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Trading Blog Wednesday (late night), November 25, 2020

11/25/2020

CRUDE OIL UPDATE (11:30 pm EST)

I am going to slightly alter the labeling of the current medium-term cycle in crude oil. It appears a new cycle started with the low of $34.04 on Nov. 2 (January contract chart). The sharp rally from that low has already exceeded the high from crude's previous medium-term cycle ($44.60), so this market's trend could be turning bullish (unless prices turn down from today's high at $46.26 for a potential "double top"). We are in a reversal zone through next Tuesday (but that could extend into Thursday for crude), so we could see an early sub-cycle high in this time frame. Any significant correction now could give us a buying opportunity as it is still early in this potentially bullish cycle. A good target to buy could be around $39. We will stay on the sidelines of crude for now.

Trading Blog Tuesday (late night), November 24, 2020

11/24/2020

UPDATE ON THE BROAD STOCK MARKET and PRECIOUS METALS (11:30 pm EST)

Despite the turmoil and uncertainty around the presidential election, the broad stock market seems to be shrugging it all off and is energetically rallying to new heights. Wall Street may be taking its cues from the Democrat party and the mainstream media which is celebrating the projected victory of Joe Biden despite the fact that the vote counting is not over and several lawsuits are pending from the Trump administration claiming voter fraud. Curiously, Democrats, who were highly critical of an accelerated or "rushed" vaccine under Trump, are now praising the same "sooner than later" vaccine under the predicted Biden administration. The news of an imminent vaccine in the midst of the current "second wave" of COVID-19 cases is certainly contributing to the current rally in equity markets.

As I stated in my last blog, the DOW and S&P 500 most likely started new medium-term cycles on Oct. 30. From their lows on that date, both indices rallied strongly into our wide reversal zone (Nov. 5 - 19). Both indices also made corrective dips from peaks on Nov. 9 and Nov. 16 which we had identified as "pivot points" for possible reversals (see my blog post on Nov. 4). Those dips were not deep, which indicates how bullish this market is right now. Today's strong rally brought the DOW into record territory (above 30,000 for the first time), but the S&P 500 and NASDAQ did not make new highs (yet) so we already have a case of intermarket bearish divergence. We also entered a new reversal zone today (Nov. 24 - Dec. 1) which means we should be looking for another top in this time frame. Because. this is a holiday week (Thanksgiving in the U.S. on Thursday), I think there's a good chance the S&P 500 and NASDAQ will make new highs (equities are usually bullish into holidays), and we may have to look for another bearish divergence signal early next week. We want to watch for a significant sub-cycle correction (which we didn't get from those Nov. 9 and Nov. 16 highs) and a low which could be a good buying opportunity (assuming the market stays bullish). We will remain on the sidelines for now.

In last Friday's blog I wrote:

"The NASDAQ 100 (E-mini, Dec. contract chart) already had its first significant sub-cycle correction with its 10,942 low on Nov. 2. It could come down for another low this week or next to around 11,350. If it does, that may be a good spot to buy. But if this index pushes higher today (Friday) or next week, it could challenge and exceed last week's high before giving us another corrective dip and possible buying opportunity. What we really need to see soon, however, is a new all-time high in the NASDAQ 100 (above 12,449) to confirm that this market is still bullish and worth buying into. "

OK. This index did not come down to our 11,350 target. It is rallying, but so far it is still below its Nov. 9 high (12,409) as well as its all-time high (12,449 on Sept. 2). As with the other two broad stock market indices, we will wait for a more significant correction for a possible spot to buy. We still need that 12,449 level to be broken to confirm that this market is bullish. We are on the sidelines of this index.

In my last post on the precious metals (Nov. 12) I wrote:

"It does look like we can label the medium-term cycles in both metals as having started with their lows on Sept. 24 ($1849 in gold and $21.75 in silver).... If these cycles are going to be bearish [then] prices will start to break below those Sept. 24 lows, and the trend will be down for many more weeks."

Gold has fallen below its Sept. 24 low which means gold's cycle has turned bearish. Silver, however, is still above its Sept. 24 low and could still be bullish. We thus have a bullish divergence signal as we enter our new reversal zone (Nov. 24 - Dec. 1). This means we should be watching for some sort of bottom this week or early next week. Even if silver does break below its Sept. 24 low ($21.75), a bottom and subsequent reversal back up is possible in this time frame. If both metals turn bearish, we may switch our trading strategy from buying to selling short. We are staying on the sidelines of this market for now.

