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Trading Blog Monday, September 30, 2019

9/30/2019

GOLD TRADE ALERT (1:30 pm EDST)

Gold (and silver) prices are plunging today (for some reason some internet spot price charts are not showing this), and it is highly unlikely gold will close above $1490 today, hence our stop loss has been triggered and we will sell our long position in gold immediately with a small loss. At the time of this writing gold is around $1470. It appears that we were a little too early in judging the end (and bottom) of the current medium-term cycle as it is still forming. We will now stand aside and wait for that final bottom to buy both metals (that could come as early as next week). Selling my long position in gold now.

Trading Blog Thursday, September 26, 2019

9/26/2019

GOLD TRADE ALERT and MARKETS UPDATE (3:00 pm EDST)

In Monday's blog on gold and silver I wrote:

"This market is very tricky to call right now. We are currently in a strong reversal zone specifically for the precious metals (Sept. 13 - 27). It's possible that last Wednesday's low in gold at $1484 was the final cycle bottom. If so, a new bullish cycle is starting now and prices will rally strongly. Silver too may have started a new cycle with that $17.41 low on Sept. 13, although that was not the ideal time for a bottom. Ideally, one of these metals (not both) will make a new low this week (bullish divergence) and give us a good spot to buy."

Well, we are near the end of this precious metals reversal zone and neither metal has made a new low so far this week. This could happen tomorrow, but even if it doesn't, there are other strong technical factors suggesting a significant bottom is forming now and a strong rally could follow. What I'm going to do is buy gold today with a close stop loss on a close below $1490 and wait a day or two on silver (silver is more volatile than gold and poses a greater trading risk). Going long in gold today but still on the sidelines of silver.

We are now technically out of our reversal zone for the broad stock market. None of our three major market indices (DOW, S&P 500, NASDAQ) made new highs this week so we are not getting a bearish divergence signal to sell short (unless it happens tomorrow). The next reversal zone for this market is coming up Oct. 4 - 16. The markets may rally into that time frame for a top, but right now it seems just as likely they could fall into a bottom. In other words, this market is still ambiguous so we will remain on the sidelines for now.

Crude oil prices are edging down some more. We are near the end of the current medium-term cycle in this market so we are anticipating the final cycle bottom soon. A good time for that to happen would be in that next reversal zone (Oct. 4 - 16), but we can't rule out some short-term rallying before then. It's still unclear whether or not this market is turning bearish, but if prices break below $52 (Nov. contract chart) that will most likely be confirmed. Still on the sidelines of crude oil.

Trading Blog Monday, September 23, 2019

9/23/2019

MARKETS UPDATE (4:30 pm EDST)

It is late in the medium-term cycles of both the DOW and S&P 500 that started with their lows back on June 3 (24,680 in the DOW; 2,728 in the S&P 500).That means we are now watching for a sharp correction down from a final high to the final cycle bottoms due within the next 5 weeks. The big question is whether or not that correction has already started from the highs of mid-September (that would be last Thursday's high of 3,022 in the S&P 500 and the Sept. 12 high of 27,307 in the DOW). Those highs did not exceed the all-time highs from July, but they were close enough to be considered a "double-top" bearish formation. So we could indeed already be heading down to the final cycle bottoms. On the other hand, we could still see the market rally now and break those those mid-September highs just before taking that sharp correction. Ideally, that would happen in the current strong reversal zone (which technically ends on Thursday) with one or two, but not all three stock market indices making new all-time highs (bearish divergence). If that happens, we will look to sell this market short. Those all-time highs are 27,399 in the DOW, 3,028 in the S&P 500, and 8,340 in the NASDAQ). If the market continues to fall, we will likely just wait for the cycle bottom to buy. On the sidelines of the broad stock market for now, but be alert for a possible sell (short) signal this week.

We have also been watching for a medium-term cycle bottom in both gold and silver to buy. Our ideal target ranges for bottoms were $1400 - $1450 in gold and $17.00 - $17.50 in silver. Silver touched the top part of its range ($17.41) on Sept. 13, but gold prices have remained significantly above $1450. This market is very tricky to call right now. We are currently in a strong reversal zone specifically for the precious metals (Sept. 13 - 27). It's possible that last Wednesday's low in gold at $1484 was the final cycle bottom. If so, a new bullish cycle is starting now and prices will rally strongly. Silver too may have started a new cycle with that $17.41 low on Sept. 13, although that was not the ideal time for a bottom. Ideally, one of these metals (not both) will make a new low this week (bullish divergence) and give us a good spot to buy. For now let's stay on the sidelines.

