Blog Archives

Trading Blog Wednesday, November 30, 2016

11/30/2016

MARKETS UPDATE (2:15 pm EST)

Yesterday the NASDAQ made a new all-time high while the DOW and S&P 500 did not (bearish divergence), and today the DOW and S&P 500 are making new highs as the NASDAQ falls. If this is the turning point for a reversal then all three indices must start falling now as we are moving out of the current reversal zone on Friday. If they don't, we could see more rallying at least into the end of next week and possibly into the last week of December. Still on the sidelines of the broad stock market.

In Monday's blog on precious metals I wrote:

"Last Thursday both gold and silver made new lows and are now rallying. That could have been the bottom, but prices could still fall lower this week. Ideally, we would like to see either gold or silver make a new weekly low this week (but not both) for a case of intermarket bullish divergence."

Today gold prices broke slightly below that low from last Thursday ($1,171) while silver is staying well above its low from last week ($16.17). Thus we are seeing intermarket bullish divergence in the current reversal zone, and we should see the market turn up shortly. Our stop loss for our gold long position will now be based on both silver and gold breaking below these lows. Holding my long position in gold for now.

Today OPEC announced that it would cut daily oil production to offset an oversupplied market. This news caused crude oil prices to soar, and at the time of this writing crude is up nearly 9% ! In Monday's blog I wrote:

"I am not sure if crude started a new medium-term cycle with its recent low on Nov. 14 ($42.95 - Jan. contract chart) or if the old cycle is still in the process of bottoming and will go back down to that low or even lower for a final bottom either in this week's reversal zone or in the next one at the end of December. If this is a new cycle then this market is probably bullish and prices will likely hold above $45 as the market rallies to challenge the recent high at $49.20."

Today prices touched $49.52 so it is looking like this could be a new cycle that started on Nov. 14. If so, this market is turning bullish. We need to see this rally follow though, however, as today's surge could just be a knee-jerk reaction to the OPEC news. On the sidelines of this market for now.

Trading Blog (#2) Monday (evening), November 28, 2016

11/28/2016

MARKETS UPDATE (8:00 pm EST)

Equity markets were down slightly today following record highs in all three major market indices (DOW, S&P 500, NASDAQ) made last Friday. It is too early to tell if a correction is starting. It could be, especially since last Friday was the dead center (most likely turning point) of the current reversal zone; however, that reversal zone extends into the end of this week so there is still time for the broad stock market to make new highs and then reverse from a top before Friday. We are looking to buy the bottom of any modest subcycle correction now although we need to keep in mind the possibility of this market "breaking out" to higher levels instead of reversing (a real possibility considering the bullish "Trumphoria" that seems to be propelling equity markets since the election). If we don't see this market turn down by Friday, we will have to consider that bullish scenario. Still on the sidelines and waiting to buy the bottom of a modest correction.

Crude oil's cycle is currently presenting us with a picture similar to that of gold and silver (see today's earlier blog on the precious metals). I am not sure if crude started a new medium-term cycle with its recent low on Nov. 14 ($42.95 - Jan. contract chart) or if the old cycle is still in the process of bottoming and will go back down to that low or even lower for a final bottom either in this week's reversal zone or in the next one at the end of December. If this is a new cycle then this market is probably bullish and prices will likely hold above $45 as the market rallies to challenge the recent high at $49.20. But if it is an older cycle still bottoming, we could see that $43 level tested or penetrated as early as this week. If that happens, we will look to buy. We will stay on the sidelines of crude until the cycle becomes more clear.

The U.S. Dollar Index nearly touched the 102 mark last week on Thursday. That was the center of the current reversal zone (which is applicable to currency markets), and the dollar has been falling over the last several days. There are technical signs that the overbought dollar is topping out now and could take a significant correction or at least consolidate in a narrow range for awhile before pushing higher to break that 102 mark. If the Fed decides not to raise interest rates in December, this could push the dollar lower and also trigger a rally in the precious metals. We will have to wait and see how this plays out.

