Today the Federal Reserve hinted that it may slow down its pace of raising interest rates at it's final FOMC meeting in mid-December. This bit of "dovish" news from a Fed that has recently appeared to be rabidly hawkish seems to have given equity markets a boost today. After falling Monday and Tuesday, the broad stock market and all three of our major indices shot back up this afternoon. The DOW and S&P 500 were able to make new weekly highs; however, the NASDAQ did not. This sets up a bearish divergence signal, which makes me think this market could forget about this news in a day or two and resume its corrective decline. But if today's cheerful optimism sticks (it IS the holiday season), we might see our expected correction bypassed and a "Santa Claus rally" beginning. We enter another strong general reversal zone on Thursday (Dec. 1- 9). It's too early to tell if we will see a major low or high (or maybe both) in this time frame. My preference would be to see a significant low to buy, but if a "Santa Claus rally" is starting now, we may be looking at a high to sell short. We are staying on the sidelines of this volatile market for now.
Dovish rhetoric from the Fed usually depresses the U.S. dollar, and indeed, the U.S. Dollar Index fell sharply today after a two day rally. A lower dollar usually corresponds to a rise in the precious metals, and both gold and silver prices did shoot up today. Silver is making a new high for November in the evening market, while gold is not, so here too we have a case of intermarket bearish divergence as we approach the center of a reversal zone specifically for the precious metals (Nov. 28 - Dec. 8). We did not buy the recent corrective dips in these metals as they did not go low enough. Several short-term technical signals are still bearish in this market. Perhaps a more significant correction will follow a high in this reversal zone. We are still on the sidelines of gold and silver.
Crude oil made a new low on Monday ($73.60 - Jan. contract chart) that went below the Sept. 24 low of $74.26. Breaching that low was a bearish sign, and even though there has been some strong rallying since Monday, other bearish technical signals are persisting in this market, and this rally could turn back down soon. Monday's low was in the center of a reversal zone specifically for crude, but we are entering another strong GENERAL reversal zone on Thursday, and that could also influence crude and become the time frame for a significant top and reversal back down. This market is too unclear to call right now, so we will remain on the sidelines.