GOLD TRADE ALERT and MARKETS UPDATE  (2:30 pm EST)

It looks like it is a good time to cover our long position in gold and start looking for a point to sell short the precious metals market. The charts for gold and silver mining company indices HUI and XAU continue to be strongly bearish which does not bode well for these metals short-term.  Gold prices today are approaching resistance in the $1251 area, and we are in our original target zone for this rally so I am going to sell my gold long positions for a decent short-term profit and stand aside the precious metals for now. Technical and cycle data are suggesting a reversal soon in the precious metals that could take prices down to new lows (and possibly the long-term cycle bottoms in both gold and silver).  We will now watch for signs of that reversal which could be sometime this week (possibly today if the market turns here and gives a short-term sell signal).  If gold prices push higher into the week then Friday could end up being the turning point.  Selling gold long positions today and standing aside the precious metals for now.

After a wild and extremely volatile week, the broad stock market closed last Friday with a strong rally, and the DOW surged up 263 points.  Some investors were encouraged by this and are viewing Wednesday's low at 15,855 as the final bottom to this correction.  Most of the analysts I follow, however, do not agree and are viewing the bounce from Wednesday as a short-term relief rally soon to be followed by new lows. Technical and cycle data are also supporting this bearish view.  My trading strategy, therefore, continues to be bearish and we will try to sell short the top of this rally, maybe even this week.  An ideal target in the DOW would be in the 16.500 - 16,800 range (in the S&P 500 it would be 1900 - 1930) preferably later in the week, but markets are still trading in a volatile environment so we may not see that ideal setup.  In fact, the high may already be in with Friday's 16,427 DOW top.  We will have to wait and see how the market moves over the next few days.  On the sidelines but looking to sell short soon. 

Crude oil prices seem to be holding above my final line in the sand support level at $79.  As I discussed in my last blog, the current crude cycle may be distorting, but if the Oct.16 low ($79.78) turns out to be the final bottom to this correction, then we are on track with a new cycle and this would be bullish.  Holding my long position in crude oil with a tight stop loss on a close below $79.

 MARKETS UPDATE  (8:00 pm EST)

The broad stock market was clearly in a pessimistic mood early in today's trading as the DOW dropped nearly 400 points by early afternoon, but then it recovered a bit and closed the day with only a 173 point loss.  Many support levels have now been broken, and the cycle pattern indicates that this market should be going lower for at least three more weeks.  The DOW's correction from its Sept.19th all-time high of 17,350 is now over 8%, so it looks like we are approaching the 10% or more correction that has been overdue for some time.  As I've stated before on the site, when major cycle corrections are delayed, they often manifest later in an abrupt and sharp fashion and are hard to pinpoint and trade.  This week's dramatic plunge is an example of this as a "normal" market would have rallied a bit more before falling.  Technical factors are now suggesting that this correction could be considerably more than 10% (possibly 17% or even more) so I am still going to be looking for an opportunity to sell this market short.  Equities are extremely oversold right now and a reversal is still possible so we may get a relief rally over the next several days. 
If we do, it might give us a good spot to sell short.  Still on the sidelines.

Gold and silver continue to rally (especially gold) and gold prices nearly touched $1250 today which is the midpoint of my first target range ($1240 - $1260) for this rally.  However, I think prices could go higher and I am not ready to take profits on long positions just yet.  Gold is overbought right now and may pull back a bit, but as long as prices remain above the $1210 - $1220 area I am holding on to my long position in gold.

After nearly four months of bullish momentum and strong rallying, the U.S. Dollar Index is starting to show some signs of weakness.  The dollar dropped sharply today (intraday) to support at 84.5 as a bearish momentum signal appeared in dollar charts.  Directional momentum is now mixed bullish and bearish for this index which means the current dollar correction could turn out to be more than just a shallow dip.  We will have to wait and see.  This is good news for the precious metals as a slump in the dollar encourages higher prices in gold and silver.

