Blog Archives

Trading Blog Monday (evening), November, 25, 2024

11/25/2024

MARKETS UPDATE (9:00 pm EST)

I entered a long position in the DOW last Monday (at 43,431), and after making a small dip on Tuesday, this index has soared up to 44,815 today - a new all-time high. This market continues to look bullish, and our next strong reversal zone starts next Tuesday. Let's see if this rally can continue into that time frame. The S&P 500 also made a new all-time high today, but the NASDAQ remained below it's all-time high from Nov. 11. This gives us a bearish divergence signal, but we are not inside any reversal zone. If the market does reverse down from here, we will consider selling our long DOW position if it goes too low. Otherwise, I am staying long in the broad stock market for now.

Both gold and silver rallied strongly last week, but today both metals dropped sharply and silver lost most of its gains. The labeling of gold's medium-term cycle is still unclear at the moment. Silver's medium-term cycle is more clearly defined, and the final bottom of this cycle is now due. I thought the low at $29.73 on Nov. 14 was it, but we may be getting a deeper low or perhaps a double-bottom to Nov. 14 this week. There is still strong support around $30, but if that breaks, I may consider selling my long position in silver. For now, I am staying long. We are still on the sidelines of gold.

Like the precious metals, crude oil rallied strongly last week and got above its 15-day and 45-day moving averages, but today prices plunged and are now back below those averages. That's a bearish sign. The current medium-term cycle in crude began with the low of $63.88 (Jan. contract chart) on Sept. 10, but we're still not sure if this cycle's trend is bullish or bearish, although it's starting to look bearish. It's also possible there's a longer-term 2-year cycle in crude that is due to bottom by early December. If that happens, we could see prices moving lower now - below $63.88 - into the upcoming strong reversal zone Dec. 3 - 12. I am staying on the sidelines of crude until these cycles are more clearly defined. If we do get a 2-year bottom in the upcoming reversal zone, it may be a good spot to buy.

Trading Blog Monday (evening), November 18, 2024

11/18/2024

BROAD STOCK MARKET TRADE ALERT and CRUDE OIL UPDATE (7:30 pm EST)

The broad stock market's medium-term cycle labeling is unclear at the moment. It's still possible that the DOW and S&P 500 started new cycles with their lows on Nov. 4, but it seems more likely that the old medium-term cycles are still in place and due to bottom soon. If that's the case, then they could either sell-off now and continue to their final bottoms over the 1 - 4 weeks or they could rally to new highs and then sell-off for the final corrective drop. A rally now seems more likely (especially if these are new cycles) because both indices are falling steeply into the current reversal zone that ends on Wednesday. Also, Wall Street seems to be in a state of "Trumphoria" (as it was after Trump's election in 2016), so the odds of a sell-off in this reversal zone seem low. The target for a rally now could be as high as 46,800.

The next general reversal zone (a strong one) is coming up Dec. 3 - 12. That could end up being the final top (likely)or final bottom to these medium-term cycles depending on which of the above scenarios plays out. The current reversal zone ends Wednesday, and all three broad stock market indices are now near strong support lines. This looks like a good place to buy. I am going to place a buy order for tomorrow's market open now. I am going to buy the DOW (index fund) as it seems to have the greatest potential profit if the market rallies now. I am placing an initial stop loss for this trade on a weekly close below 42,600.

It is still not clear if crude oil's short-term direction is bullish or bearish, but it is starting to look more like the latter. Crude started a new medium-term cycle with its low of $64.16 (Dec. contract chart) on Sept. 10. It then rose to a peak of $77.70 on Oct. 8 and fell to its first sub-cycle bottom on Oct. 29 at $66.72. Prices rose from there and are now falling to a second sub-cycle low that today slightly breached the first one ($66.61). Unless prices start rallying strongly from here, they could be headed lower to turn the cycle trend bearish. That could happen because it is possible we are nearing the end of a longer-term (2-year) cycle in crude that could bottom as early as December. If that's the case, the end of the current medium-term cycle and that 2-year cycle would converge with a simultaneous bottom. If that happens, it will be a good spot to buy. For now, we will stay on the sidelines of crude oil.