Trading Blog (#1) Monday, November 28, 2016

11/28/2016

GOLD TRADE ALERT (2:45 pm EST)

There is a situation setting up now in gold and silver that is potentially very bullish. It all depends on how one interprets the current medium-term cycle structure of both metals. If gold and silver started new cycles in October then they are bearish and prices will move lower at least into late December and possibly longer. On the other hand, if the October lows were not the final bottoms of these cycles and instead we are seeing them bottom now (or possibly last week) then both gold and silver prices could be ready to reverse and turn very bullish. Support for the bullish scenario comes from the fact that these metals are now making new lows in the current reversal zone (the midpoint was last Friday and the reversal zone lasts through the end of this week). Last Thursday both gold and silver made new lows and are now rallying. That could have been the bottom, but prices could still fall lower this week. Ideally, we would like to see either gold or silver make a new weekly low this week (but not both) for a case of intermarket bullish divergence. Actually, we probably already have a case of bullish divergence because last week gold fell below its low from May ($1,200), but silver stayed above its May low ($15.82).

Based on the above analysis I am going to go long in gold now and place a stop loss at last week' s low of $1,171, assuming silver also breaks its low from last week at $16.17, and especially if silver breaks below $15.82. If silver can stay above these lows, I may ride out a deeper correction in gold (but not past this week's reversal zone). I may also go long in silver over the next few days if the situation looks right, but for now I'm just entering a long position in gold.

I will comment on the other markets later this evening (still out of crude and equity markets).

Trading Blog Friday, November 25, 2016

11/25/2016

MARKETS UPDATE (3:30 pm EST)

We are now at the center of the current reversal zone for the broad stock market, and all three major market indices (DOW, S&P 500, and NASDAQ) are rising into it. This means that the market should be forming a top now (or by early next week) from which some sort of correction will follow. In Monday's blog I wrote:

"Because the DOW and S&P 500 likely started new medium-term cycles on Nov. 4, their current trend is bullish (in fact, directional momentum in both charts is now 100% bullish) so any corrective reversal should not be serious and could give us a good entry point to go long. This could be around 18,500 in the DOW and 2,140 in the S&P 500."

We will still watch for this, but we should also keep in mind that on occasion (it is not common) markets can break out (or break down if the trend has been bearish) in a reversal zone instead of changing direction. If these indices continue to make new highs past the end of next week, we will have to consider that possibility. For now, I will continue to wait for a modest correction with the intention to go long.

In Monday's gold and silver blog I wrote:

"It is still not clear if these metals are falling into the final bottoms of their old medium-term cycles now or if both metals started new medium-term cycles in October. If these are new cycles then there is a good chance prices will continue lower at least into the end of December and possibly longer. But if we have older cycles bottoming now or next week, these metals could reverse and turn quite bullish. Ideally, we want to see gold move closer to $1,190 and silver closer to $16 later this week or early next week (the center of the reversal zone). If this happens, we will be looking to buy, especially if we see intermarket bullish divergence where one metal makes a new low while the other does not."

Well, gold prices dropped to $1,172 yesterday which was considerably below our target price to buy. That could be a bearish signal, and it could mean that this is a newer cycle and prices are headed lower into December. Silver prices dropped to $16.18 yesterday which was close to our target; however, there was no case of intermarket bullish divergence (both metals made new weekly lows). Caution is advised here. Yes, we are in the center of a reversal zone for these metals, but these bearish signals are making me reluctant to buy right now. I will analyze this situation further over the week-end. We may still consider a long position early next week. On the sidelines of both gold and silver.

Crude oil prices surged to a high of $49.20 (January contract chart) on Tuesday but are now falling strongly (closing today close to $46). Tuesday was technically within the current reversal zone for crude (although very early), but this reversal zone continues into the end of next week. If prices fall below (or even just come close to) $43 before next Friday, we could see a final bottom to a possibly older medium-term cycle within this same reversal period. That could be a good spot to buy. It is still not clear if the Nov. 14th low was the start of a new medium-term cycle in crude. Next week's price movements could clarity this. Still on the sidelines of crude oil.

