MARKETS UPDATE (2:45 pm EST)
A significant development in crude oil took place this week with a major bearish momentum signal appearing in the price charts of crude towards the end of the week. On Thursday prices dropped to $91.65 intraday before snapping back up to close above $93. Although that was short-term bullish behavior for the day, the plunge was enough to generate a strong bearish momentum signal, and today the price plunged again and is closing the day below $92 which is bearish. Based on overall momentum we now have to declare this market bearish again. This is not so surprising because the bottom that began this new cycle in crude on April 18 was lower than the start of the previous cycle in early November and this generally indicates that the price is trending down. The reason we have been contemplating a long position (with caution) over the last three weeks is because a strong rally from
April 18 generated a medium term bullish momentum signal in early May. That signal has now been negated, so we are back to a bearish view. I know this is a little confusing if you are not following the cycles closely, but I am not flip-flopping here - the market is ! We always follow the predominant cycle and technical indicators of market direction even if high volatility changes them more frequently than we would like. We are out of this market for now, but because of this new bearish momentum we will be looking for an opportunity to go short.
The present bearishness of crude oil may have negative implications for the broad stock market as both of these markets tend to move together. The DOW still appears to be correcting off its high of May 22 and closed the week down (dropping over 200 points today) with several short-term technical indicators looking bearish, so we will continue to stand aside and wait to see if it will move lower.
Gold this week broke temporarily above a resistance level at $1400 but then closed the week just below it at $1385 (bearish behavior) while silver continued to hover just above $22. Many precious metal analysts agree that gold and silver prices are now at or close to a major bottom from which a major uptrend will begin, but the big question at the moment is whether or not they will reverse to the upside immediately or move back down to make a double bottom to the recent crash lows ($1321 in gold and now near $20 in silver) or even establish lower lows before rising again. Note that in both these scenarios a "golden opportunity" is setting up here because we are likely witnessing the start of a new cycle in the precious metals that could be bullish for at least several more years. For the moment, however, momentum indicators are still strongly bearish in both gold and silver so we will remain on the sidelines.
A significant development in crude oil took place this week with a major bearish momentum signal appearing in the price charts of crude towards the end of the week. On Thursday prices dropped to $91.65 intraday before snapping back up to close above $93. Although that was short-term bullish behavior for the day, the plunge was enough to generate a strong bearish momentum signal, and today the price plunged again and is closing the day below $92 which is bearish. Based on overall momentum we now have to declare this market bearish again. This is not so surprising because the bottom that began this new cycle in crude on April 18 was lower than the start of the previous cycle in early November and this generally indicates that the price is trending down. The reason we have been contemplating a long position (with caution) over the last three weeks is because a strong rally from
April 18 generated a medium term bullish momentum signal in early May. That signal has now been negated, so we are back to a bearish view. I know this is a little confusing if you are not following the cycles closely, but I am not flip-flopping here - the market is ! We always follow the predominant cycle and technical indicators of market direction even if high volatility changes them more frequently than we would like. We are out of this market for now, but because of this new bearish momentum we will be looking for an opportunity to go short.
The present bearishness of crude oil may have negative implications for the broad stock market as both of these markets tend to move together. The DOW still appears to be correcting off its high of May 22 and closed the week down (dropping over 200 points today) with several short-term technical indicators looking bearish, so we will continue to stand aside and wait to see if it will move lower.
Gold this week broke temporarily above a resistance level at $1400 but then closed the week just below it at $1385 (bearish behavior) while silver continued to hover just above $22. Many precious metal analysts agree that gold and silver prices are now at or close to a major bottom from which a major uptrend will begin, but the big question at the moment is whether or not they will reverse to the upside immediately or move back down to make a double bottom to the recent crash lows ($1321 in gold and now near $20 in silver) or even establish lower lows before rising again. Note that in both these scenarios a "golden opportunity" is setting up here because we are likely witnessing the start of a new cycle in the precious metals that could be bullish for at least several more years. For the moment, however, momentum indicators are still strongly bearish in both gold and silver so we will remain on the sidelines.
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