Trading Blog Thursday (night), November 14, 2024

11/14/2024

BROAD STOCK MARKET and GOLD UPDATE and SILVER TRADE ALERT (11:30 pm EST)

Financial markets have now had about a week to process Donald Trump's election win, and the one market that seems to be cheering this the most is the U.S. Dollar Index. It seems the prospect of a four year Trump Administration has boosted faith in U.S. currency. The greenback was slumping to a low of 103.37 on Nov. 5; but it shot straight up the day after the election, and today it hit 107 - a new high for the year. The broad stock market also surged to new all-time highs last week following the election, although this week equities seem to be taking a small breather near strong resistance lines. But is all this bullishness "irrational exuberance" or is it justifiable rational exuberance? The answer might depend on one's political views. Rational or not, the question is how long will this bullishness last, and to answer that question, we look mostly at cycle patterns.

My view for some time has been that equity markets are likely to make new highs into the first half of 2025, but at some point, several longer-term cycles would come to a peak leading to a steep correction (16% - 26%) due by August at the latest. Longer-term cycle corrections are sometimes preceded by steep, parabolic rises, so it may be worth buying at the bottom of any significant corrections in the broad stock market now to ride any potential rallies into the new year.

It is still not certain if last week's lows in the DOW and S&P 500 were the final bottoms of their medium-term cycles and the start of new ones. We like to see a 2-5 week decline from a crest to the final bottom of a medium-term cycle, and last week's lows qualify for these two indices (but not for the NASDAQ which made its low the week before with only a one day decline). If the DOW and S&P 500 have started new cycles, they should be very bullish now. But if they are still older medium-term cycles, they are due for another 2-5 week correction down. Since we've just entered another fairly strong general reversal zone (Nov. 13 - 20), we could see either a significant bottom by next Wednesday (a possible buy spot) or another all-time high in any or all three indices. We will remain on the sidelines for now to see how this plays out.

Not surprisingly, with the election results boosting the U.S. dollar, gold and silver prices have been falling. Anyone reading this blog knows we were anticipating a sharp correction in both metals, and we're getting it now. Because we are now near the center of a reversal zone specifically for the precious metals, we should be looking for good spots to buy. Silver has arrived at a good target for a bottom at a support line near $30. I am going to put in an order to buy silver at tomorrow's market open now. Traders may also buy silver tomorrow as long as it doesn't break and close too far below $30. Gold prices could drop further but may find a support line at $2500. Let's stay on the sidelines of gold for now.

Trading Blog Thursday (evening), November 7, 2024

11/7/2024

MARKETS UPDATE and COMMENT ON THE ELECTION (10:00 pm EST)

It's official. Donald Trump will now become the 47th president of the United States. Wall Street was very pleased with this news and demonstrated its approval with a massive equity rally on Wednesday (the DOW rose over 1,500 points). The DOW took a little breather today, but the S&P 500 and NASDAQ added even more gains following yesterday's surge. All three indices are now in record all-time high territory.

Although overshadowed by the election, today was the end of this month's FOMC meeting, but the election didn't seem to alter the Fed's policy path. The Fed cut interest rates by another quarter-point, but Fed Chairman Jerome Powell reiterated that there's a fair amount of economic uncertainty in the path going ahead. He did not rule out the possibility of an interest rate increase next year, but he also stated that "that's certainly not our plan." Powell's cautious tone did not seem to damper the dovish effect of another rate cut combined with a Trump election victory, and equity markets remain buoyed into today's closing bell.

Of course, many people were NOT pleased with the election results, and although Harris was cordial in acknowledging defeat in her concession speech and expressing a desire for a peaceful transition of power, she also encouraged her supporters to not give up their principles and to continue to fight for what they believed to be good for the country. It's too early to determine all the repercussions from this election, especially since Trump will not officially take office until Jan. 20, 2025. The Republican takeover of the Senate would now seem to rule out any plans the Democrats had for attempting to disqualify Trump's win based on "insurrection" charges, but strong discontent over his win by a large segment of the population is already underway, and a lot could happen over the next two months. My main point here is that we should be very cautious in our trading into the start of the new year as all markets could be volatile.

