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Trading Blog Friday, December 31, 2021

12/31/2021

BROAD MARKET TRADE ALERT (3:00 pm EST)

The NASDAQ has not made a new high today so our strong bearish divergence signal is persisting. I am going to sell this market short today. I am going to focus on the NASDAQ as it's chart currently is the most bearish. We can set a close stop loss on this trade based on the NASDAQ exceeding this week's high (15,902) next week (and especially if it makes a new all-time high - above 16,212). Entering a short position in the broad stock market (NASDAQ) today.

Trading Blog Thursday (evening), December 30, 2021

12/30/2021

IMPORTANT UPDATE ON THE BROAD STOCK MARKET (8:30 pm EST)

The DOW and S&P 500 both made new all-time highs today, but the NASDAQ continued to edge down as it remained below it's all-time high of 16,212 (from Nov. 22). All three indices fell dramatically at the end of the day and closed near the bottom of their respective day ranges. This is a strong bearish signal. It looks like our "Santa Claus" rally may not make it to the new year. Of course, we were expecting a peak sometime this week as our current reversal zone ends tomorrow. This looks like a good time to sell this market short for some sort of correction (and maybe the start of a big one). Unless this market gaps down severely tomorrow morning, let's look to sell it short early tomorrow. If it starts to rally again, we'll watch to see if the NASDAQ can make a new all-time high (not likely). If it can't, we will also be good to go for a short-sell. Bottom line here: Be prepared to possibly enter a short position in the broad stock market sometime tomorrow.

Trading Blog Monday, December 27, 2021

12/27/2021

BRIEF COMMENTS ON THE BROAD STOCK MARKET and PRECIOUS METALS (3:30 pm EST)

It seems like the "Santa Claus" rally in equities is continuing "full steam ahead" today as all three major indices (DOW, S&P 500, NASDAQ) are making new weekly highs. But only the S&P 500 is making a new ALL-TIME high, and this creates an intermarket bearish divergence signal (until the other two indices make new all-time highs - they are not far from doing this). We are now in the dead center of a strong reversal zone (Dec. 21 - 31), so a correction down from these highs could be imminent. Will the 'holiday spirit" carry this rally into the New Year's Day week-end? Maybe.
If it does, and if this bearish divergence persists into the end of the week, we may consider selling the market short. We will stay on the sidelines of the broad stock market for now.

Our bearish divergence signal between gold and silver from last week is remaining intact today as gold couldn't make a new monthly high and silver did. A correction could be imminent here because of the general reversal zone mentioned above. We'll stay on the sidelines of the precious metals for now.

Trading Blog Saturday, December 25, 2021

12/25/2021

MARKETS UPDATE (9:00 pm EST)

After a steep plunge in equities last Monday (Dec. 20), I wrote in my blog on the broad stock market:

"Unless this market can snap back strongly tomorrow, it looks like our chances for a "Santa Claus" rally are almost gone."

Well, the markets DID snap back on Tuesday and rose steeply into Thursday (Wall Street was closed on Friday). So despite a three trade-day tumble (Dec. 17 - 20), our "Santa Claus rally" seems to be back on track. But can it continue for another week into the New Year's Day holiday? That is a good question.

The markets closed last week with the S&P 500 and NASDAQ both making new weekly highs but the DOW unable to exceed its previous week's high. We thus have a bearish divergence signal right in the middle of our current strong reversal zone (Dec. 21 - 31). That bearish divergence signal will be even stronger if the S&P 500 makes a new all-time high next week (it is VERY close), without the DOW and NASDAQ (they are not as close to their all-time highs), and thus a correction down could be imminent. But the "holiday spirit" is still with us through Jan. 1, and this usually favors rallies in equities, or at least it tends to delay any serious sell-offs. If this market does edge up some more next week and the S&P 500 hits a new all-time high without one or both of the other two indices, we may have a very good opportunity to sell the market short. We will watch for that. We are still on the sidelines of the broad stock market.

Speaking of bearish divergences, last week gold fell just short of making a new weekly high while silver pushed well above its previous week's high. As with equities, this is happening in the center of a strong reversal zone. Although gold may have started a new medium-term cycle on Dec. 15 and is potentially very bullish, the possibility of an imminent correction in both metals will keep us on the sidelines for now.

In my Dec. 13 blog on crude oil I suggested two possible scenarios for crude:

"There are two possible scenarios for crude oil right now. One is bearish and the other could be very bullish.

The bearish scenario says that the deep low of $62.43 (Jan. contract chart) on Dec. 2 was a sub-cycle low near the end of an old medium-term cycle. This should be followed by a short and modest rally to a sub-cycle top and then a final plunge to the end of the medium-term cycle below $62.43.

