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Trading Blog Monday, September 30, 2024

9/30/2024

UPDATES on GOLD and SILVER (7:30 pm EDT)

We currently have a tricky trading situation in gold and silver. Both metals may be starting a steep fall to the bottom of a longer-term cycle, but we are about to enter a reversal zone for precious metals that could interfere with this correction down, at least temporarily.

Gold is very late in its current medium-term cycle, and the final bottom to this cycle is due anytime through the end of October. This bottom will also occur simultaneously with a longer-term 50 week cycle, which is now overdue. Because we have a 50 week cycle bottom, prices could go down into the $2300 - $2400 range. I am tempted to sell short now for this substantial drop, but today prices are making an isolated low inside a strong potential "pivot point" for gold (Monday and Tuesday). Furthermore, we enter a new reversal zone specifically for the precious metals this Wednesday (Oct. 2 -10). It's very possible gold could bounce back up today or tomorrow and make a new high inside the new reversal zone this week or next. Gold prices are currently very bullish, and the upper range of a projected top to the current medium-term and 50-week cycle is close to $2800 (prices got close to $2700 last week). Further supporting the idea of a bounce is the fact that prices are approaching the 15-day moving average which might offer support. If we don't get a bounce and prices continue to fall, we will wait for the final bottom to these cycles and look to buy.

Compared to gold, silver's current medium-term cycle is relatively young (it started with the low of $26.52 on Aug. 8). As with gold, the end of this cycle will likely correspond to the end of a longer-term cycle - in this case a 4.3 year cycle. The bottom of the 4.3 year cycle is now overdue. There's a small possibility the bottom already happened with the Aug. 8 low, but $26.52 is a bit too high for the 4.3 year bottom. The target range for that bottom would be $23 - $25. That is a substantial drop from current prices (around $31) and worth selling short. But as we noted above, we enter a reversal zone for both precious metals this Wednesday. Silver has been falling sharply from last week's high at $32.65. If it falls into this new reversal zone, we could see prices reverse back up. So how should we play this situation?

Silver's medium-term cycle is due for a mid-point sub-cycle correction, which is most likely in progress now. I am going to wait and see how far this correction goes. If it finds support quickly in the new reversal zone (perhaps near the 15-day or 45-day moving averages), the cycle could stay bullish and may push to new highs before finally falling to its medium-term and 4.3 year cycle bottom(s). On the other hand, if the current correction continues into next week and goes deeper and breaks bellow $27, the trend would be turning bearish and we might look to sell short the top of any rebound or perhaps just wait for the final bottom to buy, probably by the end of October or early November.

We should note here that the U.S. Dollar Index seems to be leveling off just above 100 after a long descent from its April high around 106. If the greenback starts to rally from this possible baseline support, it could send gold and silver prices down. We will watch this carefully.

For now, we are on the sidelines of both gold and silver..

Trading Blog Thursday, September 26, 2024

9/26/2024

CRUDE OIL UPDATE (10:00 pm EDT)

We can now say with certainty that a longer-term 4-year cycle in crude oil started with the deep low of $63.57 in May 2023 (Nov. contract chart). That means we are already 1 and 1/2 years into a new 4-year cycle. Because prices have been moving down and getting very close to that $63.57 low (after rallying to $95 in Sept. 2023), this new 4-year cycle is in danger of turning bearish if it falls below $63.57. That would be a very bearish development as it would mean that prices would be moving down for at least two more years. I don't think this is likely to happen. It's more likely a "double-bottom" is forming now which would be a bullish signal for this market.

For our shorter term view, we have two possibilities for our current medium-term cycle. We could be nearing the end of a medium-term cycle that began on June 4's low of $71.55. This cycle might have ended with the recent Sept. 10 low at $64.61, but it's more likely the bottom is still forming and would be due anytime now by mid-November. Ideally, we would see a double-bottom to the Sept. 10 low around $64. There is a strong reversal zone specifically for crude coming up Oct. 8 - 17, so that might be a good place to look for a bottom. As long as prices hold above $63.57, we will probably be looking to buy that low. For now we remain on the sidelines of crude.

