The NASDAQ finally closed its Oct. 6th "gap-down" space with yesterdays close at 11,199, thus negating the downward momentum from that early October "bearish island reversal". We note, however, that the DOW and S&P 500 are both making new monthly highs, while the NASDAQ has not yet exceeded its Oct. 6 high of 11,260. This gives us a bearish divergence signal, and all three indices seem to be moving down today after an early morning rally. We are only two days past our "pivot point" (Oct. 24), so we may be getting a top and rollover now. If so, we could see a short-lived correction into our next strong reversal zone Nov. 2 - 11 where another significant bottom could form. That might be a good spot to buy. But if this market continues to rally into this new reversal zone, we would probably be looking to sell short. Let's stay on the sidelines of the broad stock market for now.
Both gold and silver prices are rallying a bit, but not enough to convince me they are turning bullish, especially as they are making new highs in a reversal zone specifically for precious metals. We remain on the sidelines here as well.
The only market making a clearly bullish move today is crude oil. It seems to be closing close to $88 today, and that is above the downward trend line we had identified last in the week in crude's chart. A close above $92.34 (we now switch to the December contract chart) would be a more convincing bullish sign. There are some short-term bearish technical signals at the moment, so I'm not so sure that's going to happen. There's a strong reversal zone for crude coming up in mid-November. As I mentioned in previous blogs, the Sept. 26th low ($75.70) may be the start of a new medium-term cycle as well as a longer-term (3 year) cycle. If so, crude could be very bullish now. But if prices fall lower into that November reversal zone, we would label that bottom as the start of the new cycles. Today's rally is supporting the idea of a Sept. 26 bottom. We will stay on the sidelines for now and watch to see if this rally can gain any legs.