All three broad stock market indices made new highs yesterday so the intermarket bearish divergence signal from earlier in the week is now negated. However, the DOW made a new high today while both the S&P 500 and NASDAQ dropped. This could be signaling the start of a correction. If not, we could easily see equities push higher into next week. I am going to extend the reversal period for equities, precious metals, crude oil and currencies into early next week. We are not getting any strong sell signals this week in the broad stock market so I am not comfortable selling short just yet. If we see bearish divergence next Monday or Tuesday in equities, however, we will consider selling short. Still on the sidelines of this market.
Gold and especially silver prices have been rising this week, but both metals are making new highs in this current reversal zone and are thus susceptible to a reversal back down. As with equities, we may have to wait until next week for a bearish divergence signal (where gold or silver, but not both, makes a new weekly high). Ideally, I would like to see one or both of these metals break back below their Oct. 6 lows to form an older cycle bottom which would be an ideal place to buy. If those lows hold, however, we may have to assume that new cycles started on Oct. 6 and this market is already turning bullish. On the sidelines of gold and silver for now.
Crude oil prices may have topped out on Wednesday at $55.22 (Dec. contract chart), but that $55 resistance area is being challenged again as I write this in the early AM hours of Friday. We have a tight stop loss at $55.60 for our short position in crude that we entered early Wednesday. Let's hold that short position and see if this market can turn down now in this reversal zone (which ends Friday but may be extended into next Tuesday) and make a final correction down to a cycle bottom in the $47 - $48 area.