Trading Blog Monday (late night), November 21, 2016

11/21/2016

MARKETS UPDATE (11:30 pm EST)

We are now entering another strong reversal zone for several markets that will last through the end of the month (about two weeks). The mid-point and most likely time for any market reversals would be the end of this week and early next week.

After rising sharply during election week, the broad stock market leveled off last week with the DOW maintaining its lofty new record highs just above 18,900. This Thursday is a holiday in the U.S. (Thanksgiving), and equity markets tend to rise into holiday week-ends so we may see more rallying into the end of the week. If that happens, we could easily see this market reverse and fall next week. Because the DOW and S&P 500 likely started new medium-term cycles on Nov. 4, their current trend is bullish (in fact, directional momentum in both charts is now 100% bullish) so any corrective reversal should not be serious and could give us a good entry point to go long. This could be around 18,500 in the DOW and 2,140 in the S&P 500. If equities fall this week, we could get an early correction and bottom into the end of the week or early next week which would also be a good spot to buy. A third alternative could see these markets "break out" and surge higher instead of reversing (this sometimes happens in a reversal zone but is not common). I am anticipating some sort of reversal and am going to wait for it. Staying on the sidelines for now.

Unlike equity markets, gold and silver prices have been falling. It is still not clear if these metals are falling into the final bottoms of their old medium-term cycles now or if both metals started new medium-term cycles in October. If these are new cycles then there is a good chance prices will continue lower at least into the end of December and possibly longer. But if we have older cycles bottoming now or next week, these metals could reverse and turn quite bullish. Ideally, we want to see gold move closer to $1,190 and silver closer to $16 later this week or early next week (the center of the reversal zone). If this happens, we will be looking to buy, especially if we see intermarket bullish divergence where one metal makes a new low while the other does not. Currently on the sidelines of both gold and silver.

The U.S. Dollar index managed to break through that 100 level resistance last week and remains above it for now. This week's reversal zone is also applicable to currencies so if the dollar pushes higher into the end of the week or early next week it may be setting the stage for a significant downturn. If that leads to a break back below 100, we could see the dollar falling again, and this could be the trigger for the possible bullish precious metals scenario mentioned above.

Crude oil has been rallying strongly from its Nov. 14th low of $42.20 (December contract chart). It's possible that was the bottom of the current medium-term cycle (it would be early), but a more likely scenario would have that cycle bottom still ahead. If crude prices push a bit higher into the end of this week (i.e. the center of the current reversal zone), we may have a good spot to sell short a correction down into the final cycle bottom (which could be in late December). If prices start to close above $48, however, we may have to abandon this (short-term) bearish view. On the sidelines of crude for now.

Trading Blog Monday (evening), November 14, 2016

11/14/2016

MARKETS UPDATE (10:00 pm EST)

Since last week's presidential election the broad stock market has been rallying strongly, and today the DOW reached another all-time high at 18,934. It appears that the DOW and S&P 500 started new medium-term cycles on Nov. 4 which would make these markets bullish and could mean that the DOW gets as high as 19,500 and the S&P 500 up to 2,250 before any major correction asserts itself. We should therefore be looking for a good entry point to go long. The next major reversal zone for this market starts next week and continues into the end of the month. If this rally continues into the middle or end of next week then we should expect some sort of correction to follow that could give us a good entry point to buy (assuming that correction doesn't fall below the Nov. 4th lows). We might even sell short a top next week if the setup looks right (and then reverse and buy at the bottom that follows). On the other hand, the strong rally from last week may be topping out now (the DOW's new all-time high today was not matched by the S&P 500 or NASDAQ creating a possible case of intermarket bearish divergence), and we could see a low into next week's reversal zone which could also be a good buy spot. We will stay on the sidelines for now and watch how this market moves into next week.