I've mentioned in recent blogs that we might be looking to buy at the final bottoms of our current medium-term cycles in the DOW, S&P 500 and NASDAQ. There's a small possibility that Monday's lows in the DOW and S&P 500 could be the end of their medium-term cycles and start of new ones (last week's low in the NASDAQ was a bit too early for a new cycle). If so, these indices could be quite bullish now. But if these medium-term cycles are still old, a sharp correction down could be just around the corner. We will remain on the sidelines of the broad stock market for now.

Trump's election also seemed to encourage faith in the U.S. dollar as the greenback broke out of a six day down streak and soared back up to close above 105 in the U.S. Dollar Index on Wednesday. Today's dovish Fed news brought it back down a bit, but it remains close to last week's high at 104.64.

A surging dollar usually pushes down gold and silver prices, and that's what happened yesterday and today as both metals plummeted and tested their 45-day moving averages. We are looking for at least a medium-term cycle bottom in both indices soon, but I don't feel comfortable calling that yet. Let's stay on the sidelines of these metals for now.

Crude oil seemed unaffected by the election and seems to be stabilizing at a resistance level just under $72 (Dec. contract chart). Let's stay on the sidelines of this market until we see how the Middle East responds to the Trump election over the next several days.

Trading Blog Monday (night), November 4, 2024

11/4/2024

MARKETS UPDATE (11:00 pm EST)

Here we are - the day before the U.S. presidential election - and I am very happy to be on the sidelines of every market. Why? Because most markets, and especially equity markets, do not like uncertainty, and this election will probably be one of the most hotly contested presidential elections in U.S. history, regardless of which side wins. There is therefore the possibility of a lot of market volatility all this week, and perhaps even longer if the determination of the election winner is delayed and becomes mired in violent protests and complex legal proceedings. If things do get ugly, there is always the possibility of a major equity sell-off, especially considering the fact that the broad stock market is quite overbought now and could be described as a bubble ready to pop.

All three of our broad stock market indices (DOW, S&P 500, NASDAQ) have already been falling and are due to make significant sub-cycle bottoms. A bottom in the DOW and S&P 500 could be imminent, but the NASDAQ looks like it could go a bit lower before bottoming. Both the DOW and S&P 500 made new weekly lows today, but the NASDAQ did not. This bullish divergence could be setting the stage for a rally, assuming the election doesn't trigger a major sell-off. It is getting late in the medium-term cycles of all three indices, so we may just wait until the end of the current cycles before we consider trading this market. We will stay on the sidelines of this market for now.

Gold and silver prices have also been taking a dip down, but this has been from recent record highs - last week's isolated all-time high in gold at $2790 and silver's new 11 year high the previous week at $34.85. Those new highs on different weeks gives us a bearish divergence signal which suggests lower prices could be imminent. But this week's potential volatility could also lead to new highs before any serious correction. We are expecting a final medium-term cycle bottom in silver soon, so we will watch for that as a possible spot to buy. Gold's medium-term cycle is less clear, but unless a new cycle began with the low of $2606 on Oct. 10 (that would be bullish), we could also see a sharp correction in gold soon. Let's remain on the sidelines of both metals for now.

Crude oil prices rallied strongly from last week's low of $66.72, and today prices closed above both the 15-day and 45-day moving averages. This suggests crude's trend is turning bullish again. Nevertheless, we still need a stronger confirmation of this. That and this week's presidential election is enough to keep me out of this market for now.

Trading Blog Monday (evening), November, 25, 2024

Trading Blog Monday (evening), November 18, 2024

Trading Blog Thursday (night), November 14, 2024

Trading Blog Thursday (evening), November 7, 2024

Trading Blog Monday (night), November 4, 2024

Archives

LEGAL and DISCLAIMER