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Trading Blog Sunday (late night), October 31, 2021

10/31/2021

UPDATES on the BROAD STOCK MARKET, GOLD and SILVER (11:30 pm EDST)

We were stopped out of our short positions in the broad stock market (NASDAQ) last week because all three indices (DOW, S&P 500, NASDAQ) made new all-time highs, negating our bearish divergence signal. It looks like all three indices are early (young) in their medium-term cycles. This means there is a good chance they could rally many more weeks before reaching their cycle tops. I am still anticipating a sub-cycle correction in these indices very soon, but we will not try and sell it short again. Instead, we may look to buy the bottom of any corrective dip that doesn't go too low, with the idea of it being followed by another strong rally, perhaps into the end of the year. (Long-term traders may just want to wait to sell short at that final top, as it will likely be followed by a MAJOR long-term correction (i.e the "big one" we have been anticipating for some time). Targets for a short-term correction now could be around 35,000 in the DOW, 4,500 in the S&P 500, and 15,000 in the NASDAQ. We will watch for possible buying opportunities in these areas. We are back on the sidelines of the broad stock market for now.

It looks like gold may have made a significant sub-cycle top with its high of $1812 on Oct. 22. If this is correct, it is now correcting down to the sub-cycle bottom which could happen this week or next (and especially in our new reversal zone specifically for the precious metals coming up Nov. 4 - 15). If this correction can stay above $1746, and especially above $1722, gold can still be bullish and could rally to challenge the September high of $1833. Clearing that could lead to gold prices back above $1900. An alternative scenario could unfold If gold doesn't move below last Friday's low ($1773) this week. Gold could rally above $1812 and cause us to relabel the sub-cycle top this week or next. If it can rally above $1833, that would confirm that this current medium-term cycle is bullish. For now, we will go with the idea that the sub-cycle top was Oct. 12 ($1812) and a correction is in progress.

It looks like silver's medium-term cycle is younger than gold's, and silver also looks very bullish at the moment. Friday's low at $23.67 may have been a sub-cycle bottom. If so, silver could rally strongly now. If gold makes a new weekly low next week and silver can stay above $23.67, we would have a strong intermarket bullish divergence signal to buy. Ideally, that would happen in our reversal zone for precious metals coming up this Thursday (Nov. 4 - 15).
If silver does break below $23.67, it can still make a sub-cycle bottom in our reversal zone this week or next and be a good spot to buy (as long as prices stay above $21.44). We will watch for these possible buying opportunities over the next two weeks.

We are currently on the sidelines of both gold and silver.

Trading Blog Friday, October 29, 2021

10/29/2021

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

It looks like the NASDAQ is going to close the week well above 15,404, so we are fully stopped out of our short position in this market. Any traders still short should unload their positions now.

I will comment more on the broad stock market this week-end.

Trading Blog Thursday, October 28, 2021

10/28/2021

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

The NASDAQ broke to a new all-time high today so many traders may be stopped out of their short position entered on Tuesday. Those traders should remain out.

The stop loss on the short NASDAQ index fund that I chose (QID) came close but did not break today, so I am going to hold my short position into tomorrow. Although our weekly bearish divergence signal with the other two indices is now negated, there is a chance the NASDAQ is making a "double-top" formation here, which could also be bearish. We also note that today's new all-time high in the NASDAQ is not being duplicated in the DOW or S&P 500 (intra-weekly bearish divergence), although the latter two could catch up tomorrow.

If the NASDAQ can close the week tomorrow above 15,404, I will manually bail out of my short position even if my index fund stop loss holds. Traders who are still short can do the same or bail out now, depending on their loss tolerance. Bailing out today gives us a loss of about 1% on the trade.

Trading Blog Tuesday, October 26, 2021

10/26/2021

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

As I discussed in yesterday's blog, it is looking like the broad stock market's current trend is bullish. Nevertheless, we are expecting some sort of correction down at this time. I suspect that correction will be brief and not too serious, although there is a chance it could snowball into something bigger. A corrective drop in the NASDAQ at this time could be in the 4-5% range.

Today the DOW and S&P 500 both made new all-time highs while the NASDAQ remained below it's all-time high (15,403) which is continuing our bearish divergence signal. Furthermore, all three indices are closed in the lower third of their day's range. This is a strong sell signal. This may be a worthwhile short-term short sell trade as our stop loss would be based on the NASDAQ making a new all-time high (which is very close). A short index fund tied to the NASDAQ would be the most profitable vehicle for this trade. I am going to enter a short position in the NASDAQ today with a tight stop loss based on the NASDAQ making a new all-time high above 15,403.