Gold and silver prices plunged last week and took out their October lows. This jeopardizes the idea that these metals started new medium-term cycles with those lows. In other words, they could still be completing their old cycles and making new bottoms to those cycles now. If that is the case, we could easily see those bottoms in next week's reversal zone, and it would be a good spot to buy. A more bearish possibility is that the October lows were indeed new cycle bottoms. This would mean that the trend is turning bearish and prices could go much lower. In this scenario gold needs to stay above $1,200 and silver needs to stay above $15.82 to avoid turning very bearish. As with the broad stock market, we will stay on the sidelines here and watch how prices move into next week's reversal zone.

Crude oil prices continued their fall last week, and a new monthly low was made last Friday at $43.03 (December contract chart). Next week's reversal zone is especially strong for crude, and it is late in crude's medium-term cycle so we could see a significant bottom to buy then. It is possible we could see a retest of the Aug. 3rd start of this cycle at $41.58. Still on the sidelines but now looking to buy a significant bottom in next week's reversal zone.

The U.S. Dollar Index is again testing that tough resistance line at 100 which it attempted to break through twice in 2015 as well as in early 2016. Can it break through this time? Short-term technical signals right now are suggesting that it can. An interest rate hike in December (which many analysts are expecting) would also favor a bullish dollar now. If the dollar does rally higher, it will likely push gold and silver prices lower as in the possible bearish precious metals scenario I describe above.

Trading Blog Wednesday, November 9, 2016

11/9/2016

MARKETS UPDATE (9:00 pm EST)

Donald Trump Wins the Election and Will Be the Next U.S. President

Donald Trump's victory last night was truly a "Brexit" moment. As with the U.K.'s decision to leave the European Union earlier this year, Trump's win came as a surprise and shock to the mainstream media and many political analysts. Britain's Brexit vote reflected the average working class citizen's deep dissatisfaction with a government and politicians that they felt were corrupt, out of touch, and not working for them. There are many people in this country (both Democrats and Republicans) that feel the same way, and I believe this sentiment contributed strongly to Trump's win. (This dissatisfaction with establishment Washington politicians also fueled the enormous popularity and success of Bernie Sanders in his run against Hillary for the Democratic nomination). The one thing that both Republicans and Democrats can agree on is that Donald Trump is an outsider entering the political arena for the first time. His detractors say that this inexperience makes him unfit to be president, but his supporters see this as an asset that will give him a refreshing objectivity. Will things change for the better under Trump's presidency? Only time will tell.

Following the election results late last night, overnight equity markets plunged but curiously recovered and rallied strongly today with the DOW gaining 257 points at the closing bell. Many (including myself) had expected a Trump victory to send the markets down as Wall Street does not like uncertainty, and Trump, a political newbie and often outspoken and controversial personality, was certainly a "wild card" factor here. In his acceptance speech, however, Mr. Trump was even-tempered, conciliatory, and actually "presidential". This may have calmed investors a bit. The fact that Republicans also won and will retain control of both the House and Senate may also help stabilize markets as a "clean sweep" victory of one party makes it easier to predict the direction of future legislation and policies. (Remember, markets don't like uncertainty). Despite today's strong rally, it is too early to judge the full impact of Trump's victory on the markets. It is quite possible that last Friday's lows in the DOW and S&P 500 were medium-term cycle bottoms and that we are now starting new cycles. This is supported by the fact that the DOW today broke and closed above that strong resistance zone at 18,400 - 18,450. If this analysis is correct then we should be looking to go long; however, the broad stock market could still be volatile over the next few days as investors mull over the economic ramifications of a Trump presidency. Let's stay on the sidelines for now and see how prices move into the end of the week.

Gold and silver's reaction to the election was the opposite of equity markets. Prices surged overnight on the news of the Trump win but then fell back strongly today. Over the last two days gold has made a new weekly low as well as a new weekly high while silver made a new weekly high today. Neither metal has taken out its October low so it is still unclear if these new cycles are going to be bullish or bearish. Friday or next Monday could be a significant turning point for gold and silver, but the next major reversal zone for precious metals is at the end of the month. Because the trend here is not clear, I am going to remain on the sidelines of gold and silver for now.

