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Trading Blog Tuesday, December 31, 2019

12/31/2019

BRIEF COMMENT ON THE UPCOMING NEW YEAR

2020 will be a pivotal year for many (if not all) financial markets due to the culmination of several long-term market cycles. I strongly encourage all readers to watch this blog carefully in this new year. We are anticipating a very significant top in the broad stock market (probably mid-year, but possibly sooner) to be followed by a very severe correction. Gold and silver prices are also set to make significant moves (both up and possibly down) this year. It will be an especially wild ride because of the upcoming U.S. presidential election and the volatile emotional clashing of the Democrat and Republican parties, the likes of which I have never seen in my lifetime (I am in my early 60s). But not to fear. We have the powerful tools of cycle and technical studies to help us navigate any financial storms (there could be several this year). The upside to all of this is that if our navigation is good (I promise it will be), we will find unusual opportunities for large profits in our trading.

WISHING ALL BLOG READERS A HAPPY AND PROSPEROUS NEW YEAR !

Trading Blog Monday, December 30, 2019

12/30/2019

MARKETS UPDATE (5:30 pm EST)

All three broad stock market indices (DOW, S&P 500, NASDAQ) made new record highs last Friday fulfilling our "Santa Claus" rally speculation earlier this month. But can the bullish holiday spirit carry into New Year's Day (Wednesday)? Today's bearish drop in equities is suggesting that answer is no, but we can't be certain. We leave our current reversal zone today, but there is another stronger one coming up next week (Jan. 7 - 16). If this market doesn't roll over now, it's possible it could edge higher into that time window for a final top. If equities do roll over here (from Friday's highs), we may instead see a final cycle bottom in that same time frame (that would be an excellent buy spot). We usually like to see bearish divergence (one or two but not all three indices make a new high) at a significant top, but we didn't get that last week which is why I'm questioning Friday's top. Let's stay on the sidelines for now. Our current trading goal is to buy the final corrective bottom of the current medium-term cycle which is due any time now. We are expecting this market to stay bullish into the early part of this new year.

Gold prices made a new weekly high today while silver prices did not for a case of bearish divergence in the precious metals market. We have been waiting for some sort of pullback in gold and silver to buy, and because today is still in a reversal zone, it could start now. If it doesn't (and silver makes a new high this week) we may have to wait for that Jan. 7 - 16 time frame for a final top and then a reversal. The general picture for both gold and silver is quite bullish right now so we are looking to go long soon. Still on the sidelines of this market.

Crude oil today also pushed up to a new weekly high ($62.34 - Feb. contract chart). Our target for a top is in the $61 - $63 range so today's high could be it. Let's wait for a corrective dip and see how low it goes. We will probably be looking to buy the bottom of that dip which is due any time over the next few weeks. On the sidelines of crude oil for now.

Trading Blog Wednesday, December 25, 2019

12/25/2019

BRIEF UPDATE and MERRY CHRISTMAS (3:00 pm EST)

The broad stock market may be peaking now and about to take a corrective dip. The highs in the DOW and S&P 500 on Monday (and NASDAQ on Tuesday) could be the top or these indices could edge higher tomorrow, Friday, or even into early next week. We are now out of our long position and may consider shorting the market over the next several trading days; if not, we will just wait for a corrective bottom to buy.

Gold and silver appear to be "breaking out" as prices surged up Monday and Tuesday. Even so, there is still the possibility of a corrective dip soon which could give us a chance to go long in both metals.

WISHING A MERRY CHRISTMAS TO ALL READERS OF THE BLOG!

Trading Blog Monday, Dec. 23, 2019

12/23/2019

BROAD STOCK MARKET TRADE ALERT (3:30 pm EST)

Today the S&P 500 and NASDAQ are both making new weekly all-time highs as the DOW remains just below its high from last week (at 3:30 pm EST). This is a bearish divergence signal, and we are now in a new reversal zone (Dec. 20 - 31). Of course, the DOW could break to a new high tomorrow (or later in the week) and negate this bearish signal, but even if it does that, this is a holiday week (Christmas on Wednesday and New Year's Day the following week) and trading will probably be light. We also would expect a top to be completed by early next week (over the next 5 trading days). For these reasons, I am going to take profits and sell my long position in the broad stock market today (we entered this position on Dec. 12). Traders who don't sell today should probably be out by Tuesday next week.

