MARKETS UPDATE (3:00 pm EST)
In Monday's blog post on the broad stock market I wrote:
"We are seeing an unusual medium-term cycle manifesting in the broad stock market right now. This cycle is unusually bullish and is most likely expanding (distorting) beyond its normal length. It looks like the DOW and S&P 500 are rallying now from a sub-cycle corrective low from Dec. 29. This means it's possible we may not see the final cycle top in these two indices for several more weeks."
This week's steep rise in equities seems to be supporting the idea of a top later this month or in the first week of February (the next reversal zone for this market), but there is still the possibility of the market topping out now. That reversal zone in February is a very weak one so it would make more sense for a cycle top to be happening in the current reversal zone (which ends next Tuesday) which is stronger. The DOW and S&P 500 are also now touching projected ideal target levels for the tops to their cycles, and, of course, in terms of timing these tops are due or even overdue. Let's see if we get a case of intermarket bearish divergence early next week (one or two, but not all three, of the three market indices -DOW, S&P 500, NASDAQ- making new highs) and a signal to sell short. On the sidelines of the broad stock market.
In Monday's blog on gold and silver I wrote:
"...we could be falling into a sub-cycle low now. Ideal targets for that low would be around $1290 in gold and $16.60 in silver. If instead these metals start pushing higher to challenge or exceed last week's high(s) then we will watch for a top this week as we are still in this reversal zone through Friday."
Well, on Monday and Tuesday gold and silver did fall lower (and silver a bit lower on Wednesday), but gold only got to $1309 and silver to $16.91. Prices are now rallying from those lows. This corrective dip was too shallow for a normal sub-cycle bottom (although that is possible in a strongly bullish market). As with the broad stock market, I am going to extend the current reversal zone for this market into next Tuesday. We should note here that today gold is making a new monthly high while silver is well below its high for the month. This is a strong bearish divergence signal and could be signaling a top. That signal will be negated if silver makes a new high next week (above $17.37). Staying on the sidelines of gold and silver for now.
On Tuesday I posted an update on the crude oil market and wrote:
"There is currently a resistance line for crude prices from $60 - $63. Today's price surge was testing the upper level of that range. We are now in the dead center of a reversal zone specifically for crude (Jan. 3 - 15), and it is a good time for a sub-cycle corrective dip after a strong four week rally. The charts and cycle timing are telling us we should sell short now for a short-term correction, perhaps down to the $59 area, but increased price volatility from the Iranian rebellion is making this risky. It may be safer to just wait for a correction and then buy. As Iranian tension builds, I am much more comfortable with a long position than a short one."
All of this still applies, although I notice that there has been no major news on the Iranian rebellion since the Ayatollah's "threat" delivered on Tuesday. It is a bit disconcerting how we seem to be on the verge of a major war every other week or so (North Korea, Syria, Russia, now Iran) but then the "danger" passes and is forgotten. The rally in crude may have reached its peak yesterday when prices topped out at $64.77 (Feb. contract chart). Because we are at the end of a reversal zone, that may be it, and we could see prices start to fall now. Prices are closing the week above a line of resistance so I am not comfortable selling short here. Let's wait and see if crude can push higher next week. If we observe a strong technical reversal signal, I may consider selling short next week, but as I pointed out in Tuesday's update, our main strategy now is to wait for a modest sub-cycle correction to buy. On the sidelines of crude oil for now.
In Monday's blog post on the broad stock market I wrote:
"We are seeing an unusual medium-term cycle manifesting in the broad stock market right now. This cycle is unusually bullish and is most likely expanding (distorting) beyond its normal length. It looks like the DOW and S&P 500 are rallying now from a sub-cycle corrective low from Dec. 29. This means it's possible we may not see the final cycle top in these two indices for several more weeks."
This week's steep rise in equities seems to be supporting the idea of a top later this month or in the first week of February (the next reversal zone for this market), but there is still the possibility of the market topping out now. That reversal zone in February is a very weak one so it would make more sense for a cycle top to be happening in the current reversal zone (which ends next Tuesday) which is stronger. The DOW and S&P 500 are also now touching projected ideal target levels for the tops to their cycles, and, of course, in terms of timing these tops are due or even overdue. Let's see if we get a case of intermarket bearish divergence early next week (one or two, but not all three, of the three market indices -DOW, S&P 500, NASDAQ- making new highs) and a signal to sell short. On the sidelines of the broad stock market.
In Monday's blog on gold and silver I wrote:
"...we could be falling into a sub-cycle low now. Ideal targets for that low would be around $1290 in gold and $16.60 in silver. If instead these metals start pushing higher to challenge or exceed last week's high(s) then we will watch for a top this week as we are still in this reversal zone through Friday."
Well, on Monday and Tuesday gold and silver did fall lower (and silver a bit lower on Wednesday), but gold only got to $1309 and silver to $16.91. Prices are now rallying from those lows. This corrective dip was too shallow for a normal sub-cycle bottom (although that is possible in a strongly bullish market). As with the broad stock market, I am going to extend the current reversal zone for this market into next Tuesday. We should note here that today gold is making a new monthly high while silver is well below its high for the month. This is a strong bearish divergence signal and could be signaling a top. That signal will be negated if silver makes a new high next week (above $17.37). Staying on the sidelines of gold and silver for now.
On Tuesday I posted an update on the crude oil market and wrote:
"There is currently a resistance line for crude prices from $60 - $63. Today's price surge was testing the upper level of that range. We are now in the dead center of a reversal zone specifically for crude (Jan. 3 - 15), and it is a good time for a sub-cycle corrective dip after a strong four week rally. The charts and cycle timing are telling us we should sell short now for a short-term correction, perhaps down to the $59 area, but increased price volatility from the Iranian rebellion is making this risky. It may be safer to just wait for a correction and then buy. As Iranian tension builds, I am much more comfortable with a long position than a short one."
All of this still applies, although I notice that there has been no major news on the Iranian rebellion since the Ayatollah's "threat" delivered on Tuesday. It is a bit disconcerting how we seem to be on the verge of a major war every other week or so (North Korea, Syria, Russia, now Iran) but then the "danger" passes and is forgotten. The rally in crude may have reached its peak yesterday when prices topped out at $64.77 (Feb. contract chart). Because we are at the end of a reversal zone, that may be it, and we could see prices start to fall now. Prices are closing the week above a line of resistance so I am not comfortable selling short here. Let's wait and see if crude can push higher next week. If we observe a strong technical reversal signal, I may consider selling short next week, but as I pointed out in Tuesday's update, our main strategy now is to wait for a modest sub-cycle correction to buy. On the sidelines of crude oil for now.
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