The U.S. Dollar Index is making a new high today in the center of a reversal zone for currencies (Sept. 17 - 26) so we may see it turn back down shortly. That would be a bullish force for the precious metals market and supports the idea that new cycles are starting or will be starting shortly in gold and silver.

Crude oil is also a tricky market to call right now, and this is because of the recent "wild card" factor of a conflict in the Middle East, i.e. the attack on a Saudi oil facility a little over a week ago. There is no "saber-rattling" rhetoric so far today from the Trump Administration, and European diplomats seem to be trying to deescalate tensions between the U.S. and Iran by questioning whether or not the attacks even came from Iran (the U.S. believes they did). It is late in the medium-term cycle of crude that started with the June 5 low of $51.54 (Nov. contract chart). Because a mid-cycle correction got so close to that price in early August, it had appeared this cycle was turning bearish. The attack on the Saudi oil facility, however, propelled crude prices to $63.89 on Sept. 15 and technically may have turned the cycle bullish. If it did, a correction to the final cycle bottom (due within 4 weeks) might only get to the $57 area (it is there now). If U.S./Iran tensions ease, however, then the cycle might resume its bearish trend and prices could go to $50 or even lower. We will stay on the sidelines of crude for now and most likely wait for the final cycle bottom to buy (wherever that may be).

Trading Blog Wednesday (late night), September 18, 2019

9/18/2019

BRIEF COMMENT ON TODAY'S FED STATEMENT AND THE BROAD STOCK MARKET (11:30 pm EDST)

After today's conclusion of this week's FOMC meeting, the Fed dished out good news and bad news. The good news (for equity markets) was that the Fed would cut its benchmark federal funds rate a quarter percentage point. The bad news was language in the Fed's statement calling into question whether there will be another rate cut this year or next (investor's had been expecting another rate cut for later this year). The DOW took a 150 point dive after the Fed's announcement around 2 pm, but then it recovered and closed the day with a 36 point gain. The next few days will show us the impact this "mixed bag" of signals from the Fed will have on equity markets, if any. President Trump is also giving us a "mixed bag" of influences on equity markets this week. More upbeat rhetoric on U.S./China trade talks has been a bullish force, but today's announcement of increased sanctions on Iran after last week-end's Saudi oil facility attack is surely tempering that bullish energy. We are still hoping for more rallying and a possible bearish divergence signal this week or next for a good spot to sell this market short for its final correction to the current medium-term cycle bottom. Still on the sidelines of the broad stock market.

Trading Blog Monday (late night), September 16, 2019

9/16/2019

UPDATE ON THE BROAD STOCK MARKET and CRUDE OIL (11:30 pm EDST)

The attack on Saudi Arabian oil facilities over the week-end is influencing today's financial markets (especially the price of crude oil), as the Trump administration points a finger of blame on Iran for the attack. Although Trump is being a bit guarded with his rhetoric today, he is saying that the U.S. is prepared for conflict with Iran should it be necessary. Of course, any hint of military conflict will make an already jittery broad stock market even more nervous so today's drop in equities shouldn't be a surprise (the DOW lost 142 points). If tensions increase, today's drop could kick-start a major correction, but we 'll have to wait to see if that happens. The alternative is more rallying into our new reversal zone (Sept. 13 - 25). We didn't get a bearish divergence signal last week (one or two, but not all three major indices making new all-time highs). If we get that this week (or next) it will probably be a good spot to sell the market short. Still on the sidelines of the broad stock market.

Of course, crude oil prices spiked dramatically over the week-end and today in response to the attacks on Saudi oil facilities. Crude skyrocketed to $63.34 on Sunday and closed today at $61.89. We are in the dead center of a reversal zone specifically for crude right now so Sunday's high could be a significant top. But this reversal zone continues through the rest of the week. If the Trump administration does any more "saber rattling" this week, prices could edge higher to another top from which we might see a reversal and correction down. It is late in the current medium-term cycle of crude, and we are expecting a final corrective low in two to six weeks. How low the final price goes will depend on how high the current rally can go. With the "wildcard" factor of a U.S./Iran conflict pending, we will stay on the sidelines of crude for now.