But it is also possible that Dec. 2 low was the end of the old medium-term cycle and the start of a new one. Furthermore, it may also be the start of a new longer-term (17 month) cycle. If this is true, crude could be VERY bullish now with prices ready to surge above the $83.83 high of October 25."

Early last week as crude prices plummeted with the broad stock market, I thought the first (bearish) scenario was playing out. But with crude's recovery alongside equities, it seems like the second (bullish) scenario of a new medium-term cycle starting Dec. 2 is still possible. If prices can now close above $76, it would give more support to that idea. We will stay on the sidelines of crude until the cycle pattern is more clear.

Trading Blog Monday, December 20, 2021

12/20/2021

MARKETS UPDATE (8:30 pm EST)

The steep drop in the broad stock market on Friday was followed by another steep drop today. Unless this market can snap back strongly tomorrow, it looks like our chances for a "Santa Claus" rally are almost gone. Instead, we may be seeing a strong plunge into our next strong reversal zone (Dec. 21 - 31) and possibly the final bottom in the current medium-term cycles of all three indices (DOW, S&P 500, NASDAQ). Does this mean that the longer-term correction in equity markets that we have been discussing recently has already started? Very possibly - that is, if this market continues down tomorrow and into the end of the week. Some "lines in the sand" to watch now:

The DOW closing below 34,000, and especially below 33,613, would be very bearish.
The S&P 500 closing below 4,495, and especially below 4,278. would also be very bearish.
The NASDAQ is today already testing its Dec. 3 low of 14,931. If that breaks, the next support is down at 14,181, and if THAT breaks, the NASDAQ (and most likely the other two indices) will be well on their way to a longer-term serious correction.

If a major longer-term correction is starting now, we will most likely wait for the final medium-term cycle bottom (due soon) and short sell the top of a modest rally that follows from that significant bottom. We are still on the sidelines of this market.

Last week gold probably completed its medium-term cycle with Wednesday's low at $1759 while silver likely made a significant mid-sub-cycle low at $21.44 on that same day. Both metals have rallied from there, but they are facing a headwind as they rise into a reversal zone specifically for the precious metals Dec. 14 - 22. We are also entering a general reversal zone for all markets (Dec. 21 - 31). I am not keen to buy if a top forms inside these reversal zones, so let's stay on the sidelines of both metals for now.

In my last blog on crude oil (Dec. 13), I wrote:

"There are two possible scenarios for crude oil right now. One is bearish and the other could be very bullish.

The bearish scenario says that the deep low of $62.43 (Jan. contract chart) on Dec. 2 was a sub-cycle low near the end of an old medium-term cycle. This should be followed by a short and modest rally to a sub-cycle top and then a final plunge to the end of the medium-term cycle below $62.43.

But it is also possible that Dec. 2 low was the end of the old medium-term cycle and the start of a new one. Furthermore, it may also be the start of a new longer-term (17 month) cycle. If this is true, crude could be VERY bullish now with prices ready to surge above the $83.83 high of October 25."

It's starting to look like the first (bearish) scenario is playing out here as crude prices seem to be following the current steep drop in equity markets. If this is true, crude should be falling to test or break below the Dec. low at $62.26 (Feb. contract chart) to form the final cycle bottom. Wherever that bottom ends up, it could be a good spot to buy. For now, we remain on the sidelines of crude.

Trading Blog Wednesday (evening), December 15, 2021

12/15/2021

UPDATES on the BROAD STOCK MARKET and PRECIOUS METALS (8:00 pm EST)

Today the Fed announced it would speed up the tapering of its bond-buying program (now to end in March instead of April) and potentially start hiking interest rates sooner than expected. This hawkish news was expected since early this week and may account for the drop in the broad stock market over the last two days ("sell the rumor"). After the announcement at 2pm, however, equities bounced back up ("buy the news"), so it's possible this corrective dip is over, and we could see more rallying into the holidays. We'll have to wait and see as we remain on the sidelines of this market.

Hawkish rhetoric from the Fed usually boosts the U.S. dollar, and the U.S. Dollar Index did rise a bit today.

In contrast, the Fed's news was not good for the price of gold and silver as both metals fell and made new weekly lows. This negates the intermarket bullish divergence signal that we had on Monday and Tuesday. Silver is also getting very close to the start of its current medium-term cycle ($17.22 on Sept. 29). If prices break below there, it will mean silver's trend has turned bearish. We are now near the center of a reversal zone specifically for the precious metals (Dec. 14 - 22), so we could see a bottom and reversal back up anytime now. I am reluctant to go long now for the reasons mentioned above, but if we get another bullish divergence signal (one but not both metals making a new weekly low) in the first half of next week, it could be a good spot to buy (assuming prices don't go TOO low). We will stay on the sidelines of both metals for now.

