MARKETS UPDATE (2:00 pm EST)
On Wednesday of this week U.S. Federal Reserve Chairman Ben Bernanke spoke before Congress and basically indicated that he would continue the Fed's low interest rate policies for the time being; however, he also stated that the Fed "...actively seeks economic conditions consistent with sustainably higher interest rates...", hinting that this near zero interest rate policy cannot go on forever. Even a slight mention of the possibility of raising interest rates seems to be enough to spook the stock market as the DOW rose to a high of 15,542 on Wednesday morning just before Bernanke's speech but then fell steeply after his address to close the day just above 15,300. People who are bullish on the stock market sometimes ask me what could cause another crash similar to the one we had in 2008-2009. In the currently fragile global economy there are many things that could do this, but in the U.S. the raising of interest rates has to be high on the list of factors that could easily trigger panic selling in the market. This is just one of many reasons to be cautious with the broad stock market at this time.
As mentioned in the last blog, I am expecting some correction now in the broad stock market, and that drop on Wednesday may be the start of it. There is a good chance this correction will be small (maybe only to the 15000 level) and we will look to buy it. As always, we will watch carefully for any change in momentum that could indicate a more serious correction. The current momentum in the DOW, S&P 500 and NASDAQ is still strongly bullish. Still on the sidelines here and waiting to go long.
Gold and silver seem to have paused this week as if they are trying to decide what direction to take at this juncture -down to make secondary crash lows or up in a rally away from the already established bottom. The market analysts I follow are a little divided on this. Although there are several cycle and technical indicators pointing to a strong rally now, there are also some bearish indicators. After breaking down through its crash low of $22 last Sunday and then quickly rising above it (bullish behavior), silver now seems stuck just above this price. Gold was a little more active than silver this week, but prices also appear to be stuck in a narrow range between $1350 and $1400 (there is some resistance in the $1400 area). Overall momentum indicators are still mostly bearish for both metals. I am going to remain on the sidelines for now with a close eye on momentum signals. Even though this market appears to be setting up for a rally, I don't want to jump the gun before I see stronger bullish momentum.
Crude oil remains unchanged over the last few days. Crude seems to be taking its cues from the broad stock market and, as in that market, I am expecting a correction in crude as well. This market is also now in the center of a timing window that makes a price reversal more likely, so it could turn down here (or perhaps rise a bit more over the next few days and then drop). Momentum in this market is at the moment mostly bullish, so any corrections now could be small and we would look to buy them. Still out of this market.
On Wednesday of this week U.S. Federal Reserve Chairman Ben Bernanke spoke before Congress and basically indicated that he would continue the Fed's low interest rate policies for the time being; however, he also stated that the Fed "...actively seeks economic conditions consistent with sustainably higher interest rates...", hinting that this near zero interest rate policy cannot go on forever. Even a slight mention of the possibility of raising interest rates seems to be enough to spook the stock market as the DOW rose to a high of 15,542 on Wednesday morning just before Bernanke's speech but then fell steeply after his address to close the day just above 15,300. People who are bullish on the stock market sometimes ask me what could cause another crash similar to the one we had in 2008-2009. In the currently fragile global economy there are many things that could do this, but in the U.S. the raising of interest rates has to be high on the list of factors that could easily trigger panic selling in the market. This is just one of many reasons to be cautious with the broad stock market at this time.
As mentioned in the last blog, I am expecting some correction now in the broad stock market, and that drop on Wednesday may be the start of it. There is a good chance this correction will be small (maybe only to the 15000 level) and we will look to buy it. As always, we will watch carefully for any change in momentum that could indicate a more serious correction. The current momentum in the DOW, S&P 500 and NASDAQ is still strongly bullish. Still on the sidelines here and waiting to go long.
Gold and silver seem to have paused this week as if they are trying to decide what direction to take at this juncture -down to make secondary crash lows or up in a rally away from the already established bottom. The market analysts I follow are a little divided on this. Although there are several cycle and technical indicators pointing to a strong rally now, there are also some bearish indicators. After breaking down through its crash low of $22 last Sunday and then quickly rising above it (bullish behavior), silver now seems stuck just above this price. Gold was a little more active than silver this week, but prices also appear to be stuck in a narrow range between $1350 and $1400 (there is some resistance in the $1400 area). Overall momentum indicators are still mostly bearish for both metals. I am going to remain on the sidelines for now with a close eye on momentum signals. Even though this market appears to be setting up for a rally, I don't want to jump the gun before I see stronger bullish momentum.
Crude oil remains unchanged over the last few days. Crude seems to be taking its cues from the broad stock market and, as in that market, I am expecting a correction in crude as well. This market is also now in the center of a timing window that makes a price reversal more likely, so it could turn down here (or perhaps rise a bit more over the next few days and then drop). Momentum in this market is at the moment mostly bullish, so any corrections now could be small and we would look to buy them. Still out of this market.
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