Trading Blog Tuesday, September 24, 2024

9/24/2024

UPDATES ON THE BROAD STOCK MARKET, GOLD, and SILVER (11:30 pm EDT)

As I stated in yesterday's blog, the broad stock market's trend now seems to be at least temporarily bullish. This is most likely the result of the Fed's generous interest rate cut given out following this month's FOMC meeting. It also appears that we are completing a 6-year cycle rather than a 4-year cycle in equity markets, and that means our three market indices (DOW, S&P 500, NASDAQ) could push higher into next year before taking a substantial longer-term correction of at least 16% - 26%. Because our current medium-term cycles in these indices are bullish, we may be looking to buy any short-term substantial sub-cycle dips. For now, we remain on the sidelines of the broad stock market.

It is very late in the current medium-term cycle of gold, and today gold made a new all-time high at $2689. There is a potential "pivot point" for gold (and silver) through Thursday, so a final top in the current cycle could be imminent. As I've mentioned in previous blogs, this could also be the final top in a longer-term (50 week) cycle, and if so, a very steep corrective decline could follow. It's also possible another medium-term cycle could follow the current one before we make a 50 week cycle bottom. Either way, a significant top in the current medium-term cycle is due anytime now. If today wasn't it and we don't see it this week, there is another potentially strong "pivot point" for gold next Monday. If we see just a medium-term cycle bottom, prices might only get to the $2550 area, but a 50 week cycle bottom might get as low as $2400. Considering the possibility of a 50 week cycle low, it may be worth short-selling gold if we see strong technical signs of a top this week or early next week. For now I am remaining on the sidelines.

We bailed out of our short position in silver last week. That was a good move as silver prices skyrocketed today and closed just above $32 and also above the previous high from July 11. This confirms our suspicion that silver started a new medium-term cycle on Aug. 8. This means the current medium-term cycle is relatively young and has time to rally some more before topping out. The new cycle also looks bullish as prices are breaking well above a downward sloping trend-line that had been in place since May.

Silver prices are now getting close to the $32.38 high of May 21. If they exceed that, we will have a new high for the longer-term 4.3 year cycle. The top to that cycle is now overdue. Whether the 4.3 year cycle top happened on May 21 or will happen now, we expect a correction down from that top of at least 21%, so we would still like to sell silver short near that top. That top may be difficult to call; however, there's a good chance it will coincide with the top to the current medium-term cycle. I should also note that there is a remote possibility (i.e.unlikely) that the 4.3 year cycle already bottomed with the Aug. 8 low at $26.52. If that's the case, silver prices could be VERY bullish from here.
Yes, I know this is all very confusing and ambiguous right now, and that's why we are on the sidelines. If we end up missing a short sell on the 4.3 year cycle correction, we will have another good buying opportunity at the final bottom of that cycle. We remain on the sidelines of silver for now.

Trading Blog Monday, September 23, 2024

9/23/2024

BROAD STOCK MARKET TRADE ALERT (3:30 pm EDT)

We are now out of our general reversal zone and will not enter another strong one until the second week of October. Although we still have a bearish divergence in the broad stock market (the DOW and S&P 500 continue to make new all-time highs without the NASDAQ), there are several other technical and cycle patterns suggesting this market is bullish.

All three indices started new medium-term cycles with their lows on Aug. 5. The S&P 500 and NASDAQ made their first sub-cycle corrective lows on Sept. 6, and the DOW did this on Sept. 11. From those lows, all three indices have made new highs (in their medium-term cycles) which means their cycle trends are bullish. Yes, the NASDAQ still hasn't made a new ALL-TIME high, but it does not have to rally much to do that.

In my September 12 blog I wrote about the possibility of a 6-year longer-term cycle overriding a shorter 4-year cycle and turning the market bullish:

" ...it all depends on whether this market is exhibiting a 4-year longer-term cycle or a 6-year longer-term cycle. If the 6-year cycle is operative, we could see new all-time highs into 2025. If a 4-year cycle is unfolding, the current medium-term cycles will turn bearish and make new lows..."

