**PLEASE NOTE MY NEW LONG-TERM UPDATE ON THE BROAD STOCK MARKET POSTED ON THE HOME PAGE 2/7/24**
BROAD STOCK MARKET and CRUDE OIL UPDATES (9:00 pm EST)
The broad stock market was relatively flat on Monday and Tuesday, but today we saw a significant rally in all three of our market indices (DOW, S&P 500, NASDAQ). The S&P 500 and NASDAQ broke to new weekly highs while the DOW came close but did not. This gives us a bearish divergence signal (but one that could easily be negated tomorrow if this rally continues). We still have another even stronger bearish divergence signal between these indices as the NASDAQ is still below its all-time high from Nov. 2021 (16,212) while the DOW and S&P 500 are well above their previous all-time highs from Jan. 2022. We are also in the center of a relatively weak reversal zone (Feb. 2 - 13) that is being enhanced by a strong potential "pivot point" or turning point for equities that was in effect yesterday and today. It is VERY late in the current medium-term cycles of all three indices, and their final tops are now due (overdue). A significant correction down should be imminent and could start from today's highs or from any new highs over the next three or four trading days. We are expecting a 2 - 5 week corrective decline that could take the DOW back to the 37,000 level and the S&P 500 close to 4,700. We will watch for these targets as good potential buy spots as we expect this bullish market to continue its rally at least into April, and maybe considerably longer. Our next strong reversal zone is coming up at the end of this month (Feb. 19 - 29), so that would be an ideal time to see a corrective low and the final bottoms to the current medium-term cycles. We will watch for it. We are currently on the sidelines of the broad stock market. We are still not certain if crude oil began a new medium-term cycle with its low of $68.28 (March contract chart) on Dec. 13 or if crude is near the end of an older medium-term cycle that started back on Oct. 5 at $76.93. If it's an older cycle, then it is bearish and prices will go lower and soon (within the next four weeks) form a final bottom below $68.28. But if crude started a new cycle on Dec. 13, it most likely completed its first sub-cycle corrective dip with Monday's $71.41 low and is now starting a rally that will soon test the $80 level. Prices are now closing above the 45-day moving average, but they are still below the 15-day moving average (which is very close to a strong resistance line at $75). It could go either way here. I would like to see the older cycle play out because that would soon give us a good buy spot at the bottom of the older medium-term cycle (and maybe even the longer-term 4-year cycle). If instead the market rallies and breaks above $80, we will have to wait longer for another significant correction to buy. We are keen to buy crude oil now because we are either at or near the bottom of a longer-term 4-year cycle in crude, and that means we expect a strong rally this year that could challenge or exceed the 2022 high of $130. Considering all the recent tension and fighting in the Middle East, crude prices have been remarkably stable. But that could change, and we need to be on guard for large and sudden fluctuations in prices (and those moves could be both up and down). We are currently on the sidelines of crude. UPDATES ON GOLD AND SILVER (11:30 pm EST)
It's getting very late in the medium-term cycle of gold. In fact, there's a possibility it might have ended with the $2003 low on Jan. 17. If that's the case, a new medium-term cycle started from there, and this market should be very bullish. But after breaking above the 15-day and 45-day moving averages last week, prices broke back below those averages yesterday, and this rally from Jan. 17 has been modest (so far). This means the old cycle could still be in place, and prices could move lower to the final cycle bottom due by the end of this month (which would actually be a good time for the final bottom as that would be inside a reversal zone specifically for the precious metals Feb. 21 - 29). Another major concern we have with gold right now is that we are expecting a longer-term correction in gold that could take prices to $1900 or below, and that could happen anytime between now and July. If we are still in an older medium-term cycle, prices could take that steep drop now. If we already started a new medium-term cycle on Jan. 17, prices could rally a bit first before falling to that longer-term cycle low (if it happens). Either way, we have to be on guard for a significant price drop that could happen soon (older medium-term cycle) or later (new medium-term cycle). Any drop towards the $1900 area would be a good signal to go long - especially if it falls inside a reversal zone - because once that longer-term bottom