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Trading Blog Sunday (late night), December 27, 2020

12/27/2020

MARKETS UPDATE (11:30 pm EST)

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.

Happy Holidays Friday, December 25, 2020

12/25/2020

A MERRY CHRISTMAS TO ALL READERS OF THE BLOG!

I will post a market update over the week-end.

Trading Blog Wednesday, December 16, 2020

12/16/2020

UPDATES on CRUDE OIL and the U.S. DOLLAR INDEX (7:00 pm EST)

It looks like crude oil prices did not want to top out in our last reversal zone and are edging higher today (close to $48 - Jan. contract chart). Let's watch for a top in our next reversal zone (Dec. 22 - 30). If that top stays under $49, we will watch for a sub-cylcle correction to our original target area ($41 - $43) for a possible spot to buy. We may even first sell short at the top if the technical situation looks favorable next week. We are still on the sidelines of crude oil.

The U.S. Dollar Index seems to be near the end of its medium-term cycle. That means it could bottom at any time and start a a new cycle with a significant rally (new cycles always start off bullish). This is supporting our idea that the precious metals (esp. gold) are getting ready to turn down for a significant correction. Next week's reversal zone would be a good time for a bottom so we will watch for it then.

Trading Blog Tuesday, December 15, 2020

12/15/2020

UPDATES on the BROAD STOCK MARKET and PRECIOUS METALS (11:30 pm EST)

We have been watching for a significant sub-cycle correction in all three broad stock market indices (DOW, S&P 500, NASDAQ), but so far that hasn't happened. Yesterday was the last day of our reversal zone (Dec.3 - 14). The DOW made a new weekly and all-time high yesterday, but the other two indices did not (although the NASDAQ came very close to a new high today). That gives us a bearish divergence signal in a reversal zone. If that was a top, we could see a significant correction start now. But 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. Our targets for a correction are still around 29,000 and 3,545 for the DOW and S&P 500, respectively, and around 11,500 for the NASDAQ 100 (E-Mini, March contract chart). However, we may raise those targets if this market rallies strongly into next week. We are still on the sidelines of the broad stock market.

In last Tuesday's blog on gold and silver I wrote:

"We've established that gold's medium-term cycle has turned bearish. That means that the current rally should not exceed the recent high of $1965 (Nov. 9) before turning down again and falling to a final bottom below $1766 four to ten weeks from now. But silver's medium-term cycle COULD be bullish. If that's the case, silver's current rally could easily exceed its Nov. 9 high of $25.96 before its final corrective drop to its cycle bottom (two to ten weeks from now). Silver exceeding its Nov. 9 high and gold staying below its Nov. 9 high would be an ideal bearish divergence signal and could be a good opportunity to sell the metals short, if it happens."

Well, both metals are still well bellow their Nov. 9 highs. Last Tuesday was an isolated high in both gold and silver and was in the center of our last reversal zone. Prices corrected down a bit from there last week, but are rising again this week. 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. Staying on the sidelines of both metals for now.

Trading Blog Thursday, December 10, 2020

12/10/2020

UPDATE ON CRUDE OIL (8:00 pm EST)

Crude oil started a new medium-term cycle with its low of $34.04 on Nov. 2 (January contract chart). Prices rallied to a new high today above $47. That is exceeding the high of the last medium-term cycle ($44.60) and likely means this cycle is bullish. Today's high is in the center of our current reversal zone (Dec. 3 - 14) so a top and reversal could be imminent. We may want to buy the low of this first sub-cycle correction for a short-term rally back up. A good target range for a corrective low now would be around $41- $43. We will watch for that.

Despite being short-term bullish, crude oil's longer-term picture is looking quite bearish. Longer-term, crude oil most likely started a new 18 year cycle in February 2016, which means it is very early in this new cycle. Early cycle phases are usually bullish, but this one may be turning bearish as its first sub-cycle peak seems to be "rolling over" at a level considerably below the peak of the last 18 year cycle (which was around $140). Crude's dramatic price plunge below zero in April this year was another bearish sign. Unless something causes crude prices to take off in the first half of next year (e.g. geopolitical instability in the Middle East), it looks like crude could be in a long-term downtrend over the next decade. If this turns out to be true, our trading strategy will focus more on short-selling than buying.

On the sidelines of crude oil for now.

Trading Blog Tuesday (late night), December 8, 2020

12/8/2020

IMPORTANT UPDATE on GOLD and SILVER (10:30 pm EST)

It still looks as if the current medium-term cycles in both gold and silver started on Sept. 24 (at $1849 in gold and $21.75 in silver). On Nov. 24, I wrote:

"Gold has fallen below its Sept. 24 low which means gold's cycle has turned bearish. Silver, however, is still above its Sept. 24 low and could still be bullish. We thus have a bullish divergence signal as we enter our new reversal zone (Nov. 24 - Dec. 1). This means we should be watching for some sort of bottom this week or early next week."