Note: This will probably be a very short-term trade that we will unload quickly if the correction moves into the 4-5% range or if we get stopped out by the NASDAQ breaking its all-time high. Longer-term traders may wish to stay on the sidelines and ignore this likely modest correction. There is a chance, however, that the correction could become more serious, which is another reason for doing a short trade here.

Trading Blog Monday, October 25, 2021

10/25/2021

IMPORTANT LONG-TERM and SHORT-TERM MARKETS UPDATE (7:30 pm EDST)

Before analyzing the medium-term cycles in our markets (necessary to identify buy and sell points), let's take a quick longer-term view,of these markets so that we don't lose sight of the "forest for the trees" so to speak. I do post the longer-term picture on the Home Page under the BROAD STOCK MARKET "CRASH" UPDATE and GOLD Update, but I think it's a good time to briefly review it here as we are approaching critical turning points in most of our markets.

BROAD STOCK MARKET (LONG-TERM)

The broad stock market (this includes the DOW, S&P 500, and NASDAQ) seems to be in the final stages of several longer-term cycles. It is possible this market is at the end of a roughly 90 year cycle that began with the low following the infamous great stock market crash of 1929. If this is the case, one can see that the 90 year period is ending now. Notice I said "roughly" 90 years as there is some leeway or margin of error on both sides of the 90 year mark. Clearly, this long cycle has been very bullish, and we are still making new all-time highs as I write this. Bullish cycles like this sometimes reach their peak or top very late in the cycle and then fall sharply and deeply (crash) to their final bottom very quickly (as that bottom should be fairly close to the 90 year mark). In other words, the final bottom of the current 90 year cycle is due/overdue. It is not 100% certain that this 90 year cycle will play out, but there are also some other "shorter" longer-term cycles that are also due soon which could lead to a very significant correction in equities any time now. These other cycles could lead to a 15% - 20% correction, but the 90 year cycle correction could be as much as 70% or possibly even more (the market dropped over 80% in the crash of 1929). These are the reasons that we are now primarily looking for a good place to sell this market short.

GOLD and SILVER (LONG-TERM)

The long-term cycle that we study in gold is one that lasts approximately 23 years. The current 23 year cycle in gold began with gold's "double-bottom" low in 1999 and 2001 around $280. That was 20 years ago, so this cycle is obviously coming to completion soon. The highest price in this cycle so far has been $2070 (reached in Aug. 2020). As with the broad stock market's 90 year cycle, this 23 year long-term cycle has been very bullish, but a peak is now due/overdue because it is so late in the cycle. That $2070 high in Aug. 2020 could have been it, but recently this market has been looking very bullish, and it's still possible for that $2070 high to be challenged or exceeded. But if there is going to be another new high, it has to happen soon to give the cycle time to fall to its final bottom due sometime in 2023 - 2024. At the moment, it seems like there is an equally good chance that the $2070 high from last year was the 23 year cycle top. If that's the case, we won't see a new high, and we should be looking to sell this market short as the final cycle correction could take prices back down to the $1000 level.

Silver's longer-term cycle is a bit different than gold's and it is a little ambiguous at the moment. I will discuss this cycle at some point in the future, but for now, we can side step it and just focus on gold. The reason we can do this is because both these metal prices move in tandem. In other words, if gold takes a big price dive as it moves down to complete its long-term cycle bottom, silver will also take a big hit regardless of where it's at in it's long-term cycle.

CRUDE OIL (LONG-TERM)

Unlike the broad stock market and the precious metals, crude oil appears to have completed a long-term cycle recently and is in the early stages of a new one. Because of a global supply glut and a negative demand shock from COVID-19 lock-downs in 2020, crude oil prices made a dramatic plunge in April last year (prices briefly went BELOW zero). That historic low was likely the end AND start of several long-term and short-term cycles - i.e. it was a major price "reset" in crude. The early phase of any cycle is always bullish, and indeed, crude prices have risen sharply from last year's low (from around $20 to $83 in a year and a half time frame). The longest cycle we study in crude is a 36 year cycle. Because this cycle started just last year, we are indeed in the early, bullish phase. But it's too early right now to determine whether or not the overall trend of this new cycle will be long-term bullish. If prices rise too fast, the cycle could peak relatively early and then start a long-term fall. (The super bullish rally from last April is suggesting this might be the case, but it's still too early to tell.) Nevertheless, the cycle is VERY young now, and prices are looking quite bullish.

