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Trading Blog Tuesday, December 31, 2024

12/31/2024

MARKETS UPDATE (6:00 pm EST)

Last week our broad stock market indices rallied a bit into the Christmas holiday but then they rolled over and have been falling from there. The S&P 500 and NASDAQ managed to break above their 15 and 45 day moving averages before falling, but the DOW didn't do that (it stayed below both). The S&P 500 is now back below both those averages and the NASDAQ is back below its 15-day moving average and testing its 45-day moving average. All three indices are now approaching and testing their Dec. 20 lows. If those lows hold in the DOW and S&P 500, we may see a double-bottom formation that would support the idea of new medium-term cycles starting now. Furthermore, if the NASDAQ makes a lower low, that would suggest that it too is ending an old medium-term cycle and starting a new one as this index has now fallen the minimum 2 weeks from its Dec. 16 high that we like to see at the end of a cycle. All of this would be bullish and would encourage us to buy. On the other hand, if these indices continue to move lower and start closing below their Dec. 20 lows, that would open up several bearish possibilities, and we would stay on the sidelines. For now, we are still on the sidelines of this market.

Gold and silver prices have remained relatively unchanged over the last week and a half. Gold seems to be finding support around $2600 and silver around $29. If these supports hold, both metals could be forming significant cycle bottoms and may now be ready to rally strongly. But we can't rule out further declines which could turn the cycles bearish. I am staying on the sidelines of both metals for now.

Crude oil has been rallying from its $68.42 (Feb. contract chart) low on Dec. 20 and is today testing the top of a congestion zone ($66 - $72) that has been corralling prices since mid-October. If prices can start closing above $72, we may see this market break out and turn bullish. A further break above $74 and then $76.41 would be necessary to confirm this. For now, I am still on the sidelines of crude oil.

A VERY HAPPY AND PROSPEROUS NEW YEAR TO ALL READERS!
(It may be an explosive one!)

Trading Blog Thursday, December 26, 2024

12/26/2024

MARKETS UPDATE (11:00 pm EST)

This week the broad stock market has been rallying from last Friday's lows in all three of our market indices (DOW, S&P 500, NASDAQ). Those lows represented two week falls in the DOW and S&P 500, so both indices could be starting new medium-term cycles. The NASDAQ's fall, however, was only 4 days which weakens the argument for a new cycle. We have one day left in our current reversal zone. Both the S&P 500 and NASDAQ closed above their 45-day and 15-day moving averages today, although the DOW is still below both of those averages. If the DOW can get above its 15-day and 45-day moving average, we may have to assume new medium-term cycles have started, and we may be looking to go long. I am staying on the sidelines for now.

Speaking of moving averages, this week's rally in gold and silver has been weak and prices in both metals are staying below their 15-day and 45-day moving averages. Cycle analysis of these metals suggests that a medium-term and perhaps even a longer-term cycle is due about now. Last week's low in both metals may have been it, but the tepid rally from there (so far) has me concerned. Even if new cycles have started, they may be bearish. To negate this idea, we'll have to see gold and silver start closing above those averages. I am currently on the sidelines of both metals.

Crude oil HAS broken above its 15-day and 45-day moving average, but prices still remain in a congestion zone between $66 and $72. The trend here (bullish or bearish) is still not clear. I am remaining on the sidelines of crude oil.

MERRY CHRISTMAS TO ALL READERS OF THE BLOG!

Trading Blog Sunday (night), December 22, 2024

12/22/2024

SILVER TRADE ALERT and MARKETS UPDATE (8:30 pm EST)

Last week silver closed below the stop loss point I had set at $30. There's a possibility that an older medium-term cycle is finding its final bottom now, and from that low a bullish rally could start. But if the original labeling of a new medium-term cycle starting from a double-bottom on Nov. 14 and Nov. 28 is correct, the cycle has turned bearish and will continue down. At the risk of being whipsawed out of a new bullish cycle, I am going to bail out of my silver long position now. I am placing a sell order for the market's open tomorrow. Right now a sell would give us about a 3% loss, but if the market opens higher tomorrow, it may be less.

Gold may also be in a position to push lower before reversing back up (it may get down to $2500), but it doesn't have to as last week's low was inside a reversal zone. If gold does make a new low next week and stabilizes, it may be a good spot to buy. For now I am still on the sidelines of gold.