My patience in waiting for a bottom in crude oil prices is starting to wear thin.  There are two reasons I have held on to my long oil position recently.  First, the current cycle in crude has reached its maximum duration length.  This length is based on statistical probability; in other words, it is highly likely the cycle bottom is happening now (this week).  If the cycle doesn't bottom now and continues for several more weeks it is distorting, which is possible but less likely. Secondly, last week and early this week has been a time period when directional reversals in many financial markets can occur, and crude has been moving down and making new lows into this timing window.  My line in the sand now is $79 - $80, and I will have to bail out of this long oil position if that price level is breached.  We nearly touched $80 today, and prices closed in the upper part of the day's trading range so we may get a bounce here, especially if the broad stock market has a relief rally now.  Still holding my long position in crude.

With tensions in the Middle East heating up, one would expect oil prices to be rising.  So what could be sending crude prices lower and causing the crude cycle to distort right now?  A recent article posted on the news site VOX (http://www.vox.com/2014/10/14/6975977/which-countries-suffer-most-when-oil-prices-plummet) may have the answer to this question.  It points out how falling oil prices could crush Russia's current economy since oil revenues account for roughly 45% of Russia's budget.  With the recent conflicts in Ukraine and Syria intensifying, many geopolitical analysts are already referring to a new "cold war" developing between Russia and the West.  The downward manipulation of crude prices to subjugate an increasingly obstinate Vladimir Putin seems to be a possibility here, especially in light of the fact that some Washington politicians were discussing the possibility of selling U.S. oil reserves earlier this year to lower oil prices and weaken the Russian economy.  The purpose of this website is not to discuss conspiracy theories, but when distortion occurs in the natural cycle of a financial market, I believe market manipulation can sometimes be a significant force behind it, and I think it is worth mentioning.   As traders, I believe we need to accept the fact that market manipulation does happen.   When it does, it can be like someone throwing a wrench into our carefully worked out technical and cycle analysis, and trading can become very difficult, though not impossible.  Interestingly, I have noted over the years that even though market manipulation often distorts cycles, it usually doesn't eliminate them.  Thus we are not totally lost when a cycle shift occurs and can usually in short time figure out how our trading strategy needs to be altered and realigned to the new pattern.

MARKETS  UPDATE  (8:00 pm EST)

In last Sunday's blog I wrote:  " ...there are several technical factors suggesting more volatility over the next several weeks.  We need to be especially careful with our trading as market movements in this environment could be erratic and unpredictable."

We are certainly seeing this in the broad stock market this week with wild, triple digit fluctuations in the DOW.  The DOW attempted to close above 17,000 on Monday but couldn't, and then it plunged 272 points on Tuesday.  On Wednesday, minutes of the September FOMC meeting were released in which the Federal Reserve reaffirmed its intent to be prudent in raising interest rates.  This not only calmed Wall Street investors but made them jubilant, and the DOW soared 274 points.  Today, however, the DOW is back down with a 334 point loss for the day.  This is obviously an extremely nervous and unstable market right now which tells us to be cautious in our trading.  We are moving into the end of this week's time period for a likely reversal in the the markets as the DOW makes new lows close to 16,600.  We might be seeing a good buy spot here, but some short-term indicators are bearish and suggest the possibility of more downside.  If prices continue to hold above 16,600 over the next few days I will consider going long for a short-term rally, especially if short-term technical indicators turn bullish.  As I've been stating in recent blogs, a significant correction of 10% or more is overdue in equity markets.  It could be in progress now if the DOW starts closing below 16,600, but I think it is more likely we will see another rally into late October-early November and either a new all-time high or a double top to the DOW's Sept 19 high followed by a major correction.           
Out of the market for now.

We are now in the red with our crude oil long position, but if prices stay above the $84 - $85 area there is a good chance crude will be turning up by early next week from the currently forming cycle bottom.  I entered my long position on Sept. 25 and at that time wrote in my blog that:   " Because crude prices can be very volatile under the current circumstances I am investing only a moderate amount of money in this trade."   The limited funds I applied to this trade is making it a bit easier to "ride out" the current price drop, but cycle and timing analysis point strongly to an imminent bottom now so we will look for this by early next week.  Holding my long position in crude.

