The minutes from July's FOMC meeting were released on Wednesday and revealed that several FOMC members were anticipating bond-purchase tapering by the end of this year. That hawkish news sent the broad stock market tumbling. After four days of plunging, equities seem to be snapping back up today and recovering at least some of this week's losses. We had been expecting a sharp correction, but is it over? Our current reversal zone extends into next Wednesday, so this market could fall lower. On the other hand, it's possible the correction is over. We will have to wait until next week to see how the market moves. If yesterday's lows were sub-cycle bottoms, then all three of our market indices (DOW, S&P 500, NASDAQ) would be be bullish now, at least short-term. We will stay on the sidelines for now.
It's still not clear if gold started a new medium-term cycle with its deep low on Aug. 9 ($1693) or if a new cycle started on June 29 (at $1752). If the latter, then gold's trend has turned bearish (because prices have already plunged below the start of the cycle), and gold would be moving lower for many more weeks. But if the new cycle started last week (Aug. 9), then gold should be bullish as long as the current corrective dip stays above $1693. The top of the current dip was on Tuesday - the first day of our reversal zone for gold and silver (Aug. 17- 26). There is still time to make a higher top in this reversal zone or, alternatively, if the top is in, to fall some more to a sub-cycle low. We will remain on the sidelines of gold for the moment and wait until the cycle is more clear.
Silver plunged to a low of $23.02 on Aug. 9. Today it is testing that low again (it got to $22.92). This could easily be a "double-bottom" to the Aug. 9 low and the start of a new medium-term cycle. We are in the center of a precious metal reversal zone which extends into next Thursday. If we aren't seeing a bottom now, we could see it with a lower low early next week. It looks like a good time to consider going long in silver. I may give a trade alert to buy this week-end, or we may try to buy early next week at a lower price. Stay tuned. Remaining on the sidelines for now.
In my last blog on crude (Aug. 9), I wrote:
"Prices today at $65.15 could be making a double-bottom to that $65.01 July 20 low. That would be bullish and would confirm a new cycle. But if prices go lower from here, they may be moving down to the final bottom of an older cycle - maybe in the upcoming reversal zone for crude Aug. 17 - 26..."
It looks like this is an older cycle moving to its final bottom. Prices closed the week at $62.32 (Sept. contract chart). Let's see if the go any lower next week and give us a possible spot to buy. Staying on the sidelines for now.