There has been little change in the condition of the financial markets since my last blog on Monday and I am therefore remaining on the sidelines of the broad stock market, crude oil, and the precious metals for now.
The DOW stayed mostly between 16,200 and 16,400 this week and remains indecisive in its directional trend (with mixed bullish and bearish momentum indicators). A brief surge to 16,466 on Wednesday was followed by a strong down day on Thursday, so it appears this market does not want to make a new high just yet. The S&P 500 charts continue to show strong bullish momentum while the NASDAQ and DOW remain mixed. All of these mixed signals are keeping me out of the broad stock market for now.
Gold and silver fell strongly this week with gold now approaching a support level around $1280 and silver pausing today at a $19.50 support area. It is too early to tell if these are significant bottoms, especially since the short-term cycles are suggesting a longer (short-term) correction in gold and silver. Directional momentum remains mixed bullish and bearish in both metals as well as in the precious metal mining company stock indices HUI and XAU. I am staying on the sidelines here as the correction may not be over. As I mentioned in Monday's blog, this bearish drop is most likely a short-term correction. The overall long-term bullish picture for gold and silver remains intact and I am still looking to go long in both metals once this correction has bottomed.
Interestingly, the U.S. Dollar Index appears to be holding above 80 after breaking through that level two weeks ago when Federal Reserve chairwoman Janet Yellen suggested a specific time for the raising of short-term interest rates (early 2015). Momentum is now mixed bullish and bearish in this index. It is too early to tell if the dollar is actually breaking into a new uptrend; however, there are some technical patterns in the chart of the dollar suggesting that this new rally will not get very far before turning down again. We will keep a close eye on this as precious metals tend to move opposite the dollar, and a resumption of the dollar's downtrend could signal a bullish reversal in gold and silver.
Crude oil prices rose Thursday and today, supposedly based on positive U.S. economic data and increasing tensions in Ukraine. Just a few days ago a U.S. congressional hearing was considering the selling of some of America's emergency oil reserves to depress the price of oil as punishment to Putin for taking over Crimea (oil sales being a major component of the Russian economy). If the U.S. follows through with this it could send crude prices back down. As with the broad stock market, the technical picture for crude oil is a little confusing at the moment so I am remaining on the sidelines.