Current Short-Term Analysis:

The DOW and S&P 500 made new all-time highs today, continuing their bullish trend from last week. The NASDAQ rallied too, but it is still below its all-time high of 15,403 (from Sept. 7), although not far away. Yes, we are getting an intermarket bearish divergence signal here, and we are still inside a reversal zone (it ends tomorrow), so we could see the market turn down now. But we are also getting some very bullish technical signals. If these indices push higher after tomorrow, and especially if the NASDAQ can make a new all-time high, the short-term trend could stay bullish for at least several more weeks. Even a correction now could just be a minor dip to relieve pressure before the rally resumes. It still looks like both these indices are new (young) medium-term cycles that started in late September/early October, and that is supporting our bullish view

As the Thanksgiving and Christmas holiday season approaches in the U.S., equity markets will often rise into a "Santa Claus rally". But COVID-19 fears and other political and financial worries could put a damper on holiday optimism this year. If we do see such a rally, it will probably be the last surge and final top of a longer-term cycle (as discussed above) and will likely be an opportunity to sell the market short. But I'm getting ahead of myself here. For now, we wait to see if this market will take some sort of correction. Staying on the sidelines of the broad stock market for now.

Gold and silver still seem unwilling to show us a definitive trend. Both metals made a new weekly high last Friday within our general reversal zone, but they did not exceed those highs today. The reversal zone ends tomorrow, so if prices don't start falling from here, we could see a "breakout" instead and more rallying. A sub-cycle top is due in gold probably this week or next (if it didn't already happen on Friday). If that top can't exceed $1834, then gold's trend could be turning bearish. Silver is also due for a top and sub-cycle correction now (if it didn't happen Friday). Silver looks a little more bullish than gold at the moment. As long as prices don't fall below $21.44 (the start of the current cycle on Sept. 29), then it should stay bullish for at least several more weeks. We are still on the sidelines of both metals for now.

Crude oil started its current medium-term cycle on Aug. 23 at $61.11 (Dec. contract chart). This cycle has been VERY bullish, but it is now due for a sub-cycle top and a subsequent corrective low that would likely bottom sometime in the first two weeks of November. We will try and buy that corrective low as this market continues to look very bullish. On the sidelines of crude oil for now.

Trading Blog Tuesday, October 19, 2021

10/19/2021

UPDATES ON GOLD, SILVER and CRUDE OIL (11:30 pm EDST)

Gold most likely started a new medium-term cycle with its $1693 low on Aug, 9. It then rallied to a sub-cycle top at $1833 on Sept. 3. The first sub-cycle low happened on Sept. 29 at $1722, and a new sub-cycle started as prices rallied from there and touched $1800 last Thursday at the center of our reversal zone specifically for gold/silver. Thursday's high may have been a significant top because prices have fallen steeply from there.

OK. We're still not sure if this cycle's trend is bullish or bearish. If Thursday's $1800 high was a major sub-cycle top, the cycle is turning bearish because that is much lower than the $1833 high from Sept. 3. A bearish cycle could be down for many more weeks. On the other hand, this new sub-cycle could still push higher and turn the cycle bullish, maybe even into November/December. The key thing to watch now is how low prices go in the current dip that started last Friday. That dip could be over now if prices start to rally from here. But if they fall lower, we would like to see them stay above $1722, and certainly not go below $1700. A fall below $1700 would confirm a bearish cycle. A break above $1800, and especially above $1833 would suggest the cycle is bullish with higher prices ahead. The trend is too uncertain for trading, so we will remain on the sidelines of gold for now.

Silver may have started a new medium-term cycle with its low of $21.44 on Sept. 29. That would be very bullish, and indeed, prices have been rallying strongly from there (so far). Prices made a new weekly high today and touched $24 before backing down significantly. Today is the last day of our reversal zone for gold/silver, so that may be a significant top. If so, prices will correct down from here. If prices fall below $21.44, we will have to consider that silver's medium-term cycle did not start on Sept. 29 but instead started with the double-bottom lows of $23.02 and $22.92 on Aug. 9 and Aug. 20, respectively. That would mean silver is an older and bearish cycle moving to its final bottom not due for at least several more weeks. A break above $24.82 would confirm the idea of a new (bullish) cycle. Breaking below $21.44 is bearish. As with gold, we will stay on the sidelines of silver for now.

