MARKETS UPDATE (11:00 pm EDT)
We are now two days into our new reversal zone (Oct. 5 - 16) and the DOW today made a new weekly, monthly, and new low in its current medium-term cycle (that began on Aug. 25) before bouncing back strongly and closing the day with a 288 point gain. Although the S&P 500 did not make a new low today (it already made a new low in its medium-term cycle on Tuesday), it also closed the day with a significant gain. The NASDAQ also dipped then rallied today with a strong finish, but its most recent medium-term cycle low was last week (Sept. 27). OK, how do we interpret all this?
We are still holding the idea that all three indices started new medium-term cycles in August (the DOW with its low of 34,029 on Aug.25, and the S&P 500 and NASDAQ on AUG. 18 with their lows of 4,336 and 13,162, respectively). All three indices are technically bearish now because they have fallen well below the start of their cycles. Today's low of 32,847 in the DOW is likely a significant sub-cycle bottom that is due this week or next. Tuesday's low in the S&P 500 (4,216) was also likely a sub-cycle bottom also due this week or next. The NASDAQ's low of 12,963 on Sept. 27 may also have been a sub-cycle bottom, but it could form a lower low next week and still be on time (as could the DOW and S&P 500).
Today's bullish behavior suggests more rallying into the main part of our reversal zone next week, so for now, let's assume these indices have made their sub-cycle lows and will rally to the next sub-cycle top next week. If this happens, we will be looking to sell short at this top if the parameters look right as it is still early in these new bearish medium-term cycles, and they may be falling much lower. For now, we stay on the sidelines of the broad stock market.
Gold made a new low for the week today at $1812. Silver's new low for the week came on Tuesday at $20.70. Gold's low is falling inside our new reversal zone (Oct. 5 - 16 ), but silver's low was outside it. Next week is the center of this reversal zone. Furthermore, every day next week could be a potential "pivot point" for both gold and silver (with Wednesday and Thursday being the strongest window for a "pivot" - i.e. reversal). It would be ideal to see one or both metals edge lower into the middle of next week for a significant cycle bottom to buy.
Gold is now in our price range of $1780 - $1855 for a bottom, and today's low at $1812 could be it. But there is room to go lower next week. We don't have a specific target for silver, but we want to see prices stay above $19.95 (Tuesday's low was $20.70). Ideally, we would also like to see a bullish divergence signal (i.e. gold or silver, but not both, make a new weekly low). We didn't get that this week, but we might next week.
If gold stays above $1780, it could rally again to eventually challenge the all-time highs at $2070. Silver could also rally back to the $27 - $35 area (as long as it can stay above $19.95). This is why we are looking to go long near the bottom of any medium-term cycle low now in both metals. For now, we remain on the sidelines of both metals.
The U.S. Dollar Index has been falling since Tuesday, but is now testing a strong support line at 106, and it's making these lows inside our new reversal zone. A bounce or relief rally back up could be imminent, and that would put downward pressure on gold and silver prices - perhaps into next week.
Crude oil prices fell very sharply this week and briefly touched $81.50 (Nov. contract chart) before closing at $82.79. In Monday's blog on crude I wrote:
"If prices continue to fall towards the 45-day moving average (around $84.63), we will have to go back to the idea that an older medium-term cycle is completing with a steep fall to the final cycle low somewhere below $83. Otherwise, we will wait for another 3-8 day correction for a sub-cycle bottom in a new medium-term cycle (that started on Aug.24) that could land anywhere between the 15-day and 45-day moving averages. Of course, our new reversal zone Oct. 5 - 16 will be a good time frame for any bottom, so we may be looking to buy soon."
Well, prices are now well below the 45-day moving average, so this looks like the final fall to the bottom of an older medium-term cycle. We are also now below $83 in the range of a final bottom, and we have just entered our new reversal zone. But the correction down so far has only lasted six days. Usually a final correction involves a 2 - 5 week decline. Next week will be the second week, and it's in the center of the reversal zone. Let's wait and see if prices can go lower next week and then consider going long. We are still on the sidelines of crude.