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

"The DOW and S&P 500 have been falling for nearly two weeks, but today is only day 3 for the NASDAQ's fall from its all-time high of 20,204 on Monday. A final corrective drop in a medium-term cycle should last from 2 - 5 weeks, so the NASDAQ has to fall some more to satisfy that requirement. If today's panic sell-off continues into next week, that shouldn't be a problem..."

Well, the panic sell-off from the Fed's hawkish rhetoric on Wednesday stabilized a bit on Thursday, but the market certainly did not recover. All three indices made new lows on Friday, and the NASDAQ continued down to approach its 45-day moving average. Because we are still in a strong reversal zone all next week, there's a good chance the final medium-term cycle bottoms could happen then (if they didn't happen for the DOW and S&P 500 already on Friday). We will watch for a possible low to buy next week in the broad stock market.

Crude oil prices continue to be range bound between $66 and $72 (Feb. contract chart), so I am staying on the sidelines of this market for now.

Trading Blog Wednesday (late night), December 18, 2024

12/18/2024

COMMENT ON THE FED MEETING and BROAD STOCK MARKET UPDATE (11:00 pm EST)

Well, the Fed came through with its expected quarter point cut in interest rates at the end of today's FOMC meeting; however, the Fed's announcement was accompanied by an updated "dot-plot" graph that revealed only two expected rate cuts in 2025. The last dot-plot update in September indicated four proposed cuts, so this reduction in expected cuts for next year was a bit of a shock to many investors. Jerome Powell's 2:30 press conference did not assuage investor's concerns over the hawkish dot-plot as Mr. Powell pointed out that inflation was moving sideways and this justified a more cautious approach to rate cutting in 2025.

Equity markets lost no time in responding to this hawkish news with a hefty sell-off immediately following the release of the Fed statement at 2:00 pm. The DOW was down 1,123 points by the closing bell. Although many (including myself) were surprised by this sharp sell-off, it was not totally unexpected as our cycle analysis of this market indicated late stage medium-term cycles in all three market indices (DOW, S&P 500, and NASDAQ) that were due to bottom soon. As I've mentioned in previous blogs, when a medium-term cycle makes its final corrective drop, we like to see it test or even break below its 15-day and/or 45-day moving averages. Today's plunge brings the DOW well below those averages. The S&P 500 also closed below its 15-day and 45-day moving averages, and the NASDAQ closed below its 15-day, but still above its 45-day moving average.

The DOW and S&P 500 have been falling for nearly two weeks, but today is only day 3 for the NASDAQ's fall from its all-time high of 20,204 on Monday. A final corrective drop in a medium-term cycle should last from 2 - 5 weeks, so the NASDAQ has to fall some more to satisfy that requirement. If today's panic sell-off continues into next week, that shouldn't be a problem, and should that happen, the NASDAQ could take the DOW and S&P down along with it. We are staying on the sidelines of the broad stock market as we see how this plays out.

Trading Blog Monday (late night), December 16, 2024

12/16/2024

MARKETS UPDATE (11:30 pm EST)

As we approach the final weeks of 2024, the broad stock market is giving us a lot of mixed signals. Generally speaking, equity markets are looking quite bullish. Seemingly buoyed by the election of Trump (widely perceived as a "business friendly" president), all three market indices (DOW, S&P 500, NASDAQ) have been soaring to new all-time highs. This bodes well for the start of the upcoming new year. Nevertheless, several market analysts are pointing to the culmination of several longer-term cycles in equity markets that could peak by the first half of 2025 and be followed by a substantial market correction. (And yes, if a 90 year cycle is going to play out - and this is still a possibility - that correction could be very big.)

Even our medium-term and shorter cycles are a bit unclear and ambiguous at the moment. Today the NASDAQ broke and closed clearly above 20,000 - a record all-time high - while the DOW and S&P 500 did not make new highs, thus giving us a bearish divergence signal. But the DOW simultaneously made a new weekly low without the S&P 500 (and obviously without the NASDAQ), so we also have a bullish divergence signal.

This week the FOMC has its last meeting of the year. It will conclude on Wednesday at 2 PM, and a press conference will follow where Fed Chairman Jerome Powell will give an outlook for the economy going into 2025. It is almost certain that the Fed will announce an interest rate cut of 25 basis points, and this will most likely have a positive effect on the broad stock market. Right now, the DOW seems to be the only index that could be making a significant cycle or sub-cycle bottom. It is close to falling almost 2 weeks from its all-time high on Dec. 4, and it is well below its 15-day moving average and approaching its 45-day moving average. We like to see a 2-5 week fall that tests or breaks below these moving averages to complete the final bottom of a medium-term cycle, so this could be it. Because of our bullish outlook, we may see a buying opportunity this week or next - especially if dovish rhetoric from the Fed and Jerome Powell can kick start another rally, but for now we are still on the sidelines of this market.