is in, we expect a very strong rally in gold to exceed the recent all-time high at $2123. Let's wait and see if gold prices can move lower this week. If they can get to $1950 or lower, we may consider buying. If instead prices rally and break above $2100, we will have to assume a new medium-term cycle started Jan. 17, and we'll have to wait a little longer for a good spot to buy. We are on the sidelines of gold for now. It is also late in the medium-term cycle of silver with its final bottom due anytime by the end of this month. But like gold, silver may have already started a new medium-term cycle from its low of $21.96 on Jan. 22. If it is a new cycle, prices could rally strongly now, but I do not think this is likely. I think prices could go lower from here to form the final bottom of an older medium-term cycle. We have a strong potential "pivot point" for silver coming up Wednesday through Friday, so this would be a good time for a final cycle bottom. A good target for a bottom could be around $21.70 - $22.00. If we see prices there over the next three days, we may look to go long. We are currently on the sidelines of silver. UPDATE ON THE BROAD STOCK MARKET (7:00 pm EST)
Following last Wednesday's FOMC meeting, the broad stock market fell dramatically after Fed Chairman Jerome Powell dampened trader's and investor's hopes of an early interest rate cut. In my blog that day I wrote: "Today the DOW dropped 317 points, the S&P 500 dropped 79 points, and the NASDAQ fell a whopping 346 points. This looks like the beginning of a fall to the final medium-term cycle bottoms (unless the market snaps back up tomorrow)...we wait to see if today's sell-off can gain more momentum over the next several days." Well, the market DID snap back up, and by Friday all three market indices (DOW, S&P 500, NASDAQ) were making new highs for the week. This market is very bullish, but the rally and the current medium-term cycles are getting 'long in the tooth", and a final top is now due (overdue). We just left a strong reversal zone, but we are entering another one next week (February 2 - 13). Although this reversal zone is weaker than the previous one, we do have a strong potential "pivot point" for equities Tuesday through Thursday that could give it more strength. We will also watch for more bearish divergence in these indices (i.e. one or two, but not all three making new weekly highs). We note that there is still a strong bearish divergence signal between these three indices as the NASDAQ still has not exceeded its all-time high from Nov. 2021 (16,212) while both the DOW and S&P 500 have exceeded their all-time highs from Jan. 2022. The NASDAQ, however, is now very close to that high. If it does break through, that would be a very bullish signal for this market. We remain on the sidelines of the broad stock market as we wait for a corrective low and the final bottom of the current medium-term cycle. BROAD STOCK MARKET UPDATE and COMMENT ON THIS WEEK'S FOMC MEETING (10:00 pm EST)
After this week's FOMC meeting concluded at 2 pm today, the Fed left interest rates unchanged. This was not a surprise, but many investors and traders WERE surprised by Fed chairman Jerome Powell's slightly hawkish rhetoric in which he squashed their hopes of an interest cut as soon as March. Powell announced that rate cuts would not be appropriate until there is "greater confidence that inflation is moving" towards the central bank's 2% target. Most analysts expect the first rate cuts to begin in late spring or early summer. Crestfallen traders led a sharp sell-off in the broad stock market following Mr. Powell's press conference. Anyone reading this blog will know that we have been anticipating a sharp drop in equity markets no later than this week as the medium-term cycles in all three of our stock market indices (DOW, S&P 500, NASDAQ) are old and due to top out anytime, and this week is the end of a very strong reversal zone. Today the DOW dropped 317 points, the S&P 500 dropped 79 points, and the NASDAQ fell a whopping 346 points. This looks like the beginning of a fall to the final medium-term cycle bottoms (unless the market snaps back up tomorrow). We will be looking to buy at those bottoms, as long as the correction doesn't go too low. We would expect the final bottoms to break below the 45-day moving averages. For now, we remain on the sidelines as we wait to see if today's sell-off can gain more momentum over the next several days. MARKETS UPDATE (11:00 pm EST)