Trading Blog Tuesday, December 14, 2021

12/14/2021

BRIEF COMMENT ON THE BROAD STOCK MARKET (8:30 pm EST)

The broad stock market continued falling today which is confirming Dec. 10 as our second "pivot point" reversal. But will this market continue to fall into the holidays? We need to be prepared for that possibility, but it's too early to rule out more rallying over the next two weeks, especially in the DOW or S&P 500. Although the NASDAQ is looking quite bearish now as it is dropping close to its Dec. 3 low, as long as this index holds above 14,181, there is still hope for a bullish snap back. Let's see if the DOW and S&P 500 can hold above their 15-day and/or 45-day moving averages over the next few days. We are still on the sidelines of the broad stock market.

Trading Blog Monday (late night), December 13, 2021

12/13/2021

MARKETS UPDATE (11:30 pm EST)

All three of our broad stock market indices reversed strongly from bottoms near our Dec. 3 "pivot point". (The DOW's low was a little early - Dec. 1 - but the S&P 500 and NASDAQ's were right on Dec. 3). Strong rallies ensued last week with the DOW breaking and closing above its "gap down" area from Nov. 26. That has created a "bullish island reversal" in the DOW which is suggesting a bullish trend up. It is possible that the DOW started a new medium-term cycle on that Dec. 1 low (that would be very bullish), but it is more likely that the DOW and the S&P 500 and NASDAQ all made sub-cycle bottoms then in their older cycles that will not form their final bottoms for many more weeks. The question now is can these indices make new all-time highs before they top out and fall to their final medium-term cycle bottoms?

Our second "pivot point" (Dec. 10) last Friday may prove to be a hurtle here as all three indices turned down strongly today and closed in negative territory. Could this be the start of a serious sell-off? Maybe. But I think as long as panic doesn't grip the markets, our "Santa Claus rally" could push higher into our next strong reversal zone coming up Dec. 21 - 31. That would be a better time for a major top. If we can get that with intermarket bearish divergence (i.e. one or two - but not all three - indices making a new all-time high) then we will have a good opportunity to sell the market short for what could be a very significant long-term correction. At least that's what I would like to see. If today's sell-off gains some legs and triggers panic, we may have to abandon our "Santa Claus rally" idea and assume a significant correction in these cycles is already in progress. We are still on the sidelines of this market.

Gold's current medium-term cycle is nearing completion and is in the process of making its final cycle bottom (due this week or next). It's possible gold already made that bottom on Dec. 2 at $1762, but Dec. 2 was a little early for a final bottom, and it wasn't in a significant reversal zone. We are now entering a reversal zone specifically for gold and silver this week and next (Dec. 14 - 22), so it would be better to see the final cycle bottom in this time frame. Let's see if prices can drop a bit lower this week or next and give us a deeper bottom and buying opportunity.

Silver's current medium-term cycle is younger than gold's cycle. Last week's low at $21.82 may have been a significant sub-cycle bottom. But like gold, prices could still push lower this week or next. If last week was a sub-cycle bottom, silver could rally strongly now, but if it does, it will be into our new reversal zone, and that could put a damper on any rally. Let's wait and see if prices can push lower. If they do and can hold above $21.44, we may have a good spot to buy.

We remain on the sidelines of both gold and silver for now.

There are two possible scenarios for crude oil right now. One is bearish and the other could be very bullish.

The bearish scenario says that the deep low of $62.43 (Jan. contract chart) on Dec. 2 was a sub-cycle low near the end of an old medium-term cycle. This should be followed by a short and modest rally to a sub-cycle top and then a final plunge to the end of the medium-term cycle below $62.43.

But it is also possible that Dec. 2 low was the end of the old medium-term cycle and the start of a new one. Furthermore, it may also be the start of a new longer-term (17 month) cycle. If this is true, crude could be VERY bullish now with prices ready to surge above the $83.83 high of October 25. It could go either way at the moment, so we will continue to stay on the sidelines of crude oil. If prices do start moving bellow $62.43 over the next several weeks, we will likely be looking for a good buy spot near the cycle's final bottom (first scenario).

Trading Blog Monday (late night), December 6, 2021

12/6/2021

MARKETS UPDATE (11:30 pm EDT)

In last Thursday's blog (Dec. 2) I wrote:

"We are now near our first "pivot point" (Dec. 3) in our new moderately strong (but wide) reversal zone Nov. 30 - Dec. 15. (The other "pivot point" is Dec. 10). After yesterday's late day plunge, the broad stock market seems to be bouncing back today with a strong rally. This could be our pivot point reversal, especially since the S&P 500 has reached our downside target line near 4,500, and the NASDAQ is now well inside our downside target range of 15,000 - 15,500. The DOW has plunged through several target support zones, but may now be stabilizing just above 34,000....Let's see if today's bullish rise can pick up steam for a "Santa Claus" rally."