Both metals did fall to new lows and a bottom on Nov. 30 - gold to $1766 and silver to $21.90 - and prices have been rising sharply from there. Note that silver's new low did not go below its Sept. 24 low ($21.75), which was a bullish divergence signal to gold as the yellow metal pushed well below its Sept. 24 low of $1849.

OK. We've established that gold's medium-term cycle has turned bearish. That means that the current rally should not exceed the recent high of $1965 (Nov. 9) before turning down again and falling to a final bottom below $1766 four to ten weeks from now. But silver's medium-term cycle COULD be bullish. If that's the case, silver's current rally could easily exceed its Nov. 9 high of $25.96 before its final corrective drop to its cycle bottom (two to ten weeks from now). Silver exceeding its Nov. 9 high and gold staying below its Nov. 9 high would be an ideal bearish divergence signal and could be a good opportunity to sell the metals short, if it happens.

There is a SLIGHT chance that gold began a new medium-term cycle with last week's low ($1766 on Nov. 30). If it did, it would mean that gold is very bullish and could easily rally now to break that $1965 Nov. 9 high. Silver would more than likely also rally strongly in that situation. For now, I am betting on a more bearish scenario, but if gold breaks that $1965 high, I will have to change my view.

Longer-term, we are still anticipating the FINAL top in the 23 YEAR cycle in gold that began in 1999 (see Home Page gold updates). That top is due ANYTIME now, and it may have already happened with gold's August high at $2070. The question now is whether or not gold (with silver) will have a "blow-off" top above $2070 before turning down for its final steep and deep correction to the 23 year cycle bottom. That final 23 year bottom is due around 2023-2024 and could be quite low depending on the height of the final top (a "blow-off" top could also go quite high).

The reader can appreciate from all this that gold is tricky to call right now. While we want to have a short position when gold takes its final long-term correction down to its 23 year cycle bottom, we don't want to be caught in our "shorts" (pun intended) if gold has a "blow-off" rally. We may thus do short-term trading until we can be more certain that the final 23 year cycle top is in. And by the way, once the final 23 year cycle BOTTOM is in (circa 2023 - 2024), it will be a "golden opportunity" to buy for everyone. This will be especially true for long-term traders as it will be the start of a new 23 year cycle.

We are still on the sidelines of gold and silver for now.

Trading Blog Monday, December 7, 2020

12/7/2020

BRIEF UPDATE ON THE THE BROAD STOCK MARKET (11:30 pm EST)

Last week's lows in the DOW and S&P 500 did not reach our targets (29,000 and 3,545, respectively), and these indices are instead pushing higher into our new reversal zone (Dec. 3 - 14). At the end of last week, both indices were making new all-time highs (bullish behavior), and we should now be looking for a sub-cycle top instead of a bottom in this new reversal zone. If the broad stock market doesn't rally too strongly this week, we will still look for a corrective low in those target ranges from last week for a possible spot to buy for more rallying. The NASDAQ 100 (E-mini, Dec. contract chart) is also due for a sub-cycle correction. A good target here is still around 11,500, so we will keep watching for that. On the sidelines of the broad stock market.

Trading Blog Wednesday (late night), December 2, 2020

12/2/2020

BROAD STOCK MARKET UPDATE (11:30 pm EST)

In last Tuesday's blog on the broad stock market I wrote:

" Because. this is a holiday week (Thanksgiving in the U.S. on Thursday), I think there's a good chance the S&P 500 and NASDAQ will make new highs (equities are usually bullish into holidays), and we may have to look for another bearish divergence signal early next week."

All three indices did make new highs by Friday, but so far this week only the S&P 500 and NASDAQ are making new highs. We are therefore getting that intermarket bearish divergence signal this week. Last week's high in the DOW and Tuesday's highs in the S&P 500 and NASDAQ all fall within our last reversal zone (Nov. 24 - Dec. 1) so it looks like we are getting a reversal now from those tops. This could (should) be our first sub-cycle reversal in the young medium-term cycles of the DOW and S&P 500 that began with their lows on Oct. 30. If these cycles are bullish (they appear to be), a good target for a corrective low would be around 29,000 in the DOW and 3,545 in the S&P 500. If we see those targets this week or next (our next reversal zone is Dec. 3 - 14), we may consider going long for a possible rally to new all-time highs.

The NASDAQ 100's (E-mini, Dec. contract chart) current medium-term cycle began with its lows on Sept. 21 and Sept. 24 (double bottom) so its cycle is a little older than those of the DOW and S&P 500. Nevertheless, a significant sub-cycle correction could be happening here as well. A good target would be around 11,500, but this index could even get as low as 11,200. As with the other two indices, we will watch this range for a possible buy spot.

I should mention that any long position we might establish now would probably be a short-term trade as the FINAL tops to these medium-term cycles will likely be followed by a very severe correction (which we will want to sell short).

On the sidelines of the broad stock market for now.

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