Trading Blog Friday (early AM), November 20, 2020

11/17/2020

UPDATE ON THE BROAD STOCK MARKET (4:00 am EST)

We are sticking with last week's labeling of the DOW and S&P 500 having started new medium-term cycles on Oct. 30, and the NASDAQ 100 having started a new medium-term cycle on Sept. 21. All three cycles are in their early phase and have been typically bullish. All cycles are bullish in their early stage, but as they progress forward, they can either stay bullish and rally through most of their cycle, peak late and fall quickly and steeply to their bottom, or they can turn bearish, peak early and fall gradually over the major portion of their cycle. It's not clear yet which pattern the current cycles will follow, but that should become more apparent over the next few weeks.

Let's first look at the DOW and S&P 500. The DOW rallied strongly from its Oct. 30 low (26,143) and made a new all-time high this week on Monday (Nov. 16) at 29,964. The S&P 500 rallied from its low on Oct. 30 (3,234) to make a new all-time high last week on Nov. 9 at 3,644. Both highs were in our reversal zone, and each fell on one of our "pivot points" (Nov. 9 and Nov. 16) which means a significant reversal could be happening here. We also have a case of intermarket bearish divergence because the two highs were not in the same week. OK...it seems like a sub-cycle correction is underway, and the overall cycle trend appears to be bullish. We will consider buying if the DOW can get down to around 28,700 and the S&P 500 down to around 3,400. For now, we remain on the sidelines of the DOW and S&P 500.

The NASDAQ 100 (E-mini, Dec. contract chart) already had its first significant sub-cycle correction with its 10,942 low on Nov. 2. It could come down for another low this week or next to around 11,350. If it does, that may be a good spot to buy. But if this index pushes higher today (Friday) or next week, it could challenge and exceed last week's high before giving us another corrective dip and possible buying opportunity. What we really need to see soon, however, is a new all-time high in the NASDAQ 100 (above 12,449) to confirm that this market is still bullish and worth buying into. We will stay on the sidelines of the NASDAQ for now.

Trading Blog Thursday, November 12, 2020

11/12/2020

UPDATES on PRECIOUS METALS and CRUDE OIL (8:00 pm EST)

Gold and silver charts are very tricky to call right now. It does look like we can label the medium-term cycles in both metals as having started with their lows on Sept. 24 ($1849 in gold and $21.75 in silver). That means they are relatively young (7 weeks), but are they going to be bullish cycles? That is the important question now. If the cycles are bullish, gold could get up to $2200 or even $2300. A bullish silver cycle could end up in the $28 - $36 range. If these cycles are going to be bearish, however, prices will start to break below those Sept. 24 lows, and the trend will be down for many more weeks. Monday's highs were on one of our reversal zone pivot points (Nov. 9), and prices in both metals dropped steeply from there. Monday's drop was only one day - prices have stabilized and are now hovering above Monday's lows. A significant correction lasts more than one day, so if prices don't break below Monday's lows soon, we might see these metals make a second high this week or next (esp, around our Nov. 16 pivot point). As long as those Sept. 24 lows hold, these metals look very bullish, but we are not going to buy until we see how far down the current reversal goes.

Another risk in going long in the precious metals at the moment comes from looking at the chart of the U.S. Dollar Index. The dollar's current medium-term cycle is most likely approaching its final bottom over the next 5 weeks (it may even have happened with Monday's low at 92.13). Once this low is in, the greenback will start a new cycle and will rally strongly. Usually a dollar rally pushes down gold and silver prices. But we also need to keep in mind that we are not in normal financial times, and sometimes the dollar and precious metals rise (and fall) together.

Let's stay on the sidelines of gold and silver for now. Even if these metals rally from here, this week's and next week's reversal zone should put a cap on any price surge. Any new lows could give us a buying opportunity (as long as they don't go TOO low).

Crude oil most likely started a new medium-term cycle with it's "double-bottom" lows around $37 (Dec. contract chart) on Sept. 8 and Oct. 2. Prices dropped below $34 on Nov. 2. Normally, when prices go below the start of a cycle, it means the cycle is turning bearish. But prices made a new cycle high on Nov. 11 ($43.06) which could mean the cycle is negating that bearish signal. On the other hand, prices closed near $42 on that Nov. 11 date, and that could be seen as a "triple top" to $42 highs on Sept. 18 and Oct. 20, which would be very bearish. Until we get a clear directional trend in this market, we will remain on the sidelines.

