The major concern for most investors at the moment is whether or not the panic generated by Bernanke's speech last week on Federal Reserve policy and the economy is going to subside or ignite further serious sell offs in the markets. As always we look to chart analysis for clues to market direction, and there is not much change today in the charts of the DOW, S&P 500 or NASDAQ. Although the Dow dropped about 250 points earlier in the day, it rebounded a bit and is closing with a 140 point loss. Momentum and other technical signals remain mixed (bullish and bearish) so we remain on the sidelines of the broad stock market for now.
Gold and silver are both down a bit today and their momentum continues to be strongly bearish. Some blog readers may be wondering why I'm not short selling the metals due to their strong bearish momentum. The reason for this is that gold and silver momentum has been bearish for some time, and the gold and silver cycles are close to forming major bottoms from which a significant long-term rally should start. I have therefore been cautious with short positions and am trying to focus more on the establishment of long positions once the final cycle bottom can be determined. Still on the sidelines of gold and silver.
I was stopped out of my long crude oil position rather abruptly last Friday, apparently due to "fallout" from the Bernanke speech on Wednesday (which I had underestimated due to crude's weak reaction on Wednesday). In my last blog I mentioned a potential cycle pattern setting up now in crude in which the recent falling price could snap back quickly and resume its earlier rally. Crude prices did drop further today (below $93) and then snapped back up to close around $95. It may drop lower, though, towards the middle of the week (I would like to see a low closer to $91) and give a better short-term buy signal. Medium and long-term momentum remains bullish in this market, so there is still the potential for more rallying here. (But keep in mind I am expecting a significant correction in oil prices probably in July or August, so any rally now would probably be short-term). On the sidelines for now.