It's starting to look like the 6-year cycle is unfolding. If so, our new medium-term cycles could also be the start of a new 50 week cycle, and the market could now be very bullish. Unfortunately, this means we need to bail out of our short position in the broad stock market with a loss (about 6%). I am therefore going to cover (unload) my short position in the DOW today.

We are still anticipating a major correction in this market (at least 16% - 26%) relatively soon, but if a 6-year longer-term cycle is in place, we may have to wait a bit longer before it happens. It's important to note here that if a 6-year cycle is operative, we are already 4 years into this cycle, so a final top may not be far away. I will discuss this in more detail as we move forward. As far as shorter-term trading strategy goes, we may now be looking to go long on any significant corrections in this market.

Trading Blog Thursday, September 19, 2024

9/19/2024

SILVER TRADE ALERT (3:00 pm EDT)

It now looks quite likely that silver started a new medium-term cycle with its low of $26.5 on Aug. 8. This means prices could be bullish now, and we may have to wait a bit longer for a steep correction into a longer-term (4.3 year) cycle. It also means I am going to cover (unload) my short position in silver today with a loss (8%) for now.

It appears that after mulling things over last night, the broad stock market re-kindled its initial enthusiasm for the Fed's one-half point interest rate cut yesterday, and investors are perhaps re-evaluating Jerome Powell's statements as not so hawkish after all. In any event, the DOW, S&P 500, and NASDAQ took off today with large "gap-up" gains. If the DOW closes the week above 41,835, I will cover my short position in this market.

Trading Blog Wednesday, September 18, 2024

9/18/2024

COMMENT ON THE FED'S INTEREST RATE CUT (11:00 pm EDT)

Today the Fed announced a generous one-half point cut in interest rates rather than the quarter point cut some were expecting. Not surprisingly, Wall Street responded to this news with a massive surge in equity buying just after the 2 PM announcement. But this bullish euphoria was short-lived as the broad stock market indices fell back sharply over the final two hours of trading, and all three (DOW, S&P 500, NASDAQ) closed the day in negative territory. Some of this fall may have been due to some hawkish rhetoric in Fed Chairman Jerome Powell's post announcement press conference speech in which he emphasized that the Fed is in no hurry to ease policy. He also said that investors should not assume that today's large rate cut means that this will be be the pace moving forward:

“I do not think that anyone should look at this and say, ‘Oh, this is the new pace.’”
“I think we’re going to go carefully meeting by meeting, and make our decisions as we go,” he said.

Of course, our cycle and technical analysis indicated an imminent top and the start of a significant correction down by the end of this week. Did we just see it today? Maybe. But it has to follow through over the next few days. If equities surge back up tomorrow and Friday, we might be seeing a "breakout" instead of a turn down in our current reversal zone (which ends on Friday). I am still holding my short position in the DOW for now.

Trading Blog Tuesday, September 17, 2024

9/17/2024

BRIEF UPDATE ON THE BROAD STOCK MARKET and the FOMC MEETING (3:00 pm EDT)

Today the S&P 500 made a new all-time high (as did the DOW), but the NASDAQ remains well below its all-time high (18,671 from July 11). Thus our strong bearish divergence signal is still in place, and it is happening inside a reversal zone. This supports the idea of an imminent downturn in this market. But this week's FOMC meeting (which starts today and ends Wednesday afternoon) may have a stronger than normal influence on all financial markets and could change this bearish view.

There is a lot of uncertainty about what the Fed will do and say on Wednesday afternoon. While most analysts expect a rate cut (the first one in four years), there is much debate on whether that cut will be a quarter (0.25%) or one half point (0.50%). After any rate cut announcement (at 2 pm tomorrow), the Fed will release a statement with new economic projections including the infamous "dot plot" that shows where rates could be headed over the next few years. Fed Chairman Jerome Powell will then give a news conference at 2:30 pm to discuss all of this.

