MARKETS UPDATE (12:30 am EDT)
Gold prices have continued their steep drop from Monday and may be finding some support now around $1110. Silver's steep drop on Monday quickly leveled off just above support at $14.50. There are some short-term timing
signals indicating the possibility of a bounce in prices from here, but any rally may be cut short as it encounters a major reversal zone for gold (and silver) at the end of next week. A short-term rally into next week could present us with a good shorting opportunity in silver (we already have a short position in gold) as long as it doesn't get too far (we don't want to see silver prices above $15.50 and especially not above $15.90). Directional momentum remains mixed bullish and bearish for gold and 100% bearish for silver so I am still favoring the idea of more short-term downside in these metals. Holding my short position in gold and possibly looking to go short in silver next week.
After a nearly two week plunge, the broad stock market is finding some support with the DOW at 16,000 and the S&P 500 at 1880. This market is certainly entitled to a breather and relief rally from its steep drop, but as with the precious metals market, next week brings us into another strong reversal zone so any rally may not get very far before turning down again. Unlike gold and silver, technical signals in the broad stock market are not so ambiguous as directional momentum in all three major indices (DOW, S&P 500 and NASDAQ) recently shifted to 100% bearish. The last three weeks of October could be very volatile for equities, and we could see more than one significant reversal in these markets. Two significant turning points could be around Oct. 9-12 and Oct. 19-20 so traders should watch those dates carefully. My strategy for now is to hold my short position and "ride out" any rally into the end of next week. If these indices rally next week and the DOW stays below 16,800 and the S&P 500 below 2000, then we may have a good opportunity to add on to our short positions (or go short if on the sidelines). There is a slight chance that Aug. 24 was the final bottom to this correction in equity markets (the S&P 500 is testing that bottom now), but cycle, timing, and technical studies are strongly suggesting that bottom will be broken soon, and we should see new lows into October/November. Once those lows are in and the correction is over we will have an excellent buying opportunity, but for now I am remaining short in the broad stock market.
The U.S. Dollar Index has been looking quite bullish over the last week or two. After two attempts to break and hold above 96 since late August, the dollar may be succeeding on its third try as a strong bullish momentum signal appeared in its chart last Friday (directional momentum is now 100% bullish) and the last two days have seen the index close above 96. A dollar surge would likely force precious metal prices lower. This may happen, but could the dollar take a dip first and push the metals higher? Yes, anything is possible in these markets right now; however, if the dollar drops, there is strong support at 95, and it could easily resume its rally from there, especially since its directional momentum is now strongly bullish. To be bullish longer-term, the dollar needs to break clearly above 98. Any break below 93 would turn the dollar bearish. The greenback may oscillate within this range for several more weeks. Because the dollar appears to be following the broad stock market, any rally in equities now could boost the dollar (and push gold and silver down).
Crude oil prices have been stubbornly flat (around $45) since early September. Current cycle studies suggest a new cycle began on Aug. 24 at $38.54, but the high of $50 on Aug. 31 was too early for a cycle top so it is likely prices will go higher before a significant correction kicks in (unless this market is turning very bearish). As with the broad stock market and the precious metals, the end of next week (and early the following week) is a strong reversal zone for crude oil. If crude prices can rally above $50 into that time frame, we may get a good opportunity to sell short.
Out of this market for now.
Gold prices have continued their steep drop from Monday and may be finding some support now around $1110. Silver's steep drop on Monday quickly leveled off just above support at $14.50. There are some short-term timing
signals indicating the possibility of a bounce in prices from here, but any rally may be cut short as it encounters a major reversal zone for gold (and silver) at the end of next week. A short-term rally into next week could present us with a good shorting opportunity in silver (we already have a short position in gold) as long as it doesn't get too far (we don't want to see silver prices above $15.50 and especially not above $15.90). Directional momentum remains mixed bullish and bearish for gold and 100% bearish for silver so I am still favoring the idea of more short-term downside in these metals. Holding my short position in gold and possibly looking to go short in silver next week.
After a nearly two week plunge, the broad stock market is finding some support with the DOW at 16,000 and the S&P 500 at 1880. This market is certainly entitled to a breather and relief rally from its steep drop, but as with the precious metals market, next week brings us into another strong reversal zone so any rally may not get very far before turning down again. Unlike gold and silver, technical signals in the broad stock market are not so ambiguous as directional momentum in all three major indices (DOW, S&P 500 and NASDAQ) recently shifted to 100% bearish. The last three weeks of October could be very volatile for equities, and we could see more than one significant reversal in these markets. Two significant turning points could be around Oct. 9-12 and Oct. 19-20 so traders should watch those dates carefully. My strategy for now is to hold my short position and "ride out" any rally into the end of next week. If these indices rally next week and the DOW stays below 16,800 and the S&P 500 below 2000, then we may have a good opportunity to add on to our short positions (or go short if on the sidelines). There is a slight chance that Aug. 24 was the final bottom to this correction in equity markets (the S&P 500 is testing that bottom now), but cycle, timing, and technical studies are strongly suggesting that bottom will be broken soon, and we should see new lows into October/November. Once those lows are in and the correction is over we will have an excellent buying opportunity, but for now I am remaining short in the broad stock market.
The U.S. Dollar Index has been looking quite bullish over the last week or two. After two attempts to break and hold above 96 since late August, the dollar may be succeeding on its third try as a strong bullish momentum signal appeared in its chart last Friday (directional momentum is now 100% bullish) and the last two days have seen the index close above 96. A dollar surge would likely force precious metal prices lower. This may happen, but could the dollar take a dip first and push the metals higher? Yes, anything is possible in these markets right now; however, if the dollar drops, there is strong support at 95, and it could easily resume its rally from there, especially since its directional momentum is now strongly bullish. To be bullish longer-term, the dollar needs to break clearly above 98. Any break below 93 would turn the dollar bearish. The greenback may oscillate within this range for several more weeks. Because the dollar appears to be following the broad stock market, any rally in equities now could boost the dollar (and push gold and silver down).
Crude oil prices have been stubbornly flat (around $45) since early September. Current cycle studies suggest a new cycle began on Aug. 24 at $38.54, but the high of $50 on Aug. 31 was too early for a cycle top so it is likely prices will go higher before a significant correction kicks in (unless this market is turning very bearish). As with the broad stock market and the precious metals, the end of next week (and early the following week) is a strong reversal zone for crude oil. If crude prices can rally above $50 into that time frame, we may get a good opportunity to sell short.
Out of this market for now.
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