News of the downing of a Malaysia Airlines jetliner over eastern Ukraine seemed to have at least a short-term influence on several financial markets yesterday. This horrific incident, of course, is now exacerbating tensions between Russia, Ukraine and the West and could lead to longer-term instability in markets as well. Today's markets, however, seem calmer so yesterday's surges and dips may have been "knee-jerk" reactions to the news. My deepest sympathies go out to the victims of this senseless tragedy.
The DOW dropped 161 points yesterday from a new all-time high (but recovered smartly today and rose 122 points). The news of yesterdays airline crash was likely responsible for the plunge as geopolitical instability always makes the stock market nervous. The S&P 500 has still not exceeded its July 3rd all-time high so we still have a case of potential intermarket bearish divergence with the DOW (which will be negated if the S&P does make a new high). We are now at the center of a timing window for a likely reversal down in the broad stock market, but directional momentum and some other short-term indicators continue to suggest more upside so I am not ready to sell short yet. I am still anticipating a significant high anytime by early August to be followed by an 8 -10% correction and will continue to watch for an ideal spot to sell short. Still on the sidelines.
Panic in equity markets will usually boost the price of precious metals, and yesterday's surge in gold and silver following the DOW's drop was therefore not surprising. These metals are down today, however, so investors may not be that worried about the problems in Ukraine. The big question continues to be whether or not the precious metals are starting to break out now. Could we see more downside in prices before finding a bottom to buy? Well, yes we could. The recent bottoms in gold and silver (on July 15 and July 16 respectively) were a little early and did not reach down to ideal target prices, directional momentum is still mixed bullish and bearish for both metals, and several other short-term indicators are bearish. Ideally, gold and silver prices will move lower into early next week and give us a good spot to buy. If the precious metals are breaking out now we should soon see bullish changes in momentum to confirm it and that will also alert us to go long. On the sidelines and waiting to buy.
Crude oil prices surged dramatically yesterday on the airline crash news. This is yet another example of synchronicity between market cycles and global events. The cycle structure in recent crude charts was suggestive of an imminent sharp surge in prices. I haven't gone long because other technical indicators are suggesting that this rally could be short-lived and followed by a significant correction (I try to avoid short-term trading). We are now in a timing zone (over the next three weeks) when crude could make a significant directional trend reversal. If prices continue to rise we may see this market suddenly turn bearish (perhaps in sync with the broad stock market). Out of this market for now.