MARKETS UPDATE (8:30 pm EST)
Here we are on the last day of the current reversal zone for several markets. Yesterday the DOW, S&P 500 and NASDAQ all made new all-time record highs with the DOW closing above a 20,000 milestone. This is all very bullish and shows that "Trumphoria" is still influencing the broad stock market. There is still a small possibility that the markets could turn down from here (we are still in the reversal zone), but that seems unlikely now. It is far more likely that the pivot point for this reversal zone was the low on Jan. 19 in the DOW at 19,678 and the low on Jan. 23 in the S&P 500 at 2,257. If this is the case, these markets could now rally strongly into late February (the next strong reversal zone). In my blog on Monday I wrote:
"Could stronger selling kick in over the next several days? Maybe, but we are now in the center of another reversal zone (the pivot point could be Wednesday/Thursday) and the markets are falling into it. The S&P 500 and NASDAQ are making new weekly lows today while the DOW is not so we have a potential case of bullish intermarket divergence in this reversal zone. The current cycle patterns also allow for a significant bottom now. Even though the current reversal zone is not as strong as the last one in early January, the bullish "Trumphoria" factor could give it extra strength in this current set-up."
So it looks like Trumphoria has turned this market back up and could keep it up for at least several more weeks. A strong rally into the last week of February could set up another opportunity to sell short, but we will deal with that if and when it comes. For now, our strategy is bullish and we will look to buy any short-term dips that stay above the lows I mentioned above (19,678 in the DOW and 2,257 in the S&P 500). Even if those lows hold, however, our bullish view might be in jeopardy if the DOW starts closing back below that 20,000 milestone level (which has major "psychological" significance in the minds of investors). On the sidelines of the broad stock market for now.
I am still not certain if gold and silver started new medium-term cycles in December. As I stated in Monday's blog:
"The cycle pattern in gold and silver is still not clear. It is possible that both metals started new medium-term cycles in the second half of December, but this isn't confirmed yet. If they did, then this market could turn very bullish. This entire week could be a reversal zone for the precious metals (with pivot points especially likely on Tuesday and Friday) and prices have been rising. It would therefore not be unusual to see gold and silver back down at some point this week, especially as both metals are now encountering strong resistance areas in their charts....If these are indeed new cycles then any correction now shouldn't be serious and may be a good opportunity to buy. If gold moves down to the $1,170 area and silver towards $16.50, I may consider a long position this week. At some point (perhaps after a small correction) gold will have to close above $1,220 and silver above $17.50 to confirm any new bullish trend."
Well, both gold and silver did turn down sharply on Tuesday, fell significantly Wednesday, Thursday and early today (but prices did not get down to our targets, although they got close), and both metals closed up today (especially silver). Could today be another turning point for a reversal up and the start of a bullish rally? Maybe, but current technical signals are suggesting the possibility of lower prices. If gold and silver are still completing an older cycle (i.e. if December was not the start of a new cycle) then we could indeed see prices go lower over the next several weeks that could test or break below those December lows ($1,124 in gold and $15.65 in silver). I am going to hold off buying for now. If prices continue to rise past Tuesday next week (and especially if gold exceeds $1,220 and silver exceeds $17.40) then the bullish scenario (newer cycles) will be confirmed. We may have to wait for that to happen before buying; however, if prices fall closer to our targets ($1,170 in gold and $16.50 in silver) early next week, I may consider buying with a close stop loss just beneath those lows. Still on the sidelines of gold and silver.
The bullish or bearish direction of the precious metals may depend in large part on the U.S. dollar. Last week the U.S. Dollar Index broke below a strong support line at 101, and it also broke below the lower line of a strong uptrend channel that had been in place since October 2016 (very bearish). Both of these levels are now resistance to any possible rally in the dollar (the lower channel line is currently at 102.5 and rising). This week the dollar found support at the 100 level and is now rising again towards 101. If this index can push a bit higher next week, it could send gold and silver prices down closer to our targets. Still, the dollar may not get beyond 102.5 (or even 101) before it turns back down (and sends gold and silver back up). The current medium-term cycle of the U.S. dollar suggests that the greenback may make a significant bottom in late February. This implies that any rally now will be turned back by these two resistance areas, and the dollar could move to lower levels over the next several weeks. That would be bullish for gold and silver.
Crude oil prices still seem to be caught in a congestion zone between $52 and $54 (March contract chart). A major reversal zone relevant to crude is coming up in the second week of February (Feb. 7 - 15) so we will now focus on that time for a possible turning point in crude prices. If prices start closing below $51.63, we could see a bottom at that time to buy. But if we see a rally into mid-February that tests or exceeds $56.18, we may have a good spot to sell short. On the sidelines of crude oil for now.