Trading Blog Friday, December 20, 2019

12/20/2019

BRIEF COMMENT ON THE BROAD STOCK MARKET (2:30 pm EST)

As I suspected/expected, it looks like the broad stock market is shrugging off the Democrat's impeachment of President Trump as all three major indices (DOW, S&P 500, NASDAQ) leap to new all-time highs today. We are "breaking out" of our previous reversal zone (instead of reversing) and now moving into our next one (Dec. 20 - 30). This means we should still be on the lookout for a top and subsequent correction. One sign of that would be intermarket bearish divergence where one or two, but not all three indices make new highs. We will watch for that next week or even the following week to cover our long position and possibly sell short. We are currently long in the broad stock market.

Trading Blog Monday, December 16, 2019

12/16/2019

MARKETS UPDATE (3:30 pm EST)

All three broad stock market indices (DOW, S&P 500, NASDAQ) have just turned 100% bullish in their directional momentum, and today they are all making new all-time highs. This is very bullish, but we need to note that we are now in the middle of a strong reversal zone (Dec. 6 - 18). This means it is possible for us to see a top by Wednesday and a reversal back down. However, in strongly bullish markets we sometimes get a "break-out" instead of a reversal, and this could be happening now, especially if optimism about the new U.S/China trade deal announced last week remains high. In fact, technical and cycle studies could support a "Santa Claus" rally into the end of the year. If that happens, we could see the DOW get to 28,800 or possibly even 29,700. Let's stay long in our broad stock market position for now but watch this market carefully for any signs of a top and possible reversal and be ready to sell our position if necessary.

It is starting to look like gold started a new medium-term cycle with its low of $1446 on Nov. 12, but it's still not clear if the cycle is bullish or bearish. Either way, we are in the middle of a reversal zone for precious metals (Dec. 4 - 18, same as for the broad stock market) so we could see a top this week (if it didn't happen last Thursday at $1486) and the start of a correction down. COT (Commitment of Traders) charts for both gold and silver are suggesting lower prices which also makes me think a correction is imminent. There is still the possibility of gold dropping to the $1420 area (maybe even as low as $1360). Silver has been rallying from a significant low it made last week at $16.53. It could rally some more this week, but we are in that reversal zone though Wednesday so a top could be imminent. If that top doesn't get too high, we could see silver prices going back down to $16.25 and maybe even $15.75.

Despite this short-term bearish view of gold and silver, I should say that both metals seem to be setting up for a major longer-term rally very soon. If gold and silver do correct down to those levels mentioned above then that would be a very good buy spot for what could be a very significant rally. If gold and/or silver bypass this corrective drop, and especially if gold prices break above $1490, that significant rally may already be underway. Let's wait to see if prices correct down some more. Still on the sidelines of both metals, but looking to go long soon.

Crude oil formed a sub-cycle bottom on Nov. 20 at $54.85 and has been rallying strongly from there. Our target for this rally has been the $60 - $64 range. On Friday prices got to $60.48 (Jan. contract chart), and we are in a reversal zone specifically for crude (it ends tomorrow). Prices today are not exceeding Friday's high so we may be seeing a top and reversal now. But as with the broad stock market, it's possible for crude prices to push higher into the end of this month before topping and then correcting down. Ether way, let's wait for a corrective drop to buy (as long as it doesn't go too low). Still on the sidelines of crude oil.

Trading Blog Saturday, December 14, 2019

12/13/2019

Ooops! I wrote this update on Friday around 3 PM and intended to post it, but didn't. Here it is with some minor adjustments:

COMMENT ON THE BROAD STOCK MARKET and the U.S./CHINA TRADE DEAL (2:00 pm EST)

Early Friday morning news of a trade deal reached between China and the U.S. pushed the broad stock market up, but when details of the deal were released, the market backed down again and closed the day flat. Apparently some of the Trump Administration's original demands are being compromised even as tariffs on some Chinese goods are being reduced from 15% to 7.5%. It is difficult to tell just how "bad" the deal is as some "anti-Trump" news sources are putting a negative spin on it while "Trump friendly" sources are presenting a neutral or even optimistic slant on the deal. (As is my policy, I am not making a political statement here - just observing how polarized journalism has become in recent years. To use the X-Files slogan: "The truth is out there". But it sure isn't easy to find in today's divisive political environment). There is also talk of a "second phase" in the deal to be worked out "later" which suggests that the Trump Administration is compromising its original demands at this point in time to deescalate trade tensions that are clearly impacting equity markets in a negative way. A collapse in the stock market would certainly compromise Mr. Trumps's chances for re-election in 2020.