Trading Blog Wednesday (late night), November 11, 2020

11/11/2020

BROAD STOCK MARKET UPDATE (11:00 pm EST)

As I mentioned yesterday, it looks like the DOW and S&P 500 started new medium-term cycles on Oct. 30 (the DOW at 26,143 and the S&P 500 at 3,234). It is very early in these cycles, and most cycles are bullish in their early stage. Both indices are demonstrating this as they have rallied steeply from their respective lows to make new all-time highs already. BUT - yes, there is often a "but" to temper our enthusiasm in any one direction - we are now inside a strong reversal zone (Nov. 5 - 19) that could have "pivot points" around Nov. 9 and/or Nov. 16. That means that despite this market's bullish momentum, we should be watching for a top and some sort of correction (and maybe even a subsequent bottom and reversal back up) around either one (or both) of these "pivot' dates. We are already seeing a sharp dip from Monday's (Nov. 9) all-time highs, and we will now watch to see if this follows through to a deeper correction.

Because both the DOW and S&P 500 have made new all-time highs so quickly, it is likely that the trend of these cycles will be bullish, and they will make newer highs soon. In that scenario, we would want to buy any modest dips now. If the DOW can get down to the 27,650 area and the S&P 500 to the 3,375 area and stabilize, we may consider going long. But if this market wants to push higher this week or even into next week (esp. Monday - Nov. 16), we may have to wait a bit longer for a corrective low to buy.

The NASDAQ 100 (E -Mini, Dec. contract chart) is also a young medium-term cycle that started with a low of 10,656 on Sept. 21. This index took its first significant sub-cycle corrective dip on Nov. 2. It bounced back up from there, but it could now take another significant and steep correction from a high in our new reversal zone. It's possible that high already happened on Monday. If it can drop down to the 11,450 level, we may consider buying; however, as with the DOW and S&P 500, if this market rallies some more, we may see Monday's high exceeded this week or next before a subsequent correction unfolds. If the NASDAQ 100 makes a new all-time high (it did NOT do that on Monday as the other two indices did), it would be an even more bullish sign and a signal to wait for a significant corrective dip to buy. For now, we will remain on the sidelines of the broad stock market.

Although equity markets are looking bullish here, we shouldn't forget that we are still anticipating a VERY significant correction in the broad stock market (maybe 30-50% or even more) that will likely commence from the final tops in these new medium-term cycles that have just started in all three indices (DOW, S&P 500, NASDAQ). This market is very overbought (a bubble looking for a pin) right now, and any dramatic political or geopolitical event could theoretically trigger this big sell-off. Nevertheless, we COULD see a significant rally (even a strong "blow-off" rally) before such a large sell-off. This is why we are considering long positions on current corrective dips. I don't think the big sell-off is here yet, but the NASDAQ will have to make a new all-time high fairly soon for us to discount that possibility. The final outcome of our very heated presidential election could be a significant factor in determining whether we have a "blow-off" or "sell-off" (or both). We are truly living in volatile political, social, and financial times.

Trading Blog Tuesday (late night), November 10, 2020

11/10/2020

BRIEF UPDATE ON THE BROAD STOCK MARKET (11;30 pm EST)

I apologize for not posting over the last several days, but I've been dealing with some complications from some minor eye surgery that has made it difficult to spend extended time looking at a computer screen. I will post a general market update tomorrow, probably in the evening.

Of course, the election controversy rages on, as we expected, but surprisingly, it is not having a detrimental effect on equity markets (at least so far). The DOW and S&P 500 have been especially bullish since election day, and it looks like we can finally say that both indices started new medium-term cycles with their lows on Oct. 30. That means it is very early in their new cycles. The fact that both indices have already made new all-time highs (on Monday) suggests that these two new cycles are bullish. The NASDAQ (NASDAQ 100 E-Mini, Dec. contract chart) is also a relatively young medium-term cycle that started with a low on Sept. 21. The NASDAQ 100, however, did NOT make a new all-time high on Monday, so we now have case of intermarket bearish divergence with the DOW and S&P 500. This is happening in a strong reversal zone so we may see a significant correction now. I will discuss this more tomorrow.