Here we are on the last day of the current reversal zone for several markets. Yesterday the DOW, S&P 500 and NASDAQ all made new all-time record highs with the DOW closing above a 20,000 milestone. This is all very bullish and shows that "Trumphoria" is still influencing the broad stock market. There is still a small possibility that the markets could turn down from here (we are still in the reversal zone), but that seems unlikely now. It is far more likely that the pivot point for this reversal zone was the low on Jan. 19 in the DOW at 19,678 and the low on Jan. 23 in the S&P 500 at 2,257. If this is the case, these markets could now rally strongly into late February (the next strong reversal zone). In my blog on Monday I wrote:
"Could stronger selling kick in over the next several days? Maybe, but we are now in the center of another reversal zone (the pivot point could be Wednesday/Thursday) and the markets are falling into it. The S&P 500 and NASDAQ are making new weekly lows today while the DOW is not so we have a potential case of bullish intermarket divergence in this reversal zone. The current cycle patterns also allow for a significant bottom now. Even though the current reversal zone is not as strong as the last one in early January, the bullish "Trumphoria" factor could give it extra strength in this current set-up."
So it looks like Trumphoria has turned this market back up and could keep it up for at least several more weeks. A strong rally into the last week of February could set up another opportunity to sell short, but we will deal with that if and when it comes. For now, our strategy is bullish and we will look to buy any short-term dips that stay above the lows I mentioned above (19,678 in the DOW and 2,257 in the S&P 500). Even if those lows hold, however, our bullish view might be in jeopardy if the DOW starts closing back below that 20,000 milestone level (which has major "psychological" significance in the minds of investors). On the sidelines of the broad stock market for now.
I am still not certain if gold and silver started new medium-term cycles in December. As I stated in Monday's blog:
"The cycle pattern in gold and silver is still not clear. It is possible that both metals started new medium-term cycles in the second half of December, but this isn't confirmed yet. If they did, then this market could turn very bullish. This entire week could be a reversal zone for the precious metals (with pivot points especially likely on Tuesday and Friday) and prices have been rising. It would therefore not be unusual to see gold and silver back down at some point this week, especially as both metals are now encountering strong resistance areas in their charts....If these are indeed new cycles then any correction now shouldn't be serious and may be a good opportunity to buy. If gold moves down to the $1,170 area and silver towards $16.50, I may consider a long position this week. At some point (perhaps after a small correction) gold will have to close above $1,220 and silver above $17.50 to confirm any new bullish trend."
Well, both gold and silver did turn down sharply on Tuesday, fell significantly Wednesday, Thursday and early today (but prices did not get down to our targets, although they got close), and both metals closed up today (especially silver). Could today be another turning point for a reversal up and the start of a bullish rally? Maybe, but current technical signals are suggesting the possibility of lower prices. If gold and silver are still completing an older cycle (i.e. if December was not the start of a new cycle) then we could indeed see prices go lower over the next several weeks that could test or break below those December lows ($1,124 in gold and $15.65 in silver). I am going to hold off buying for now. If prices continue to rise past Tuesday next week (and especially if gold exceeds $1,220 and silver exceeds $17.40) then the bullish scenario (newer cycles) will be confirmed. We may have to wait for that to happen before buying; however, if prices fall closer to our targets ($1,170 in gold and $16.50 in silver) early next week, I may consider buying with a close stop loss just beneath those lows. Still on the sidelines of gold and silver.
The bullish or bearish direction of the precious metals may depend in large part on the U.S. dollar. Last week the U.S. Dollar Index broke below a strong support line at 101, and it also broke below the lower line of a strong uptrend channel that had been in place since October 2016 (very bearish). Both of these levels are now resistance to any possible rally in the dollar (the lower channel line is currently at 102.5 and rising). This week the dollar found support at the 100 level and is now rising again towards 101. If this index can push a bit higher next week, it could send gold and silver prices down closer to our targets. Still, the dollar may not get beyond 102.5 (or even 101) before it turns back down (and sends gold and silver back up). The current medium-term cycle of the U.S. dollar suggests that the greenback may make a significant bottom in late February. This implies that any rally now will be turned back by these two resistance areas, and the dollar could move to lower levels over the next several weeks. That would be bullish for gold and silver.
Crude oil prices still seem to be caught in a congestion zone between $52 and $54 (March contract chart). A major reversal zone relevant to crude is coming up in the second week of February (Feb. 7 - 15) so we will now focus on that time for a possible turning point in crude prices. If prices start closing below $51.63, we could see a bottom at that time to buy. But if we see a rally into mid-February that tests or exceeds $56.18, we may have a good spot to sell short. On the sidelines of crude oil for now.
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