Well, the DOW edged up some more on Friday and took off strongly today, so it looks like Dec. 1 was a pivot point for this index. The S&P 500 and NASDAQ, however, made new lows on Friday but may be accommodating our Dec. 3 point precisely as they also pushed higher today. It's still too early to tell if we are going to get that "Santa Claus" rally, but if this market pushes higher into the end of the week, there's a good chance it could happen. Ideally, we would like to see a strong rally in all three indices into our next strong reversal zone coming up Dec. 21 - 31 with one or two, but not all three, making a new all-time high (bearish divergence). This would give us a strong signal to sell short.

We don't always get our ideal scenario, however, and there are some bearish hurdles that could turn this market south before Christmas. The DOW is now coming up to strong resistance where this index made a "gap down" the day after Thanksgiving (from 35,591 to 35,366). If the DOW can push through this gap (exceed 35,591), however, it could gain some steam. We also can't ignore our second "pivot point" coming up Dec. 10 (Friday). A strong rally into there could also lead to a top and reversal back down. There are a lot of reasons for this market to be jittery right now (QE tapering, impending interest rate hikes, rising inflation, COVID-19 worries, etc.), and any day could bring a news story that could trigger a sell-off. It is certainly an overbought market, and overbought markets are ripe for corrections. We need to watch this very carefully now. Let's stay on the sidelines and see if today's rally can gain some legs over the next several days.

Gold is in the process of making its final medium-term cycle bottom which is due anytime over the next two weeks. It's possible that bottom happened on last Thursday's low at $1762, but that was a little early for the low. Furthermore, we are going to enter a reversal zone specifically for precious metals next week (Dec. 14 - 22), and that would be an ideal time for the final cycle bottom. If gold can rally above its 15-day moving average (now around $1798 and falling), we may have to accept last week's low as the start of a new medium-term cycle and start looking to buy.

Silver may have formed a significant sub-cycle bottom last Friday at $22.09, but like gold, it could push lower this week to a deeper bottom. If prices go below $21.43, it would mean the cycle is tuning bearish. There aren't many technical signals suggesting a rally right now.

Let's stay on the sidelines of both metals for now as directional signals are not clear, and we are not in a strong reversal zone for metals until next week.

Crude oil's medium-term cycle is also approaching its end and final bottom, probably within the next 4 weeks. Last week's low at $62.43 was likely a sub-cycle low which means the final bottom is still to come after a brief bounce in prices. I am going to wait for that final bottom before attempting to go long in this commodity. We remain on the sidelines of crude.

Trading Blog Thursday, December 2, 2022

12/2/2021

MARKETS UPDATE (3:30 pm EST)

We are now near our first "pivot point" (Dec. 3) in our new moderately strong (but wide) reversal zone Nov. 30 - Dec. 15. (The other "pivot point" is Dec. 10). After yesterday's late day plunge, the broad stock market seems to be bouncing back today with a strong rally. This could be our pivot point reversal, especially since the S&P 500 has reached our downside target line near 4,500, and the NASDAQ is now well inside our downside target range of 15,000 - 15,500. The DOW has plunged through several target support zones, but may now be stabilizing just above 34,000. If this index starts closing below 33,613, however, that would be a very bearish sign that might signal a serious sell-off. Let's see if today's bullish rise can pick up steam for a "Santa Claus" rally and top into the Christmas/New Year holidays. We're not going to chase such a rally, but instead we will be looking to sell short near the top. If this market starts collapsing now, we may be looking to sell short even sooner. We're staying on the sidelines for now.

Crude oil prices fell to $62.43 (Jan. 2022 contract chart) today but then bounced and recovered strongly to close near $67. As I have stated in my previous blogs, if prices start closing below $62, crude could turn very bearish. We are now near the center of a reversal zone specifically for crude (Nov. 30 - Dec. 8), so today's bounce from that low could be the start of a rally. I am not going to buy here, however, because it is a little too early for a final bottom in crude's current medium-term cycle, and any rally now will probably be short-lived and will not make a new cycle high before turning down and moving to a final cycle bottom. I think we will wait for that final cycle bottom before considering any long position in crude. We are on the sidelines of crude.

Gold prices moved lower today which is suggesting it is bypassing a potential rally and will be heading down some more. Gold's medium-term cycle is very old and ready to bottom. That could be happening now, but the technical signals for a strong rally are weakening, so I am reluctant to call the bottom here.

Silver's medium-term cycle is much younger than gold's, and silver is now taking a major sub-cycle corrective drop near the center of its cycle. As with gold, the technical signals that we had for a strong reversal earlier in the week are weakening, so we could see prices push lower. A normal corrective drop here could get as low as $22, and we are almost there, so even though we COULD see a bounce here, there are enough mixed technical signals to keep me from buying. If prices fall below $21.44, silver could turn very bearish.

Let's remain on the sidelines of both silver and gold for now.

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