Trading Blog Thursday, September 12, 2019

9/12/2019

BRIEF UPDATE ON THE BROAD STOCK MARKET (3:45 pm EDST)

News stories today suggesting progress in U.S./China trade negotiations seem to be adding more fuel to a rally in equity markets that started yesterday after President Trump "tweeted" he would delay a tariff on Chinese exports.That tweet helped the DOW gain 227 points at Wednesday's closing bell. All three market indices (DOW, S&P 500, NASDAQ) are now close to their all time highs (that would be 27,399, 3,028, and 8,340, respectively). As I mentioned in yesterday's blog, we are about to enter a very strong reversal zone (Sept. 13 - 25) on Friday so we are watching for a bearish divergence signal (one or two, but not all three indices breaking their all-time highs) in this time frame to possibly sell the market short. If that happens tomorrow, however, we will hold off any trade decision into the week-end. Still on the sidelines of the broad stock market.

Trading Blog Wednesday, September 11, 2019

9/11/2019

MARKETS UPDATE (3:45 pm EDST)

Equity markets are rallying strongly today with all three market indices (DOW, S&P 500, NASDAQ) exceeding last week's highs. This negates our bearish divergence signal from early this week and suggests that markets could rally into our next strong reversal zone (Sept. 13 - 25) which starts on Friday. If that happens, we will look for another bearish divergence signal (one or two, but not all three indices making new all-time highs) either next week or in the first half of the following week. That is our ideal scenario to sell short. But, of course, we don't always get what we want, especially in volatile markets. We could see a final top to the current medium-term cycle anytime from now through Sept. 25 followed by a sharp fall to the final cycle bottom. If all three indices make new all-time highs, we may even see this rally continue into early October before turning down. OK, those are all the possibilities, but for now let's look for a bearish divergence signal next week (or the following week) for an opportunity to sell this market short. Still on the sidelines of the broad stock market.

Gold and silver prices seem to be stabilizing yesterday and today in the center of this week's reversal zone so there's a possibility of them turning up here. Gold's directional momentum, however, switched from 100% bullish to mixed bullish and bearish on Monday so I think prices are still declining into the final cycle bottom for both metals due most likely next week (or possibly the following week) in a reversal zone specifically for the precious metals (Sept. 13 - 27). Although we could see a bottom now, we are not quite into our target prices of $1400 - $1450 for gold and $17 - $17.50 in silver so this is another argument for a cycle bottom next week (or the following week). Let's stay on the sidelines of both metals for now.

From a high of $58.39 on Monday (Oct. contract chart), crude oil prices plunged to $55.61 today. Unless prices can rise back up and exceed $58.39 by the end of next week, it looks like this market could be turning bearish. That would be confirmed if prices drop and close below $52. Let's wait and see how prices move over the next seven trading days. If this market is turning bearish, that may not bode well for the broad stock market. On the sidelines of crude oil.

Trading Blog Monday, September 9, 2019

9/9/2019

MARKETS UPDATE (4:30 pm EDST)

Today the DOW and S&P 500 made new weekly highs early in the day but the NASDAQ did not; then all three indices turned down in the afternoon. We are thus starting the week with possible bearish divergence; however, all three indices snapped back significantly (especially the DOW) by the closing bell so it is not a very strong bearish signal. Let's stay on the sidelines for now and see if the broad stock market continues down tomorrow. It still has plenty of time to rally up and make a top in this week's reversal zone or in another (stronger) one next week. That is my preferred scenario to give us a potential high to sell short. But if this market turns down now, we could instead see a sharp fall and a possible cycle low to buy near the end of the month. The news and sentiment on the U.S./China "trade deal" will likely be a major factor in driving this market up or down over the next several weeks. New trade talks are tentatively scheduled for early next month. Hopeful anticipation could propel a rally until then, but if the talks don't produce much, equities could take a dive off that rally (or the market might just rally on the rumor - of a trade deal - and "sell on the news" even if the trade deal works out well, i.e. "buy the rumor, sell the news").

Gold and silver still seem to be headed down to their final medium-term cycle bottoms. Ideally, we would like to see this in the next reversal zone specifically for the precious metals (Sept. 13 - 27). Our target prices for a low are still around $1400 - $1450 in gold and $17 - $17.50 in silver. We will remain on the sidelines now as we watch for this buying opportunity in both metals.

Crude oil prices surged today and made a new monthly high at $55.07. We are, however, just entering a new reversal zone specifically for crude (Sept. 6 - 21) so we are anticipating a top either this week or next which will most likely be followed by a sharp correction to the final medium-term cycle bottom. If the current rally stays under the July 12 high of $60.76 (Oct. contract chart), the cycle will turn bearish and likely take a deep correction. But if this rally gains legs and can exceed $60.76, the cycle will be bullish and the correction down to the final cycle low may be modest. Let's stay on the sidelines in crude oil for now. As I've mentioned before, crude's behavior may mimic the broad stock market so we will keep a sharp eye on both markets as we move forward.

