before bottoming, so last week's low doesn't really qualify as a legitimate sub-cycle. If we don't get another corrective drop this week, however, we may have to assume last week was it. We are still on the sidelines of crude oil.

Trading Blog Tuesday (night), August 1, 2023

8/1/2023

BRIEF BROAD STOCK MARKET UPDATE and IMPORTANT UPDATE ON PRECIOUS METALS (9:30 pm EDT)

The DOW is edging up to a new weekly (and yearly) high today as the S&P 500 does not, and the NASDAQ remains below its high from July 19. Thus we have more bearish divergence and evidence that a top is forming now. We are still holding our short position in the DOW.

The precious metals are getting a little tricky to call right now. Gold made an isolated high yesterday and closed above the 15-day moving average, but yesterday was also a very strong "pivot point" for gold, and prices today are falling back below the 15-day moving average and also testing the 45-day moving average. "Pivot points" are short-term signals, and we note that gold is now falling into another major reversal zone specifically for the precious metals from Aug. 1 - Aug. 10. This means gold could find a low in this time frame and reverse back up. The problem is that it has this week and most of next week to make a low, so it could potentially go very low. But it doesn't have to do that; in fact, it could turn back up tomorrow as we are getting a bullish divergence signal today as gold makes a new weekly low without silver.

Even though gold's medium-term cycle is young (it started with the low of $1894 on June 29) and still bullish, it could turn bearish if prices start falling below $1900. We need to be alert for that possibility now. I am going to hold my long position in gold for now. We entered our long position in gold on June 30 close to $1900, so we still have a profit on this trade. We may sell it this week or next if it looks like gold prices are falling too low. If gold rallies, we may also take profits and sell at any new highs that are made in this new reversal zone. A good upper target for a rally could be around $2000 or even $2040. If gold's medium-term cycle stays bullish, prices could eventually go much higher.

Silver's medium-term cycle is also young as it most likely began on June 23 at $22.12. Its rally from there has been bullish, but as with gold, a cycle can sometimes turn bearish in its early phase. It hasn't done that yet, and prices could still test the 45-day moving average (now at $23.75 and rising) and remain bullish. Closing well below the 45-day moving average, however, would make me cautious, and breaking below $22 would turn the cycle bearish. We are currently on the sidelines of silver, but if prices find support near the 45-day moving average this week or next, we may look to go long in this metal as the upside to a bullish medium-term cycle could be as high as $30 - $35.

Sometimes watching the U.S. Dollar Index can give us clues as to how prices will move in the precious metals (i.e. they generally move in an opposite direction to the dollar). We just moved out of a strong reversal zone specifically for currencies (July 18 - 27). On July 25 (within the reversal zone), this index made an isolated high and then fell sharply into July 27 (the last day of the reversal). Interestingly, it made an isolated low on the 27th and has been rising from there. Thus it looks like a high AND a low were made in the same reversal zone, and we are now moving towards a new top. That top could come soon as we enter yet another reversal zone for currencies next week (August 8 - 17).

OK. A top in the U.S. Dollar Index could correspond to a bottom in the precious metals, and the reversal zone for precious metals (Aug. 1 - 10) extends into next week and overlaps with the reversal zone for currencies (Aug. 8 -17). The overlap days are Aug. 8, 9 and 10. This suggests that gold and silver might make a significant bottom around that time. We will watch for this.

Archives

LEGAL and DISCLAIMER