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).