Trading Blog Thursday, September 5, 2019

9/5/2019

UPDATE ON THE BROAD STOCK MARKET and PRECIOUS METALS (4:30 pm EDST)

On Tuesday I commented on that day's sharp drop in the broad stock market:

"Is this just another dip in the roller coaster ride or will it continue down? The drop seems to be finding support at the "gap up" point from last Wednesday/Thursday so a bounce back up is certainly possible."

We are getting that bounce today as all three major indices (DOW, S&P 500 and NASDAQ) are soaring up and making new weekly highs. We are in a reversal zone this week and next (Sept. 3 - 13). We will not see any bearish divergence signal this week so we will look to next week for one. This market's bullishness is being fueled by new hopes of trade talks with China. If this rally continues into next week, we could easily see all three indices challenge their all-time highs. We are at a critical juncture now. If all three indices break to new all-time highs, it suggests that the current medium-term cycle and most likely the next one are pointed up for at least a few more months. However, If these indices cannot exceed their all-time highs (or if only one or two indices exceed their high(s) but not all three) then this market could turn south and start a very serious longer-term correction. That's why we are looking to sell the market short on a strong bearish divergence signal. If we don't get that, we may hold off shorting and possibly go long on a significant corrective dip for more rallying into early next year. But I'm getting a bit ahead of myself here as the cycle patterns are not clearly defined yet. Hopes for a U.S./China trade deal may be driving this market up now, but if we don't get those trade talks or we do and they are unproductive then the market could drop hard. For now we will remain on the sidelines as we wait for a possible opportunity to sell short.

The bottom line here is that we are anticipating a very major correction in the broad stock market from a top that could happen anytime between now and the first half of 2020. We want to sell short near that top, however, significant rallying could happen before that top is in.

Both gold and silver made new weekly (and yearly) highs yesterday negating our bearish divergence signal. Nevertheless, both metal prices are dropping significantly today so we could be seeing a top and the start of the correction we've been waiting for (yesterday's top is in our reversal zone). If not, we could see still more rallying before the tops to the current medium-term cycles in both metals are in (they are due, even overdue now). The lack of a bearish divergence signal this week makes me think the tops are not in yet, but we shall see. We are still looking to buy the final corrective bottoms of the current medium-term cycles in both metals, and our price targets are still at $1450 and $17 for gold and silver, respectively. Still on the sidelines of gold and silver.

Trading Blog Tuesday, September 3, 2019

9/3/2019

MARKETS UPDATE (4:30 pm EDST)

Several markets are giving investors a wild ride today.

The broad stock market took another dive with the DOW losing a good chunk of its gains from last week's end of week surge. Is this just another dip in the roller coaster ride or will it continue down? The drop seems to be finding support at the "gap up" point from last Wednesday/Thursday so a bounce back up is certainly possible. We are now starting the first day of the new reversal zone (Sept.3 - 13) so there is plenty of time for a significant top or bottom to form this week or next. If equities do continue lower, we will watch to see if the DOW breaks its Aug. 15 low at 25,339. That would be a sign the market is turning bearish. On the sidelines here.

Perhaps in response to the equity plunge, gold and silver prices surged dramatically today. Gold got up to $1549 but was not able to break its recent Aug. 25 high of $1555. Silver prices, however, shot up to a new yearly high of $19.19. This gives us yet another bearish divergence signal (we had one last week) until gold can break through $1555. It is late in the medium-term cycles of both metals so we are still waiting for a top (due now) and correction down to the final cycle bottoms where we will look to buy. It would be ideal to see those bottoms in the next reversal zone for the precious metals coming up Sept. 13 - 27, but if this strong rally continues, we could end up seeing the top in that time period instead of the bottom (that would mean the cycles are expanding - a possibility). Either way, this market is looking very bullish now. On the sidelines of gold and silver for now.

Today crude oil made a double top to Friday's high at $57.13 before dropping down and closing the day at $53.95 (Oct. contract chart). This is bearish behavior, and indeed, directional momentum in this market today switched from mixed bullish and bearish to 100% bearish. This is suggesting that prices will fall below the Aug. 7 low of $52.17 and turn the current cycle bearish. Let's wait to see if that happens. I am especially concerned here because crude often parallels the broad stock market so this may be a bearish sign for equities as well. We are on the sidelines of crude.

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