MARKETS UPDATE (8:30 pm EST)
I am posting this blog a little late as I wanted to see how the unemployment and jobs report released today would affect the markets. The report figures are giving mixed and confusing signals about the current state of the economy (hiring slowed yet unemployment rates dropped). The numbers, however, are not giving any overwhelming evidence that the economy is standing on its own, and because of this investors are likely feeling relieved that the spectre of QE tapering is still a good distance away. The broad stock market dropped early in the day but then steadily regained that loss, and the DOW, S&P 500 and NASDAQ all closed the week at new highs. We are now moving out of a time period where strong market reversals can occur (although it could extend into the middle of next week) and we are not seeing any signs of a correction yet. There is another reversal zone coming up in late August, so either the market starts to turn down now or there is a possibility of seeing more rallying into the last week of August and then a significant correction. The DOW has shown practically no downward correcting over the last two weeks so it is overbought, and I am wondering if today's market enthusiasm from the jobs report will be forgotten by Monday and if we could see a downturn begin next week. The alternative scenario is that the market is in a "blowoff" mode (very possible) and continues into late August with enthusiastic rallying. I am going to wait until next week to decide what strategy is appropriate at this point. Still out of this market.
Gold dropped below its support at $1300 in the overnight market but then snapped back up and closed the day around $1309. This is bullish behavior and gives support to our long position right now. Silver is maintaining its position just under $20 and, like gold, seems reluctant to push down further. Medium-term momentum remains bullish so I am going to stay with my long positions in both gold and silver for now. Note that I am not heavily invested in these metals right now and I am trading short-term until I can be more certain that the final long-term cycle bottoms in gold and silver are in. Once those bottoms have been established I am planning to be heavily invested in precious metals as the medium and long-term picture for both gold and silver will then be very bullish. (See Brief Overview of Financial Markets for Second Half of 2013.)
After studying the chart pattern forming in crude oil prices right now, I am going to change my strategy a bit from the one I suggested in my last blog. There is some disagreement among the analysts I follow as to what direction oil is taking from here. Oil prices are in a position similar to the broad stock market at the moment; that is, they are both due (overdue) for a signifcant downward correction, but there is a possibility of prices "blowing off" into the end of the month before a major downturn. Unlike the DOW, however, the price of crude has corrected over the last few weeks (over 5%), but based on chart and cycle analysis I think a bigger correction is imminent and will either start now or after further rallying into the end of this month. Based on all this, my main strategy at this point will be to watch for another downturn to possibly sell short and then to go long at the bottom of that correction because that will likely mark the end of a significant cycle in oil and the start of a new one. We remain out of this market for now.
I am posting this blog a little late as I wanted to see how the unemployment and jobs report released today would affect the markets. The report figures are giving mixed and confusing signals about the current state of the economy (hiring slowed yet unemployment rates dropped). The numbers, however, are not giving any overwhelming evidence that the economy is standing on its own, and because of this investors are likely feeling relieved that the spectre of QE tapering is still a good distance away. The broad stock market dropped early in the day but then steadily regained that loss, and the DOW, S&P 500 and NASDAQ all closed the week at new highs. We are now moving out of a time period where strong market reversals can occur (although it could extend into the middle of next week) and we are not seeing any signs of a correction yet. There is another reversal zone coming up in late August, so either the market starts to turn down now or there is a possibility of seeing more rallying into the last week of August and then a significant correction. The DOW has shown practically no downward correcting over the last two weeks so it is overbought, and I am wondering if today's market enthusiasm from the jobs report will be forgotten by Monday and if we could see a downturn begin next week. The alternative scenario is that the market is in a "blowoff" mode (very possible) and continues into late August with enthusiastic rallying. I am going to wait until next week to decide what strategy is appropriate at this point. Still out of this market.
Gold dropped below its support at $1300 in the overnight market but then snapped back up and closed the day around $1309. This is bullish behavior and gives support to our long position right now. Silver is maintaining its position just under $20 and, like gold, seems reluctant to push down further. Medium-term momentum remains bullish so I am going to stay with my long positions in both gold and silver for now. Note that I am not heavily invested in these metals right now and I am trading short-term until I can be more certain that the final long-term cycle bottoms in gold and silver are in. Once those bottoms have been established I am planning to be heavily invested in precious metals as the medium and long-term picture for both gold and silver will then be very bullish. (See Brief Overview of Financial Markets for Second Half of 2013.)
After studying the chart pattern forming in crude oil prices right now, I am going to change my strategy a bit from the one I suggested in my last blog. There is some disagreement among the analysts I follow as to what direction oil is taking from here. Oil prices are in a position similar to the broad stock market at the moment; that is, they are both due (overdue) for a signifcant downward correction, but there is a possibility of prices "blowing off" into the end of the month before a major downturn. Unlike the DOW, however, the price of crude has corrected over the last few weeks (over 5%), but based on chart and cycle analysis I think a bigger correction is imminent and will either start now or after further rallying into the end of this month. Based on all this, my main strategy at this point will be to watch for another downturn to possibly sell short and then to go long at the bottom of that correction because that will likely mark the end of a significant cycle in oil and the start of a new one. We remain out of this market for now.
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