In last Saturday's blog on the broad stock market I wrote: "After their mid-cycle "dips", all three indices are now headed towards their final medium-term cycle highs to be followed by a steep correction down to their final cycle bottoms due sometime over the next two months. There's a good chance those final tops could happen in our next strong reversal zone coming up next week (Jan. 23 - Feb. 1) or even in a weaker one in the first week of February (Feb. 2 - 13)." We are now at the center of that strong general reversal zone (Jan. 23 - Feb.1), and this market is rising steeply into it. A top could be imminent. The NASDAQ made a new weekly isolated high on Wednesday while the DOW and S&P 500 pushed to new weekly highs today. Because all three indices made new weekly highs, we have no bearish divergence signal this week; however, the NASDAQ still has not exceeded its all-time high from Nov. 2021 (16,212), but both the DOW and S&P 500 have now exceeded their all-time highs from Jan. 2022. This is a strong bearish divergence signal (until the NASDAQ breaks through that high - it is close). Although this market could turn down now, there is still time for it to push higher through next Thursday, and even into the following week (Feb. 2 -13). We will stay on the sidelines as we continue to wait for the final correction down to the end of the current medium-term cycle, which should be a good spot to buy as this market continues to look bullish into the summer. It is getting late in the current medium-term cycle of gold, and prices seemed reluctant to rally this week as they stayed below both the 15-day and 45-day moving averages. Gold's recent low on Jan. 17 at $2003 was not in any reversal zones, so it is unlikely that was the end of the current medium-term cycle. In other words, prices are probably headed lower to the final cycle bottom. While it's still possible for prices to surge up and test the $2100 level before falling to the final cycle bottom, that is looking less likely now. Let's stay on the sidelines of gold as we wait for the final cycle bottom, which could end up happening in our current strong general reversal zone (that ends next Thursday). Ideally we would like to see gold drop down into the $1900 - $1950 area. That would be a good spot to buy, if it happens. Silver made a deep low at $21.96 on Monday, and it has risen steeply from there. It's possible that low was the start of a new medium-term cycle as it was in a potential "pivot point" area for the precious metals, but that would be a bit early, and there's still plenty of time for silver to go lower before completing a final medium-term cycle bottom. Today silver tested and closed just below the 15-day moving average. Let's wait and see if this week's rally gains some legs next week or if it instead turns back down. We remain on the sidelines of silver for now. The U.S. Dollar Index made a new weekly high (103.82) on Tuesday, but that was just one day outside a reversal zone for currencies (Jan. 24 - Feb. 1). If the greenback can push higher next week, we could get another isolated high inside the reversal zone and then a significant correction down. if that scenario plays out, it could correspond to a significant bottom and reversal back up in the precious metals. We will watch closely for this next week. Crude oil prices have finally broken upside out of their $70 - $75 (March contract chart) congestion zone. Prices are now even closing above the $76.31 high from Dec. 26. This strongly suggests that the $68.28 low on Dec. 13 was the start of a new medium-term cycle. If that's the case, a significant sub-cycle top is due shortly, and we are now in the center of a reversal zone specifically for crude Jan. 23 - Feb. 1 (it overlaps precisely with our strong general reversal zone). There is also considerable resistance between $78 - $80. We should be watching next week for a top and a correction back down which could give us a good entry point into this new cycle as the cycle's current trend looks quite bullish. We are on the sidelines of crude oil for now. UPDATES on THE BROAD STOCK MARKET and CRUDE OIL (10:00 pm EST)
On Thursday and Friday last week, all three of our broad stock market indices (DOW, S&P 500, NASDAQ) rallied strongly and broke to new weekly highs. Significantly, the S&P 500 finally broke above its all-time high (4,819 from Jan. 2022). This leaves only the NASDAQ below its all-time high (16,212 from Nov. 2021), but it is fast approaching that high after last week's steep rally. Until the NASDAQ breaches that high, however, we have a strong intermarket bearish divergence signal to put a curb on any rally. After their mid-cycle "dips", all three indices are now headed towards their final medium-term cycle highs to be followed by a steep correction down to their final cycle bottoms due sometime over the next two months. There's a good chance those final tops could happen in our next strong reversal zone coming up next week (Jan. 23 - Feb. 1) or even in a weaker one in the first week of February (Feb. 2 - 13). We may consider short-selling if a top looks imminent, but because the trend in this market is very bullish now, we