Crude oil started its current medium-term cycle on Aug. 23 with its low of $61.11 on that day. From there it has rallied sharply to yesterday's high of $83.18. That high was at the center of a reversal zone specifically for crude that ends this Friday (Oct 12 - 22). This market is overdue for a sub-cycle correction, so we could see a top this week (if it didn't already happen yesterday). We will watch for that correction for a possible opportunity to buy as this market looks very bullish. We could soon see prices near $90 (and possibly even higher in 2022). Still on the sidelines of crude oil.

Trading Blog Monday, October 18, 2021

10/18/2021

BROAD STOCK MARKET UPDATE (11:30 pm EDST)

All three of our broad stock market indices made new weekly highs today, but only the S&P 500 and NASDAQ closed the day in positive territory. We are at the center of our current reversal zone (Oct. 8 - 25), so this market may be getting ready to rollover for some sort of correction.

It now looks very much like the DOW started a new medium-term cycle on Sept. 20, but it could still be an older cycle. For now, let's go with the idea of a new cycle. If that is the case, this index could be quite bullish and could rally to a new all-time high, even into December. A break above the all-time high of 35,631 would support that scenario. But even a new cycle can turn bearish. We are expecting a correction now, and if that correction falls below the start of the new cycle (33,613), then either the new cycle is turning bearish or an older cycle is completing its final bottom. In both cases, this index could be down for many more weeks. Let's wait and see if we get a correction now and how low it will go.

The S&P 500 also looks like a new and young cycle off the low of Oct. 4 (4,279). As with the DOW, that could be bullish if the all-time high (4,546) is exceeded soon. But this new cycle could also turn bearish if it breaks below that Oct. 4 low (or it too could be an older cycle making its final bottom). We will now watch for a correction from a high in this week's reversal zone and see if that support at 4,279 can hold.

The NASDAQ may have started a new medium-term cycle on Oct. 4 at 14,182 or it may have started a new cycle on Aug. 15 at 14,424. In the first case, this index could be very bullish if it can exceed its all-time high of 15,403, but if it doesn't do that soon, it could turn also turn bearish if it breaks clearly below that Oct. 4 low. In the second case (the cycle starting on Aug. 15), we already know the index has turned bearish because it has already broken below 14,424. As with the other two indices, we will now wait for a corrective drop. If it can stay above 14,182, there is hope for a bullish rally into the end of the year. Otherwise, we should be getting ready to sell the market short.

We are staying on the sidelines of the broad stock market for now.

Trading Blog Wednesday, October 13, 2021

10/13/2021

UPDATE ON THE BROAD STOCK MARKET (8:00 pm EDST)

Way back on September 27th I wrote:

"We are now entering a time period starting today through the first three weeks of October in which all markets could be very volatile and indecisive. Thus, we need to be especially cautious, nimble, and flexible with any trading during this period as markets may be giving us mixed signals."

Well, we are still in that time frame, and the broad stock market is still giving us mixed signals and seems indecisive in its directional trend (up or down). The cycle patterns in the DOW and S&P 500 are also unclear, but the trend seems a bit more bearish than bullish. However, the NASDAQ's trend appears to be more bullish at the moment. Let's look at each index separately.

The DOW could still be an old medium-term cycle making its final bottom (due anytime within the next 3-4 weeks). If this is the correct labeling, then this index will test or break below the Sept. 20 low of 33,613 soon. But it's also possible that the Sept. 20 low was the start of a new medium-term cycle. In that case, the DOW should not break below there and should start to rally soon to possibly challenge the all-time high of 35,631 from Aug. 16. We are now near the center of our current strong reversal zone for all markets (Oct. 8 - 25), so we should expect a significant high or low soon. The key support and resistance lines to watch are 33,613 and 35,631, respectively.

The S&P 500 is especially ambiguous in its cycle pattern right now, but it seems likely that it is an older cycle still bottoming. There is, nevertheless, the possibility that a new medium-term cycle started with the 4,279 low of Oct. 4. If that labeling is correct, this index should be bullish and about to start a significant rally. A significant break below 4,279 would negate that idea. A break above last week's high at 4,430 would support this bullish scenario. As with the DOW, we will have to wait and see which line will break to better determine the current trend.

The NASDAQ seems a little more bullish than the other two indices. There is a strong possibility that this index started a new medium-term cycle with last week's low at 14,181. If so, this index could be very bullish (last Thursday's "gap up" point jump supports this view). If the NASDAQ starts falling below 14,181, however, we will have to consider the possibility that this index began a new medium-term cycle with its low of 14,424 on Aug. 19. If that's the case, the NASDAQ's trend has turned bearish (because it has already fallen below 14,424), and it will be headed lower for many more weeks. So the line to watch here is 14,181.