Despite last week's dips, gold and silver are also looking quite bullish. There's a chance gold could be nearing the end of a longer-term cycle which could cause it to drop suddenly to the $2500 area. If that happens, it could be a good spot to buy. For now, however, I am staying on the sidelines of gold. Silver is less at risk of falling, so I am continuing to hold my long position in silver with a stop loss on a close below $30.

It is late in crude oil's current medium-term cycle (which started with the low of $63.88 - Jan. contract chart) on Sept. 10, and this cycle has been looking mostly bearish - so far. Prices seem to be stuck between $66 and $72, and until this congestion breaks - one way or the other - the trend of this cycle will remain neutral to bearish. It's possible the old medium-cycle ended and a new one started on Dec. 6, but to confirm that, prices will have to rally soon and break above $72, and then $74. In the meantime, we will wait and watch as a low below $63.88 and the final bottom to an older medium-term cycle could form in the upcoming reversal zone specifically for crude Dec. 17 - 27. If that happens, it would be a good spot to buy. I am currently on the sidelines of crude oil.

Trading Blog Friday (early AM), December 13, 2024

12/12/2024

BRIEF UPDATE ON PRECIOUS METALS (1:30 AM)

Just a quick update on silver and gold. I am still holding my long position in silver and staying on the sidelines of gold. Both metals still appear to be starting new cycles, but they may be taking sub-cycle corrections now. We won't worry about silver's correction unless it starts closing below $30. I will comment more on this and the other markets this week-end.

Trading Blog Thursday, December 5, 2024

12/5/2024

BRIEF MARKETS UPDATE (5:00 pm EST)

We are now near the center of a strong general reversal zone for all markets (Dec. 3 - 12). All three broad stock market indices (DOW, S&P 500, NASDAQ) continue to push higher with all three making new all-time highs this week. This market is looking toppy, however, and because we are at the center of a reversal zone, a strong downturn could be imminent. We are remaining on the sidelines of this market as we wait for the next significant corrective low as a possible spot to buy.

Gold prices have been rather flat this week, but they are remaining above the $2541 low from Nov. 14 which could have been a significant cycle low. In addition to the current general reversal zone mentioned above, there is another reversal zone specifically for the precious metals coming up next week (Dec. 11 - 23). Although gold's current direction is unclear, we will keep an eye out for any significant high or low that forms in these time frames. Silver made a double-bottom to its Nov. 14 low ($29.73) on Nov. 28 ($29.70), and prices have been rising from there. It's looking like those two lows are defining a new medium-term cycle bottom, and if so, that would be bullish. I am holding my long position in silver for now. Gold's cycle is less defined at the moment, so I am remaining on the sidelines of that metal.

Crude oil prices have been very flat this week, but they seem to be finding support at the $68 level. Prices seem to be stuck between $68 and the 45-day moving average (around $70). It's still not clear if this market wants to make a new low below $64 before embarking on another significant rally. If we don't see a lower low happen in our current reversal zone, there is another reversal zone specifically for crude coming up Dec. 17 - 27 which could correspond to a low (or high if this market starts to rally). I am staying on the sidelines of crude for now.

Trading Blog Monday, December 2, 2024

12/2/2024

BROAD STOCK MARKET TRADE ALERT (2:45 pm EST)

We bought the DOW on Nov. 19's isolated low at 43,243, and from there it rose steeply, but it is now encountering resistance near 45,000. Last week the DOW and S&P 500 made new all-time highs without the NASDAQ, and today the S&P 500 and NASDAQ are making new all-time highs without the DOW. This bearish divergence suggests that a top could be imminent. Even if these indices rally some more, we are about to enter a very strong general reversal zone (Dec. 3 - 12), so a significant top could form anytime in that time frame. But if this market turns down now, we could also see this new reversal zone correspond to a deep low. I'm going to play it safe here and sell my long DOW position now with a decent profit. I will then wait for the next corrective dip. If the current medium-term cycle is an old one, that correction could be substantial. But if a new medium-term cycle started on Nov. 4, we might only see a shallow sub-cycle correction that could be another buying opportunity.

I am selling my long position in the DOW - broad stock market - today.

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