The broad stock market gave us a traditional "Santa Claus" rally into the this week's Christmas holiday, and it may continue into next week's New Year's celebration as well (although a sell-off is possible before Jan.1st to accommodate tax strategies). As I have mentioned in recent blogs, I am looking for this market to top out soon and take a significant correction. There are many technical, cycle and timing signals that point to a likely reversal in the broad stock market by the second week of January. If this happens, I will look for momentum changes to confirm the reversal and then possibly sell the market short. On the sidelines for now.
Crude oil has also been rising this week and today prices broke through and closed just above the $100 level. If prices continue to rise into the second week of January (and stay below $105), we may see an ideal set-up to short sell this market. Current directional momentum in crude is still mixed bullish and bearish, so the appearance of any new bearish technical signals now could indicate an imminent correction. We will watch for this over the next two weeks. Still out of this market.
Gold and silver prices have been rising this week. This is in line with a reversal zone for gold that was centered on the 21st of December, however, another strong zone for a reversal is centered around Jan. 4, so this rally may not get very far before prices turn down again. Directional momentum in the entire precious metals sector is still strongly bearish so prices could still move down next week and make a new low. Ideally, I would like to see gold enter the $1150 - $1180 area before covering short positions and going long. Still holding short positions in both gold and silver.