Politics aside, our cycle and technical studies do allow for the possibility of a major stock market correction between now and next year's election so we will be watching carefully for this. The success or failure of a U.S./China trade deal could turn out to be a major factor determining if and when this correction will commence. For now, let's keep our eye on that 27,500 stop loss we established for our long position in the DOW in Thursday's trade alert.

Trading Blog Thursday, December 12, 2019

12/12/2019

BROAD STOCK MARKET TRADE ALERT (3:00 pm EST)

Yesterday the Fed left interest rates unchanged as expected, and the Fed's remarks following the interest rate announcement were ambiguous, but on the dovish side. It appears there are plans for only one interest rate increase for 2020, but of course, those plans could change according to how the economy performs as we move into the new year.

There are also indications today that U.S./China trade deal negotiations are going well and may even be settled by this Sunday. The broad stock market is responding favorably to this news today as all three market indices jumped to new all-time highs. The directional momentum of all three indices also turned 100% bullish today. For all of these reasons, I am going to enter a long position in the broad stock market now. For those trading index funds, I would suggest a DOW fund as the S&P 500 and NASDAQ have already gained more in their rally than the DOW. We can set our stop loss here on a close below 27,500 in the DOW.

We may see prices back down a bit tomorrow, but as long as they stay above 27,500, we will remain long. Any traders who don't buy today might use that as a good entry point tomorrow.

Trading Blog Tuesday, December 10, 2019

12/10/2019

UPDATE ON THE BROAD STOCK MARKET (4:15 pm EST)

We have three news events influencing the broad stock market this week. First and foremost are the U.S./China trade deal negotiations. New tariffs are set to be placed on Chinese goods Dec. 15 (this Sunday) unless a better trade deal can be worked out, but the Trump White House is also considering the possibility of delaying those tariffs. This uncertainty is keeping equity markets in limbo as investors and traders oscillate between trade deal optimism and pessimism.

The second news event possibly influencing markets is, of course, the ongoing impeachment trial being pushed forward by mostly Democrats in the U.S. Congress. So far, Wall Street seems to be shrugging off the impeachment, but that may change as it comes to a head over the next several weeks.

Finally, we have December's two day FOMC meeting this week that starts today and ends Wednesday afternoon. The Fed is expected to hold benchmark interest rates steady (especially considering the stellar November jobs report), but analysts will be scouring the Fed's rhetoric for a "dovish" or "hawkish" tone concerning future interest rate policy. Dovish "coos" could keep equity markets bullish, but hawkish language would likely push the market down.

Today the broad stock market continues to be indecisive. It dropped in the morning, rallied in the afternoon, and is now dropping again as the trading day closes. The S&P 500 did drop into our target range, but the DOW was a little short. Regardless, I don't feel comfortable trading before we get the Fed's interest rate announcement tomorrow afternoon. That, perhaps with more news on the China trade deal negotiations will determine the direction of this market. If the Fed talks "dovish" and there is positive news on the trade deal, it may be enough to kick-start a "Santa Claus" rally which is often seen on Wall Street at this time of year.

Trading Blog Monday, December 9, 2019

12/9/2019

MARKETS UPDATE (4:00 pm EST)

After rallying very strongly last week, the broad stock market backed down a bit today. Such a corrective dip after a strong rally is normal. It may even give us a good spot to go long if we think the rally will continue. If the DOW gets down into the 27,600 - 27,675 range and the S&P 500 in the 3,100- 3130 range, we may consider going long. If we do this, we're hoping all three indices (DOW, S&P 500, and NASDAQ) will then rally strongly and break to new highs. If only one or two (not all three) make new highs in this reversal zone (bearish divergence), we could be setting up for a reversal and significant correction down instead. Let's remain on the sidelines for now and see if prices can push down into those ranges and find support.

Gold's cycle pattern is very ambiguous right now and has several possible interpretations. If prices hold above the $1445 area, we could see more rallying soon, but if that level breaks, we might see prices push down to a $1420 support line. If that happens, it could be an ideal spot to buy. Silver's medium-term cycle is a little more clear. It likely began with a bottom on Oct. 1 at $16.93. Prices have since moved lower than that which means this cycle's trend has been bearish. Silver could fall into a new low in our current reversal zone this week. There is a support area this week for silver around $16.35 and another one around $15.75. As with gold, these may turn out to be good buying spots for silver. Let's remain on the sidelines for now and see if prices move lower this week.

Crude oil most likely formed a significant sub-cycle bottom on Nov. 20 at $54.85 (Jan. contract chart) where we missed a good buy spot. Prices are now rising up to a sub-cycle peak in the $60 - $64 range. Let's stay on the sidelines for now and see how high this rally goes.

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