The Alternative Investor
  • Home
  • TRADING BLOG
  • Current Positions
  • Alternative Investor Strategy
  • ETFs
  • About Alternative Investor
  • Contact

Trading Blog (#2)     Monday (late night),  April 24,  2017

4/24/2017

 
MARKETS  UPDATE and COMMENT ON THE FRENCH PRESIDENTIAL ELECTION  (11:30 pm EDT)

Part of the thrust for today's strong rally in the broad stock market came from France's presidential election and the edging ahead of centrist Emmanuel Macron over far-right leader Marine Le Pen. Equity markets had been fearing the election of Le Pen and her campaign against globalization which many think could collapse the European Union. Investor's fears may be justified. Last summer's Brexit vote caused the DOW to drop nearly 1000 points in two days, and although the DOW recovered quickly, investors could see a Le Pen victory as a continuation of anti-EU sentiment that is closer to the heart of the EU and thus more serious. The final vote for either Macron or Le Pen will come in two weeks (May 7th). It appears that Macron is ahead now, and equity markets are happy, but if Le Pen pulls off a surprise victory (as Trump did in November's U.S. election), the markets could panic and sell off (at least short-term). We will have to wait and see how this unfolds.

For now, a "Frexit" seems less likely (that may change in two weeks), and all is well on Wall Street. At least it was today. The DOW opened over 200 points above Friday's close and maintained that gain into the end of the day. This seems to confirm the idea that the broad stock market is starting a new medium-term cycle (the DOW from its 20,379 low last week and the S&P 500 and NASDAQ from their March 27 lows - 2,322 in the S&P 500 and 5,769 in the NASDAQ). The cycle lows in these indices all occurred within a major reversal zone for equities, and there was intermarket bearish divergence (the DOW made a new low last week while the S&P 500 and NASDAQ did not). For these reasons we entered a long position in the broad stock market today (see earlier blog and trade alert). We are now out of a major reversal zone for this market, but if these indices start to fall again and break below the lows mentioned above, we could see them fall to a new bottom in May or June. That doesn't seem likely at the moment, but if it happens, we might have to relabel the bottoms of these cycles. Right now a rally seems more likely into early May when we will be keeping an eye on the French presidential election results. Holding a long position in the broad stock market.

We are also coming out of a reversal zone for the precious metals. That reversal zone seems to have correlated with a high in both gold and silver on April 16, but so far the correction down has not touched our target areas of $1,200 in gold and $17 in silver. There are technical signals now suggesting that both metals could be very volatile this week (and even into next week), and cycle patterns are showing a possibility of gold pushing higher and maybe even exceeding its April 16 high of $1,295. If this happens and silver does not exceed $18.64, we may have a good signal (bearish divergence) to sell both metals short. If instead prices continue to fall, we will wait for these cycles to bottom over the next few weeks and look to buy closer to those targets mentioned above. On the sidelines of gold and silver for now.

As usual, the U.S. dollar may determine the fate of gold and silver. On Monday last week I wrote:

"
The cycle structure of the U.S.Dollar Index is very ambiguous at the moment, i.e. it could be either very bullish or very bearish. A major reversal zone for currencies is ending this week and the dollar is falling. If we get a significant reversal here, that may give us more clues as to the longer-term direction of the dollar. If the dollar starts to break down, we could see precious metal prices take off."

Well, the U.S. Dollar Index made a new monthly low yesterday (Sunday) which was within its reversal zone, and it is now up a bit from that low. We could therefore see a rally now, but that rally may not get very far before turning down again. The fact that the dollar made a new monthly low is adding weight to the idea of the dollar's trend turning bearish. Directional momentum is also now 100% bearish in the chart of the U.S. Dollar Index. While that could change if this reversal becomes a pivot point for a strong rally, right now it looks like the dollar could be in trouble. The current favoring of pro-EU Macron in the French presidential election is good for the euro, but it is probably weakening the U.S. dollar. (and strengthening gold and silver). On the other hand, if anti-globalist Le Pen can pull off a surprise victory (like Trump) in two weeks, we might see the U.S. dollar recover (as gold and silver prices drop).

In last Monday's blog on crude oil I wrote:

"
Crude oil most likely started a new medium-term cycle from its low in late March and has been rallying strongly from there. From a high of $53.76 (May contract chart) last week (in a reversal zone), crude seems to taking a sub-cycle correction. A normal target for this correction would be in the $50 - $51 area. If we get there this week that might be a good spot to buy."

Today crude prices dropped to $49.20 (June contract chart) which is a bit below our target for this correction, but more importantly, directional momentum in some crude charts changed from mixed bullish and bearish to 100% bearish. This is making me reluctant to go long now. We are moving out of a reversal zone for crude, but there is another one coming up in the second week of May. It is possible for this correction to continue down and bottom in that time period. If prices break below the start of this cycle on March 22 ($47.58), the cycle trend would likely be turning bearish, and we might switch our trading strategy to selling short the top of any short-term rally. Still on the sidelines of crude oil.




​

Comments are closed.

    RSS Feed

    Archives

    May 2025
    April 2025
    March 2025
    February 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    May 2024
    April 2024
    March 2024
    February 2024
    January 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012

The Alternative Investor takes no advertising or incentives from any company, institution or investment that is discussed on the website.  Any trading and investing information presented is based on Alternative Investor's independent and unbiased research and analysis of current financial markets.

                                                                                                                                                            LEGAL and DISCLAIMER

All statements and trading/investment information on this website represent solely the personal opinion of The Alternative Investor based on information available at the time of writing and are intended for educational purposes only and are not a recommendation to buy or sell securities, commodities or currencies.  The Alternative Investor is not a licensed broker or financial advisor.  The Alternative Investor presents the trading and investing information on this site in good faith based on his own research into current financial markets but cannot and does not guarantee profit and does not guarantee against any financial losses that result from using this information.  All users of this website and the information presented within it assume full responsibility for their own personal trading/investing decisions and any losses that may result from them.

Trading and investing in any financial market may involve serious risk of loss.  For this reason all traders and investors should never place more money than they can afford to lose in any individual market.  The Alternative Investor monitors several markets and encourages a balanced distribution of funds among them (and others).  The Alternative Investor recommends consulting with a professional financial advisor before making any transactions with financial ramifications.  All trading, investing and financial transactions should always be made in accordance with the appropriate laws and legal regulations in your area of jurisdiction.

The Alternative Investor is an independent researcher and analyst and receives no compensation of any kind from any individuals, groups, companies or institutions discussed on this website.