With the markets on edge and divided on what could and what should be a proper rate cut to sustain a "soft landing" of the economy, we could see a strong reaction (up or down) in equities (and even other markets) to ANY rate cut and rhetoric from the Fed tomorrow. We also need to keep in mind that the Fed most likely does not want to tank the market just before the presidential election, so there is a strong incentive for Mr. Powell to not appear too hawkish in his rhetoric. But as I mentioned in yesterday's blog, even if the Fed and Powell are dovish tomorrow, the markets are rallying and may have already priced this in, and we could see a classic "buy the rumor, sell the news" scenario that could produce at least a short-term sell-off. We will have to wait and see how this unfolds.

I am still holding my short position in the broad stock market (DOW) for now.

Trading Blog Monday (night), September 16, 2024

9/16/2024

MARKETS UPDATE (10:00 pm EDT)

We are at the center of our reversal zone (Sept. 11 -19) and today the DOW made a new all-time high. The S&P 500 and NASDAQ, however, did not (and they did not even make new monthly or weekly highs). This is a strong bearish divergence signal, so I am still holding my short DOW position in this market. The FOMC meets this week, and most investors and analysts are expecting an interest rate cut from the Fed (to be announced on Wednesday afternoon at @ 2pm). If this doesn't happen (i.e no rate cut), the market could sell-off, but even the expected cut might be a turning point down as traders often follow the adage "buy the rumor, sell the news". On the other hand, a higher than expected cut or dovish comments from the Fed could trigger a rally. We will have to wait and see what happens. The S&P 500 is not far from a new all-time high. The NASDAQ would have more distance to cover, but it too is within "walking distance" of a new all-time high. All three indices making new all-time highs would turn this market bullish.

Gold prices may be topping out near $2600 (a new all-time high) and silver may be topping near $31, both inside our current reversal zone. But silver is still below this year's high from May ($32.38) which gives us another bearish divergence signal. I am still holding my short position in silver as both metals are due to make a substantial downward correction soon. I am currently on the sidelines of gold.

Crude oil's current medium-term cycle has been a bearish one as it began with the June 4 low of $71.90 (Oct. contract chart) and prices are now well below that point. Although it would be a bit early, it's possible this cycle ended with last week's low at $65.27. If so, prices should soon break above the 15-day and 45-day moving averages. But as with the other markets, today's high is happening in the center of our reversal zone, so a reversal back down could be imminent. I am staying on the sidelines of this market until we can be more certain a new medium-term cycle has started.

Trading Blog Thursday, September 12, 2024

9/11/2024

BROAD STOCK MARKET UPDATE (11:00 pm EDT)

In last Tuesday's blog I wrote about the broad stock market:

"All three indices started new medium-term cycles on Aug. 5 and are only 4 weeks old. They are young and bullish. Nevertheless, they are now in a time frame for their first significant sub-cycle correction. The depth of this correction will determine whether or not their trend stays bullish. We'll have to wait and see. If the NASDAQ finds support this week (i.e. inside our reversal zone) around 17,000 and the DOW and S&P 500 find support at or below their 15-day and 45-day moving averages, that could be a springboard for another rally."

Well, on Friday the NASDAQ broke and closed below 17,000. the DOW found support between its 15-day and 45-day moving averages, and the S&P 500 found support below its 15-day and 45-day averages around 5,400. All three indices are rallying this week from those lows, but yesterday the DOW plunged below its 45-day moving average before snapping back up above it. This made a new weekly low. The S&P 500 and NASDAQ did a similar dip and bounce, but neither one made a new weekly low. This creates at least a temporary bullish divergence signal (until the S&P 500 and NASDAQ make new lows). Yesterday was also the first day in a new general reversal zone (Sept. 11 - 19), so that low in the DOW could be significant.

It is still not clear if these new medium-term cycles are going to be bullish or bearish. If they are to be bearish, their first significant sub-cycle corrective lows (which could happen anytime now and would be due by the end of the month) would go below the Aug. 5 lows (that would be 38,499 in the DOW, 5,119 in the S&P 500, and 15,713 in the NASDAQ). There are a lot of bearish technical signals right now that support this bearish view, and so I am favoring it at the moment.