Our main concern right now is whether or not the broad stock market has already made a LONG-TERM TOP and is ready to take a very significant long-term correction down. If this is the case, then the all-time highs of our three indices (35,631 on Aug. 16 for the DOW, 4,546 on Sept. 2 for the S&P 500, and 15,403 on Sept. 7 for the NASDAQ) will not be exceeded, and we should be selling this market short. But it looks like there could be one last rally into the end of this year where one, two, or possibly all three indices could make new all-time highs before starting their final long and steep descent into a long-term cycle bottom (possibly due sometime in 2023 -2024, but it could end earlier). We obviously want to be in a short position during this long-term correction - crash?

So we now wait to see if this market can muster another rally to new all-time highs. If it can't, or if one, two, but not all three of our market indices make(s) a new high (bearish divergence), then we will be looking to sell short for a very long correction down. Still on the sidelines of the broad stock market.

Trading Blog Wednesday, October 6, 2021

10/6/2021

UPDATES on the BROAD STOCK MARKET and PRECIOUS METALS (9:00 pm EDST)

The broad stock market is still refusing to give us a clear directional trend as we enter the first week of October. We are getting several mixed technical signals as well as some inconsistency between our three major market indices (DOW, S&P 500, NASDAQ). Let's look at each one.

The DOW seems to be finding support at the 34,000 line. As I stated in my last blog, this index could be forming a "double-bottom" base with the Sept. 20 low and about to start a new medium-term cycle. Certain technical indicators are suggesting this is the case, and if so, this index would be bullish and should start another rally now. We are approaching another reversal zone at the end of this week (Oct. 8-22). If this is the start of a new cycle, then we should see a good rally into that time frame that may or may not make a new all-time high. But there's still a chance this index could break lower and form some sort of bottom in that same time period. At the moment, a bullish rally seems more likely. Even if we get a rally, however, we are still on the lookout for a long-term cycle top to sell short. A new medium-term cycle is usually very bullish, but if a longer-term cycle top is due (now overdue), the medium-term cycle could top out early and start a long and steep fall to its final bottom. Let's remain on the sidelines as we wait to see if this index can start a rally now.

The S&P 500 is most likely completing an older medium-term cycle. Monday's low at 4,279 could have been a significant sub-cycle bottom (probably not the final bottom), and this index, like the DOW, could start a rally now. If that happens, as with the DOW, we would be looking for a top in our new reversal zone that may or may not break to a new all-time high. If instead, this index turns south, we may be watching for a bottom in that reversal zone. We will remain on the sidelines as we watch for a potential rally.

The NASDAQ is looking more bearish than the other two indices. We had been thinking that this index was starting a new medium-term cycle on either Aug. 19 (at 14,424) or Sept. 20 (at 14,530). If that's still the case, the NASDAQ is very bearish because it has now broken below both of those lows and could be moving lower for many more weeks (even months). There's a chance, however, that this Monday's low at 14,181 or a lower low in our upcoming reversal zone (which starts on Friday) will be the final bottom of an older medium-term cycle and the start of a new one. The cycle pattern - bullish or bearish - is just not clear right now. We will stay on the sidelines of this index for now.

In last week's blog on gold I wrote:

" ...the current medium-term cycle (which began with the low of $1693 on Aug. 9) is showing a reluctance to rally and could be turning bearish. Last week's low at $1739 was in our reversal zone and could be a sub-cycle low and the starting point for a rally....We need to see gold closing above $1800, and especially $1834, for the trend to start looking bullish again..."

Gold has rallied a bit but hasn't gotten beyond $1770, so the trend is still unclear.

In last week's (Sept. 27) blog on silver I wrote:

"That low last Monday at $22.07 may have been the end of an old medium-term cycle and the start of a new one. That would make silver very bullish now, but prices would have to rally above $24.82 to confirm this labeling. The alternate view is that silver started a new medium-term cycle with the double-bottom of Aug. 9 ($23.02) and Aug. 20 ($22.92). In that case, silver's trend is bearish because prices have already moved below the start of the cycle. It is unclear at the moment which view - bullish or bearish - is correct."

Well, silver prices broke down to $21.44 last Wednesday (Sept. 29). They have been rallying from there, so that may have been the end of an old medium-term cycle. That will be confirmed with more rallying, but if prices turn south again, we may have to accept the bearish view of silver and lower prices for many more weeks.

It does not bode well for the bullish view that both metals are now making highs in our current reversal zone for the precious metals (Sept. 9 - Oct. 7) We will remain on the sidelines of both silver and gold for now.

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