might just wait for the final bottom and buy the start of a new medium-term cycle and ride a bullish rally into the middle of the year. For now, we will not chase this rally, and we will remain on the sidelines of the broad stock market. Crude oil broke and closed above its 15-day and 45-day moving averages on Friday. While this is bullish behavior, we note that prices are still below the strong resistance at $75 (Feb. contract chart), and we are about to enter a very strong general reversal zone that precisely over laps another reversal zone specifically for crude coming up next week (Jan.23 - Feb. 1). Unless these reversals correspond to a "break-out" in crude (possible, but not likely), we could see prices turn back down from an isolated high anytime in the next two weeks. If prices can rally significantly above $76.18 before turning down, it could confirm the low of Dec. 13 ($67.98) as the start of a new bullish medium-term cycle. Otherwise, we expect prices to go lower before we see a significant medium-term cycle bottom, and possibly a 4-year cycle bottom at or below $65.24. We remain on the sidelines of crude oil. MARKETS UPDATE (11:00 pm EST)
Last week the S&P 500 and NASDAQ snapped back up from their sub-cycle corrective lows on Jan. 5 and the DOW rose up a bit from the bottom of its sub-cycle "dip" from Jan. 8, but this week all three indices are falling again. We may be starting a 2 - 5 week decline to the final bottoms of the current medium-term cycles, but there's still time for this market to push a little higher before that happens. We want to focus now on the next strong general reversal zone which is coming up next week (Jan. 23 - Feb. 1). This could coincide with the final tops in the current medium-term cycles, but if the market continues falling from here, it could instead coincide with a bottom (probably another sub-cycle bottom, but if the fall is steep, possibly a final cycle bottom, although that would be a bit early). Because the general trend of this market is still bullish, we are waiting to buy at the final bottom of this current medium-term cycle. A good target for the DOW would be around 35,600 - 36,000. The S&P 500 could get back down to 4,600. We will wait for these levels before thinking about going long. For now we remain on the sidelines of the broad stock market. As with the broad stock market, we are also waiting to buy the final medium-term cycle bottoms in gold and silver. It is late in both of these cycles, so a final bottom is due soon. Prices are falling sharply today, and both metals are below their 15-day and 45-day moving averages. The descent to the final cycle bottoms could be underway. Nevertheless, there's still time for gold to rally back up and challenge its Dec. 28 high around $2070 (but probably not its all-time high of $2123 from Dec. 4) before hitting its final cycle bottom. (Today gold made a new weekly low without silver - a bullish divergence signal that could indicate an imminent reversal back up.) Silver looks a bit more bearish than gold at the moment. If silver rallies now, it might get back up to $24, but then it should fall again towards its final cycle bottom due anytime now over the next six weeks. There's a possibility that gold's final medium-term cycle bottom could go quite low, i.e. back to the $1900 area. If that happens, it would be a good buying opportunity. A good buy spot in silver could be between $21 and $21.70. We will stay on the sidelines until prices approach these levels. After falling from a high of 103.10 (Feb. contract chart) on Jan. 5 (which was right in the middle of our reversal zone for currencies), the U.S. Dollar Index is rising again and today made a new weekly and monthly high at 103.69. This is putting downward pressure on gold and silver prices, but we note that next week we enter another reversal zone for currencies (Jan. 24 - Feb. 1). If the greenback pushes higher into that time frame, another turn down could follow which could lift precious metal prices. We will watch this carefully as we move into next week. Crude oil prices continue to stagnate between support at $70 (Feb. contract chart) and the falling 15-day and 45-day moving averages (now at $72.42 and $73.62, respectively). We are still not sure if crude started a new medium-term cycle with the low of $76.43 on Aug. 23 or if a new cycle started with the Oct. 6 low of $77.86. If the former, the medium-term cycle could be ending and bottoming now, or it may have already ended with the Dec. 13 low ($67.98). If the cycle started on Oct. 6, it is very bearish and prices should be headed lower for at least 3 or 4 more weeks to a price below $67.98. We will be better able to tell which medium-term cycle labeling is correct once crude prices break out of their congestion zone ($70 - $73.62) one way or the other. Until