Yesterday and today's market behavior, however, was bullish. If these indices can close the week above their 15-day moving averages, we may have to change that bearish view. As I mentioned in previous blogs, it all depends on whether this market is exhibiting a 4-year longer-term cycle or a 6-year longer-term cycle. If the 6-year cycle is operative, we could see new all-time highs into 2025. If a 4-year cycle is unfolding, the current medium-term cycles will turn bearish and make new lows as described above. I am still holding my short position in the DOW (which I entered on Aug. 8 around 39,500). That trade is still a bit in the red, but if this market is bearish, it should soon be headed towards a significant profit. I will cover this short position if the market turns bullish.

Trading Blog Tuesday (night), September 3, 2024

9/3/2024

MARKETS UPDATE (10:00 pm EDT)

The Labor Day holiday in the U.S. is now over, and the recent rally in the DOW and S&P 500 may also be over (at least temporarily) as both are dropping steeply today from last week's highs. Significantly, the DOW made a new all-time high last week (41,585) while the S&P 500 and NASDAQ did not. This gives us a strong bearish divergence between these indices, and it is happening in the center of our current strong reversal zone (Aug. 23 - Sept. 6). A significant correction down could be starting. We note that the NASDAQ seems to be the most bearish at the moment. Unlike the other two indices, this index has been trending down since Aug. 22, and today it broke and is closing below both its 15-day and 45-day moving averages.

All three indices started new medium-term cycles on Aug. 5 and are only 4 weeks old. They are young and bullish. Nevertheless, they are now in a time frame for their first significant sub-cycle correction. The depth of this correction will determine whether or not their trend stays bullish. We'll have to wait and see. If the NASDAQ finds support this week (i.e. inside our reversal zone) around 17,000 and the DOW and S&P 500 find support at or below their 15-day and 45-day moving averages, that could be a springboard for another rally. I think this scenario is likely, and so, barring a serious sell-off this week, I will probably be looking to cover my short position in the DOW (broad stock market) at any support level it finds by the end of the week. I am holding my short position in the DOW for now.

Gold and silver prices are also dropping today. As I wrote in last Wednesday's blog:

"It is late in the current medium-term cycle of gold. This means the final top in the cycle is due, and it may have already happened with last week's all-time high at $2530. We also note that the final top in a longer-term 50 week cycle is also due and will be simultaneous with the medium-term cycle top. Once this top is in, we expect a sharp correction down to at least $2400, and possibly as low as $2250. Wherever the low ends up, that will be a good spot to buy as it would be the final bottom to both the medium-term and 50 week cycles and thus the start of new ones."

That high at $2530 is still holding, and gold broke below its 15-day moving average today. Unless prices can break to a new all-time by the end of the week, it looks like the final correction has started. We are currently staying on the sidelines of gold and waiting to buy at the final bottom to these cycles.

Silver has been falling steeply from last week's high, and prices thankfully closed today below the entry point of our short position (entered on Aug. 1). This puts our trade back in the black, but we still can't be certain a new bullish medium-term cycle didn't start on Aug. 8 until prices start closing below $26.52. I am holding my short position in silver as we wait to see if prices can go lower. We don't want to see prices move back above the 15-day and 45-day moving averages (now just above $29) as that would negate our current bearish view of this market.

Today crude oil prices took a deep dive and closed just above $70 (Oct.contract chart). Because this is a clear break below the "triple bottom" around $72 on June 4, Aug. 5, and Aug. 21, it is a very bearish development. If the June 4 low at $71.90 was the start of a medium-term cycle, the cycle is old and should be making its final bottom 3 - 11 weeks from now (somewhere below $71.90). As long as prices stay above the 4-year cycle low of $63.57 made on May 4, 2023, the longer-term trend in crude oil will stay bullish. If prices break below there, however, we will have to reexamine our bullish view of this commodity. We are currently on the sidelines of crude.

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