Crude oil prices have rallied a bit this week, but last week's steep fall and last Friday's break slightly below the Sept. 20 subcycle bottom ($43.77 - Dec. contract chart) suggests that this cycle may be turning bearish. Prices may move lower into the next reversal zone for crude at the end of this month. If so, we will consider going long. If instead we see prices edge higher over the next two or three weeks, we will consider selling short. Still on the sidelines of crude.

Trading Blog Monday, November 7, 2016

11/7/2016

BROAD STOCK MARKET TRADE ALERT and MARKETS UPDATE (8:00 pm EST)

Here we are the day before the U.S. presidential election. The melodrama that has made this election one of the most tumultuous and bizarre elections in recent history continues with reaction to yesterday's announcement that the FBI (or at least director James Comey) has cleared Hillary Clinton a second time of wrongdoing after examining 650,000 of her newly discovered emails. Last month's reopening of the investigation of Hillary's mishandling of email boosted Donald Trump in the polls. It also seemed to cause a small selloff in equity markets. (Whether you like Donald Trump or not, stock markets do not like uncertainty, and Mr. Trump, a newbie politician, is considered to be an "unknown variable" by Wall Street investors.) Not surprisingly, equities rallied strongly today as Clinton's polls are getting a boost from Comey's exoneration. The DOW closed the day with a 371 point gain. Is this the start of a new uptrend, or is it just a volatile, knee-jerk reaction to today's news?

While the DOW made a new weekly high today, the S&P 500 and NASDAQ did not. We therefore have a potential case of intermarket bearish divergence here which is suggesting more downside in equity markets. I wrote in my blog last Thursday that:

"We are coming to the end of a reversal zone on Friday, but I am going to extend that into early next week because next Tuesday (election day) could be a significant turning point for many markets. Equities could bottom then and start to rally again. If they don't, we could see them fall lower into the end of the month when we have our next strong reversal zone."

Last Friday's low could be a significant bottom. The DOW dropped to 17,883 and got into the upper part of our target range for a cycle bottom (17,300 - 17,900). The S&P 500's low of 2,083 on Friday, however, was some distance above our target of 2,030 - 2,060. Also, despite today's rallies, directional momentum in the DOW, S&P 500 and NASDAQ remains nearly 100% bearish. OK, this is a tough call. If Trump wins tomorrow, equities could plummet back down sharply, but if Hillary wins, we could see today's rally skyrocket even higher. Our short position in the broad stock market is now at a break even point. I am going to play it safe here and cover (unload) this short position now. Hillary's victory could mean that last Friday's lows were broad stock market cycle bottoms. That would be confirmed if the Dow starts to move above a resistance area at 18,400 - 18,450. A Donald trump win, however, could push equities lower, and in that case these cycles would likely bottom near the end of this month. We will move to the sidelines now to avoid any election hysterics in the markets. Covering my short position in the broad stock market tonight for tomorrow's market open.

We can now confirm that both gold and silver started new medium-term cycles in October. This could be very bullish (early stages of cycles are usually bullish), but current directional momentum in both metals is mixed bullish and bearish so there is a chance of the trend turning bearish if at any time prices start to move below the start of these cycles ($1,243 in gold and $17 in silver). Both metals rallied and made new highs last week but are now down significantly from those highs. It is hard to say how the election will affect this market, but it looks like the prospect of a Trump victory was boosting precious metal prices last week, and the news of Hillary's "exoneration" may have depressed prices today. In my blog last Thursday I wrote:

"...if gold and silver have started new cycles and the trend stays bullish then any subcycle correction now should not go too deep and would be a good spot to buy. We will watch for this. "

We could be seeing that subcycle correction starting now. If Hillary wins tomorrow, prices could continue lower for another week or two, but a Trump victory might push prices higher and delay any correction for at least another week. We will remain on the sidelines here and watch how the election moves this market. Ideally, we are looking to buy a subcycle correction that holds above $1,243 in gold and $17 in silver which could happen between now and the end of the month.