It is "so far, so good" with our long position in gold.   We seem to be back on track for a rally in the precious metals. The analysts I follow are a bit divided in their opinions on gold at the moment.  While some anticipate a major rally and possibly a "breakout" right now, others feel the current rally will be short-lived and followed by a deeper correction.  I am leaning towards the latter scenario, that is, a short rally now followed by a another decline into the final cycle bottoms of both gold and silver sometime early next year.  My first target for this rally is the $1240 area.  If we reach or exceed that level tomorrow or Monday, I may take profits as we are still in a timing zone for a market reversal.  I would prefer, however, to see this rally continue into November and sell then.  This rally could go as high as $1290, but unless it exceeds $1300, we will be looking to reverse position (ideally in November) and sell short a correction into the final bottom of the long-term gold cycle.  Holding my long position in gold and still out of silver..

The U.S. Dollar Index is finally taking an overdue correction as it is moves down from a high of 86.75 on Oct. 3rd to a support level close to 85.  This is giving a major lift to gold and silver prices, but the overall strength of the dollar chart suggests that this correction may not last very long.  If 85 breaks there is another support level at 84-84.5.  
A resumption of the dollar rally may be the trigger that sends gold and silver prices back down to their final bottoms so we will watch the dollar index closely to help time any short selling of the precious metals.

MARKETS  UPDATE  (11:15 pm EST)

On Friday the U.S. Labor Department reported that the economy generated 248,000 jobs in September which was 33,000 more than what had been forecast by economists.  The Labor Department report also showed that September's unemployment rate dropped to 5.9%, its lowest level in six years.  This upbeat economic news had a dramatic effect on many markets including the broad stock market, crude oil, precious metals, and the U.S. Dollar. This is demonstrating just how volatile many markets are right now and, unfortunately, there are several technical factors suggesting more volatility over the next several weeks.  We need to be especially careful with our trading as market movements in this environment could be erratic and unpredictable.

One would think that the broad stock market would be a little nervous to hear that the economy is improving.  After all, an improving economy increases the likelihood of the Fed raising interest rates sooner, and the markets definitely don't want that to happen.  Nevertheless, the ever fickle stock market decided to cheer Friday's employment numbers with a big rally, and the DOW surged over 200 points and closed just over the 17,000 mark.  October 7-8 represents the center of a timing window for a major market reversal, but it is possible that reversal came early with last Thursday's DOW plunge to 16,674.  If so, we should see this market continue up this week as it works its way towards another new high (or double top to the Sept.19th high of 17,350).  If that high happens this week, I may look to sell short, but any rally now could extend into November, so we may have to wait until then for the ideal point to short sell what could be a severe market correction of 10% or more.  Alternatively, if last Friday's market jubilance turns out to be short-lived, we could get a new low in the DOW (say in the 16,500 area) this week (the ideal time for a reversal), and if that happens I will consider a long position to ride a new rally up.  Still on the sidelines of the broad stock market.

Friday's positive Labor Department report also gave a great boost to the U.S. Dollar Index and that drove both silver and gold prices lower.  Gold has broken below my stop loss level of $1200, but I am holding onto my long position because we are now entering the center of a strong reversal zone (Oct. 7-8) and there are still technical and cycle factors that point to a short-term bottom now. The key support level to watch here is the $1180 area in gold.  A clear break and close below there would be very bearish and would likely force me out of my long position.  Friday's kick to the dollar now makes this currency severely overbought on several technical levels, and a correction next week seems likely.  This makes me optimistic that gold will hold above its support and start to rally.  Holding onto my long position in gold.  Still out of silver.

As a commodity often referred to as "black gold", crude oil  also turned down on Friday in response to the dollar surge.  Although this puts our long position a bit in the red, cycle analysis still indicates that a normal bottom in this market is due this week, and we are also in the center of a reversal zone for crude.  For these reasons I am going to hold onto my long position and try to "ride out" any price dips this week with the idea of a final bottom forming now and a subsequent rally to follow.  While prices could get as low as $85, it's still possible that the Oct. 2 low of $88 was the final bottom.  We will have to wait and see if it will go lower next week.  Holding my long position in crude.