Today the DOW and S&P 500 are breaking to new weekly highs so this triggers our stop loss for the short position in the broad stock market that we entered on Tuesday. Traders should be out of this market. Because we entered our trade very close to our stop levels (21,225 in the DOW and 2,440 in the S&P 500) we are getting out with an insignificant loss (<1%). There is a chance we are being "whipsawed" out of this trade too early. Even though we are technically out of our reversal zone (it ended Wednesday), turning points can sometimes happen outside these zones. The next reversal zone for this market is coming up around July 1, but if we get another case of intermarket bearish divergence next week, I might consider going short again. Otherwise, it seems like this market might bypass this reversal and rally to new highs over the next several weeks. We are on the sidelines of the broad stock market for now and will watch how the DOW, S&P 500 and NASDAQ move next week before considering another trade. Sold our long positions in the broad stock market today as stop loss levels were triggered.
In Monday's blog on precious metals I wrote:
"...prices are rising into a strong reversal zone specifically for precious metals this week (the center point is Wednesday), and while gold made a new weekly high today, silver did not so we have an intermarket bearish divergence signal...There is still time for both metals to push higher before reversing (the reversal zone extends through Friday), and gold may do that."
Gold and silver both pushed higher into Tuesday near the center of our reversal zone and have been falling sharply from there. We will watch for a spot to buy once this correction is complete, possibly next week. On the sidelines of gold and silver for now.
Crude oil prices made a new low yesterday ($45.20 - July contract chart) right in the center of a reversal zone specifically for crude (which extends into early next week). Crude seems to be testing its low from May 5 ($44.13) which started the current medium-term cycle. Because prices still have time to push lower in this reversal zone, and because crude's directional momentum switched to 100% bearish this week, I am going to put off buying on what could be an imminent turning point. If prices break below $44.13, it would mean the overall trend is turning bearish and we would have to reevaluate our trading strategy. Still on the sidelines of crude.