As I stated in last Thursday's blog, crude oil's cycle may be turning bearish. Prices have been falling steeply and last week broke below some important technical support levels which is why we held off buying any subcycle correction. Tomorrow's election could create volatility in all markets so, as with the broad stock market and the precious metals, we will remain on the sidelines of crude for now.

Trading Blog Thursday (evening), November 3, 2016

11/3/2016

MARKETS UPDATE (8:00 pm EDT)

The broad stock market has been falling steadily this week with the DOW, S&P 500 and NASDAQ making new weekly lows today. Yesterday's Federal Reserve meeting and release of its latest policy statement doesn't seem to be having much of an effect on equity markets, probably because most investors are waiting for the results of next week's presidential election before making any major trading decisions. The Fed, of course, is aware of this and did not make any dramatic changes from its last policy statement in September. It most likely does not want to "rock the boat" before the election. Not surprisingly, the Fed kept interest rates unchanged. Many analysts are expecting an interest rate hike in December, however, and yesterday's Fed statement seemed to support this view with a positive description of the economy and a comment that “the case for an increase in the federal funds rate has continued to strengthen”. Nevertheless, the Fed was typically cryptic in addressing when that first rate hike will happen, saying only that it would “wait for some further evidence of continued progress toward its objectives” before raising rates. This gave the statement a tone of tempered hawkishness. That tempering, however, may not be enough to calm a very nervous stock market.

Our cycle and timing analysis of equity markets continues to suggest that we are nearing the end of a medium-term cycle that could bottom anytime over the next several weeks. We are coming to the end of a reversal zone on Friday, but I am going to extend that into early next week because next Tuesday (election day) could be a significant turning point for many markets. Equities could bottom then and start to rally again. If they don't, we could see them fall lower into the end of the month when we have our next strong reversal zone. As I stated in Tuesday's blog:

"Normal targets for this correction could be anywhere from 17,300 - 17,900 in the DOW and 2,030 - 2,060 in the S&P 500. If markets panic, however, it is possible we could see a more severe sell-off. Given the bizarre and tumultuous nature of the current presidential election and the high level of anxiety in markets, I think anything is possible."

We sold this market short on Monday and have a small profit so far. Let's wait and see if equities can move lower and at least penetrate into the ranges stated above. If new lows continue after election day then it is highly likely we won't see the cycle bottom until the end of the month. Holding my short position in the broad stock market.

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

"Gold and silver prices both surged to new weekly highs today and broke important resistance levels. This makes it much more likely that these metals started new medium-term cycles in early-mid October (Gold on Oct. 7 and silver on Oct. 7 or Oct. 19). If this is true, we could now see prices rally for several weeks (perhaps even months) as the new cycle attempts to match or exceed the previous cycle highs from June ($1,375 in gold and $21 in silver). Before we get too bullish, however, we need to recognize that the current highs are being made within a strong reversal zone specifically relevant to precious metals which extends through the end of this week. A price correction could therefore be imminent from any high between now and Friday. If gold and silver have indeed started new cycles then this correction shouldn't break below $1,240 in gold or $17 in silver."

All of this still applies. Yesterday both gold and silver prices surged to new weekly highs ($1,307 in gold and $18.73 in silver) and prices are down today. That may have been a significant high, but, as with the broad stock market,
I am going to extend the current reversal zone into early next week; therefore, these metals still have time to go higher before correcting down. As stated above, if gold and silver have started new cycles and the trend stays bullish then any subcycle correction now should not go too deep and would be a good spot to buy. We will watch for this. Still on the sidelines of gold and silver.