We are still out of all markets.

Trading Blog Thursday, November 5, 2020

11/5/2020

UPDATE ON BROAD STOCK MARKET INDICES (9:00 pm EST)

While the medium-term cycle labeling is still not perfectly clear in the DOW and S&P 500, it's possible that both may be completing older cycles now. In fact, the DOW may have completed its cycle with last Friday's low at 26,144, and the S&P 500 with its low at 3,234. The only problem is that last Friday was not in a reversal zone. It would be much better to see those final cycle lows in our new reversal zone (Nov. 5 - 19) That could happen if these indices fall back to make a double bottom formation over the next two weeks. We will watch for that as a possible spot to buy, but if this rally continues to push higher, we may not get that opportunity. We may instead wait for the final top in the new cycle to sell short. That final top may come before the end of the year. For now, we stay on the sidelines as we wait for the resolution of the presidential election results.

The NASDAQ (NASDAQ 100 E-Mini, December contract chart) is a relatively young (new) medium-term cycle that began with the low of 10,656 on Sept. 21. Monday's low at 10,942 may have been a significant sub-cycle low (or even a double bottom to the Sept. 21 low). Either way suggests that this current rally could be quite bullish. We may have to wait for the next sub-cycle dip to buy, but if this rally continues into next week, we may not have to wait long for it to top out in our reversal zone and take a significant correction down. As with the other two indices, it's best to be on the sidelines of this index now as the battle for the U.S. presidency continues.

Trading Blog Wednesday (late night), November 4, 2020

11/4/2020

MARKETS UPDATE (11:30 pm EST)

As we expected, it may take a little time to determine the clear winner in yesterday's presidential election due to the complexity of counting this years's many early and mail-in ballots. Once the final counts are in, however, there may be even more delays as President Trump is openly accusing the Democrats of voter fraud. Equity markets do not normally react well to this kind of uncertainty in something as important as a U.S. presidential election, but for some reason, the broad stock market rallied strongly yesterday and today. This bullish surge is puzzling many analysts at the moment, but one explanation may be that Wall Street is somewhat relieved that the massive "blue wave" predicted by the mainstream media polls is not panning out. Even if Joe Biden wins, it will not be a landslide victory, and it looks like the Democrats will probably not take the Senate as they had hoped (and as the media pundits had predicted). In addition, Republicans gained seats in the House (contradicting most media predictions of double-digit seat losses).

Because of this delay in the resolution of the election, the market is very volatile now, and we cannot attach much significance to this two day rally. We are about to enter a strong reversal zone Nov. 5 - 19 which is actually an overlap of two reversal zones (Nov. 5 - 13 and Nov. 11 - 19) with strong potential "pivot points" around Nov. 10 and Nov. 16. We could get a strong market reversal (or more than one reversal) in this time frame. I will analyze the DOW, S&P 500, and NASDAQ indices in more detail tomorrow. We are still on the sidelines of this market.

Gold and silver prices are still flat. We will wait to see if they can move lower into this next reversal zone for a possible spot to buy.

In my blog on crude oil last week (Oct. 27) I wrote:

"Although crude is in a new medium-term cycle that started with the double bottom lows of Sept. 8 and Oct. 2 at $37 (Dec. contract chart), it may have peaked early with last week's high of $41.90 (or even the Sept.18 high of $42.02) and could be turning bearish. If prices start to fall below $37, that bearish scenario will be confirmed, and we may have to switch to a short-selling trade strategy."

It looks like this is happening as prices dropped to $33.64 on Monday. If this market is turning bearish, that does not bode well for the broad stock market. Any rally into our next reversal zone that fails to exceed $42 may give us a good opportunity to sell short. We are out of this market for now.

Trading Blog Monday, November 2, 2020

11/2/2020

BRIEF UPDATE (11:30 am EST)

I have been posting infrequently recently because of some minor eye surgery that should be resolved by the middle of this week. My last posts on the broad stock market, precious metals, and crude oil are still valid. I will refrain from any further analysis until we see how the markets react to the results of tomorrow's presidential election. Of course, this is a very heated election, and a final declared winner may not happen tomorrow night. I will be posting something on Wednesday. We are out of all markets at this time, which is probably the best place to be during this election process.

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