In last Monday's blog on crude oil I wrote:
"If prices continue to fall, we will have to abandon the idea of a new cycle starting last week and wait for a new low and final cycle bottom due within the next two weeks. That bottom could be around $50 or even lower."
Prices did push a little lower on Tuesday and Wednesday (to $52.76) but then surged back up on Thursday and Friday (to $54.62). They went down again today (to $52.71 - Nov. contract chart). It's still not clear if the low of Oct. 9 ($51.38) was the start of a new medium-term cycle or if an older cycle bottom is still forming (with a likely target of $50 or lower). The bottom to an older cycle would be due this week (or possibly early November if it expands), but if Oct. 9 was the cycle bottom, that low should hold and more rallying will commence shortly. This ambiguous situation will keep us on the sidelines for now. Crude's direction now may depend on where the broad stock market is going, and that looks bullish to me at the moment.
The prospect of QE4 (see my last blog) and the recent interest rate cut from the Fed has had a negative impact on the U.S. Dollar Index. Last week this index plummeted sharply from 98.4 to 97.2. It looks like a relatively new medium-term cycle in the dollar could be peaking early and may now be down for at least five more months. Normally this would be good news for gold and silver prices (as they usually move counter to the U.S. dollar), but as I mentioned in my last blog, the short-term technical picture for these metals is looking bearish so we may be seeing an unusual case of the precious metals falling with the dollar. Despite last week's plunge in the greenback, gold and silver prices remained relatively flat. If QE4 generates enthusiasm for equities, investors may lose interest in the "safe havens" of precious metals and/or the U.S. Dollar. We will keep a close eye on this situation moving forward. We haven't yet given up on the longer-term bullish view of gold and silver (see Gold Update on the home page of this website).