The U.S. Dollar Index rallied dramatically in October, seemingly in an attempt to overcome that 100 mark it failed to break through last year. Last week it got to 99, but this week the dollar is falling steeply and closed today just above 97. The dollar's fall this week helped propel precious metal prices higher, but now this index is encountering support in the 96 - 97 area. It may consolidate here and attempt another rally, especially since directional momentum in the U.S. Dollar Index chart is nearly 100% bullish, but other technical signals are suggesting it could break lower. Here too, we may have to wait until the outcome of next week's election to see where the dollar is heading.

In Tuesday's discussion on crude oil I stated:

"Directional momentum in crude charts is now mixed bullish and bearish, but it looks like a bottom is forming here. I may enter a long position tomorrow or Thursday if prices don't go below $45. "

Well, prices closed today at $44.75 (December contract chart) so there is a concern that the cycle is turning bearish. We will hold off buying for now. If prices move below $43.77 (the subcycle low of Sept. 20), we may have to alter our trading strategy for this market. Out of crude oil for now.

Trading Blog Tuesday (late night), November 1, 2016

11/1/2016

MARKETS UPDATE (11:30 pm EDT)

I had been looking to sell short the precious metals market, but today's price surge in both gold and silver is changing the cycle picture for these metals. In Sunday's blog I wrote:

"...there is a possibility that both metals already bottomed and began new cycles in early October and are still in their early stage. If that is the case then this market could turn bullish...This market is tricky to call right now. "

Gold and silver prices both surged to new weekly highs today and broke important resistance levels. This makes it much more likely that these metals started new medium-term cycles in early-mid October (Gold on Oct. 7 and silver on Oct. 7 or Oct. 19). If this is true, we could now see prices rally for several weeks (perhaps even months) as the new cycle attempts to match or exceed the previous cycle highs from June ($1,375 in gold and $21 in silver). Before we get too bullish, however, we need to recognize that the current highs are being made within a strong reversal zone specifically relevant to precious metals which extends through the end of this week. A price correction could therefore be imminent from any high between now and Friday. If gold and silver have indeed started new cycles then this correction shouldn't break below $1,240 in gold or $17 in silver. We will abandon our plan to sell short now and just focus on buying the bottom of any significant correction. If these are still older cycles then that bottom could be as low as $1,200 in gold and $16 in silver, but I think it's more likely prices will stay above those $1,240 and $17 lows from October. On the sidelines of gold and silver for now.

The broad stock market's significant drop today was likely being fueled by the increasing chances of a Trump presidency in the wake of more damaging email scandals surrounding Hillary Clinton and her associates. The DOW and S&P 500 both made new monthly lows and directional momentum in both charts switched from mixed bullish and bearish to 100% bearish (the NASDAQ is still mixed bullish and bearish). If these indices don't turn back up by the end of this week, it is likely they will continue down into and beyond the election to form a cycle bottom near the end of this month. That drop may not be that severe. Normal targets for this correction could be anywhere from 17,300 - 17,900 in the DOW and 2,030 - 2,060 in the S&P 500. If markets panic, however, it is possible we could see a more severe sell-off. Given the bizarre and tumultuous nature of the current presidential election and the high level of anxiety in markets, I think anything is possible. We sold this market short on Monday, and right now that seems like a good decision. We will stay short but will carefully watch for any significant turn up over the next three days as we are still in a reversal zone. Holding my short position in the broad stock market.

In Sunday's blog on crude oil I wrote:

"Crude oil prices now appear to be making a subcycle bottom in a strong reversal zone and are close to our target range of $47 - $48. A bearish signal just appeared in crude's Sunday night chart so I am going to wait and see if prices can move lower and more directly into our target zone early next week."

It looks like it was a good idea to delay buying crude as prices dropped dramatically this week. Crude closed today at $46.29 (December contract chart) which is a little below our target price but still in an acceptable range for a subcycle bottom. Directional momentum in crude charts is now mixed bullish and bearish, but it looks like a bottom is forming here. I may enter a long position tomorrow or Thursday if prices don't go below $45. Still on the sidelines here.

Archives

LEGAL and DISCLAIMER