In my last post on the broad stock market (Dec. 15) I wrote:
"...if the S&P 500 and NASDAQ push to new highs this week, that bearish signal will be negated, and we may have to look for a top in our next reversal zone coming up Dec. 22 - 30. This current medium-term cycle seems bullish, so I wouldn't be surprised to see more rallying into next week."
All three market indices (DOW, S&P 500, NASDAQ) did indeed push higher that week, and all three closed that week with new all-time highs. Last week, however, only the NASDAQ made a new high into the the Christmas holiday. This gives us another intermarket bearish divergence signal, and it happened in our new reversal zone (Dec. 22 - Jan. 1). The top could be in and a significant correction about to begin - unless the markets push higher into this week's holiday (New Year's Eve and New Year's Day on Thursday and Friday). Markets are often bullish into holidays, so that is very possible. We will watch for another bearish divergence signal this week (or even early the following week).
Our trading strategy is that we are still waiting for a significant correction and a low to buy. Still on the sidelines of this market.
In my Dec. 15 post on the precious metals I wrote:
"If we see rallying into next week's reversal zone, we will watch for silver to break above its Nov. 9 high ($25.96) with gold staying below its Nov. 9 high ($1965) for a case of intermarket bearish divergence and a possible spot to sell short."
Well, we did see rallying into last Monday (Dec. 21) with gold staying below its Nov. 9 high and silver breaking above it; however, Dec. 21 was technically outside our reversal zone. A sharp price drop followed those highs but did not go very far, and today prices are shooting up again. We will watch for another case of bearish divergence early this week.
We established earlier this month that gold's current median-term cycle has probably turned bearish, but that silver's cycle could be bullish. If gold prices do start to rise above $1965, we may have to give up that bearish view of gold. We are still on the sidelines of both metals.
Crude oil made a temporary top on Dec. 28 at $49.43 (February contract chart), but it was not in any reversal zone. A minor 3-day corrective dip followed and prices are edging up again. That dip did not get near our ideal corrective target area of $41 - $43. That could mean this market is very bullish and will bypass a normal sub-cycle correction, but this week is still within our new reversal zone (Dec. 22 - extended now to Jan.1). Any new high this week could also be a top. On the other hand, if prices drop into our target range, we could see a buy spot. We will stay on the sidelines for now.