It looks like the tax reform bill is close to being passed (a vote is expected later today). Optimistic anticipation of its passing drove the broad stock market to new heights yesterday as the DOW reached and breached the 24,000 milestone. We should note that while the DOW and S&P 500 both made new all-time highs yesterday, the NASDAQ made its high on Tuesday and has been falling. This could be signaling that a top to the current medium-term cycle is near. We are now at the center of a reversal zone that extends through next Wednesday. If the tax reform bill passes with no delays, we could see these markets rally some more into next week; however, if the DOW and/or S&P 500 make new highs next week with the NASDAQ remaining below its high from Tuesday, we will have an intermarket bearish divergence set-up and a good signal to sell short. If all three indices make new highs next week, we may have to wait until the end of December for a cycle peak and another good shorting opportunity. Still on the sidelines.
In Tuesday's blog on the precious metals I wrote:
"We thus have an intermarket bearish divergence signal which could mean lower prices into this week's reversal zone for precious metals (Nov. 28 - Dec. 6 - same as the broad stock market). If that happens, and especially if one or both metals drop below their Oct. 6 lows ($1,262 in gold and $16.38 in silver), we will look to go long."
Gold and silver prices are indeed dropping into this new reversal zone. Silver has broken below its Oct. 6 low while gold is still above its $1,262 from Oct. 6 so we also have an intermarket bullish divergence signal in the middle of this reversal zone. We should be looking to go long now, but silver's directional momentum just turned 100% bearish today which makes me a bit reluctant to buy. I'm going to wait and analyze these charts more extensively this weekend before posting a buy recommendation. I will post an update sometime on Sunday. On the sidelines of gold and silver for now.
Crude oil made a low on Wednesday at $56.75 (Jan. contract chart) and prices are now rising a bit from there. There is still time for crude to drop below $55 within the current reversal zone (Nov. 28 - Dec. 6) and complete the current medium-term cycle with a bottom, but if prices push higher next week, we may have to assume the top is not yet in. If prices can get close to $60 early next week, that may be it, and we may have a good opportunity to sell short. It is late in this current medium-term cycle, and a top followed by a corrective decline and bottom is due (overdue). On the sidelines of crude for now.