then we will remain on the sidelines of this market. It is also not clear if a longer-term 4-year cycle ended on May 4 at $65.24 or if that cycle will go lower over the next six months (it is due anytime now before August). We are very interested in going long at the bottom of the 4-year cycle as a strong rally should follow that could see prices rise 100% by the end of the year. If crude prices break upside soon and are able to close above $76.18, it would support the idea of a new medium-term cycle starting on Dec. 13 and also the idea that a new 4-year cycle began on May 4 at $65.24. In the bearish alternative view, prices could soon break below $67.98 as crude heads to the end of an older 4-year cycle below $65.24 and possibly below $62 anytime before August. MARKETS UPDATE (3:30 pm EST)
It looks like all three of our broad stock market indices have more or less completed their medium-term mid-cycle "dips". The NASDAQ's sharp 5-day drop last week that broke well below the 15-day moving average was a legitimate sub-cycle correction. The S&P 500's 5-day drop was not as steep or deep, but still qualifies as a sub-cycle. The DOW's 4-day "dip" barely tested its 15-day moving average, and one could argue that this buoyant index is heading straight to its medium-term cycle top with no sub-cycle corrections (very bullish). The DOW made a new weekly and all-time high today. The S&P 500 also made a new weekly high, and it is just 20 points away from exceeding its all-time high (4819 from Jan. 2022). The NASDAQ, however, did not make a new weekly high today (it is close), and it is still a good distance away (about 1000 points) from its all-time high of 16,212 from Nov. 2021. Thus we still have strong bearish divergence signals in place that could lead to a more severe turn down in this market. We are now in the center of a relatively weak general reversal zone (Jan. 8 - 16), so another reversal back down is possible; however, this market seems to have a lot of bullish energy, and both the DOW and S&P 500 are breaking above last week's highs which suggests their trend is still pointed up. A very strong reversal zone is coming up in two weeks (Jan. 23 - Feb. 1). We could see this market continue its rally into that time frame, but then we'll have to watch for a top - possibly the final top in the current medium-term cycle - followed by a steep correction down to the cycle's final bottom. We're staying on the sidelines of this market until we see a more significant corrective drop. Gold and silver are both making new weekly lows today (negating the bullish divergence signal from earlier this week), and silver is testing its previous sub-cycle low ($22.52 on Dec. 13). Could these metals now be headed down to their final medium-term cycle bottoms? Yes, but we note a strong potential "pivot point" for both gold and silver coming up tomorrow through next Tuesday. Prices could snap back up from any new lows in this window, at least temporarily. We are still staying on the sidelines of both metals until we see the current medium-term cycles complete their final bottoms. Gold's bottom could happen anytime starting next week through the end of February. Silver's bottom is due anytime starting this week through the end of February. Crude oil prices have remained relatively flat this week as they continue to test both the 14-day and 45-day moving averages but remain below both of them. These two averages are converging with both sloping down as they approach the strong $70 support line. Crude prices have been stuck in a congestion zone between these moving averages (now at $73.80 and $72.68) and the $70 support and should soon break out one way or the other. We abandoned our long crude position on Tuesday to avoid a potential break below $70 (and especially $67.98) and are now on the sidelines of crude. There is a reversal zone specifically for crude coming up Jan. 23 - Feb. 1 (it overlaps with the strong general reversal zone mentioned above for equities). If prices do break lower, we might see a significant bottom in that time frame and another opportunity to go long. CRUDE OIL TRADE ALERT (3:15 pm EST)
After looking over the charts for crude oil, I've decided to sell my long position. Today prices rallied a bit, and we are back to a "break even" point in our long trade (which we entered on Dec. 14) so we should be able to get out now with little or no loss. There are several short-term signals now that look bearish and they are increasing my fears that prices could break lower (i.e. below $70, and especially below $67.98 - Feb. contract chart). Any traders who are more risk tolerant could still use those prices as stop loss points, but I am going to play it safe here and get out. I am selling my long position in crude oil today. |
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