We are now two days into our new reversal zone (Oct. 5 - 16) and the DOW today made a new weekly, monthly, and new low in its current medium-term cycle (that began on Aug. 25) before bouncing back strongly and closing the day with a 288 point gain. Although the S&P 500 did not make a new low today (it already made a new low in its medium-term cycle on Tuesday), it also closed the day with a significant gain. The NASDAQ also dipped then rallied today with a strong finish, but its most recent medium-term cycle low was last week (Sept. 27). OK, how do we interpret all this?
We are still holding the idea that all three indices started new medium-term cycles in August (the DOW with its low of 34,029 on Aug.25, and the S&P 500 and NASDAQ on AUG. 18 with their lows of 4,336 and 13,162, respectively). All three indices are technically bearish now because they have fallen well below the start of their cycles. Today's low of 32,847 in the DOW is likely a significant sub-cycle bottom that is due this week or next. Tuesday's low in the S&P 500 (4,216) was also likely a sub-cycle bottom also due this week or next. The NASDAQ's low of 12,963 on Sept. 27 may also have been a sub-cycle bottom, but it could form a lower low next week and still be on time (as could the DOW and S&P 500).
Today's bullish behavior suggests more rallying into the main part of our reversal zone next week, so for now, let's assume these indices have made their sub-cycle lows and will rally to the next sub-cycle top next week. If this happens, we will be looking to sell short at this top if the parameters look right as it is still early in these new bearish medium-term cycles, and they may be falling much lower. For now, we stay on the sidelines of the broad stock market.
Gold made a new low for the week today at $1812. Silver's new low for the week came on Tuesday at $20.70. Gold's low is falling inside our new reversal zone (Oct. 5 - 16 ), but silver's low was outside it. Next week is the center of this reversal zone. Furthermore, every day next week could be a potential "pivot point" for both gold and silver (with Wednesday and Thursday being the strongest window for a "pivot" - i.e. reversal). It would be ideal to see one or both metals edge lower into the middle of next week for a significant cycle bottom to buy.
Gold is now in our price range of $1780 - $1855 for a bottom, and today's low at $1812 could be it. But there is room to go lower next week. We don't have a specific target for silver, but we want to see prices stay above $19.95 (Tuesday's low was $20.70). Ideally, we would also like to see a bullish divergence signal (i.e. gold or silver, but not both, make a new weekly low). We didn't get that this week, but we might next week.
If gold stays above $1780, it could rally again to eventually challenge the all-time highs at $2070. Silver could also rally back to the $27 - $35 area (as long as it can stay above $19.95). This is why we are looking to go long near the bottom of any medium-term cycle low now in both metals. For now, we remain on the sidelines of both metals.
The U.S. Dollar Index has been falling since Tuesday, but is now testing a strong support line at 106, and it's making these lows inside our new reversal zone. A bounce or relief rally back up could be imminent, and that would put downward pressure on gold and silver prices - perhaps into next week.
Crude oil prices fell very sharply this week and briefly touched $81.50 (Nov. contract chart) before closing at $82.79. In Monday's blog on crude I wrote:
"If prices continue to fall towards the 45-day moving average (around $84.63), we will have to go back to the idea that an older medium-term cycle is completing with a steep fall to the final cycle low somewhere below $83. Otherwise, we will wait for another 3-8 day correction for a sub-cycle bottom in a new medium-term cycle (that started on Aug.24) that could land anywhere between the 15-day and 45-day moving averages. Of course, our new reversal zone Oct. 5 - 16 will be a good time frame for any bottom, so we may be looking to buy soon."
Well, prices are now well below the 45-day moving average, so this looks like the final fall to the bottom of an older medium-term cycle. We are also now below $83 in the range of a final bottom, and we have just entered our new reversal zone. But the correction down so far has only lasted six days. Usually a final correction involves a 2 - 5 week decline. Next week will be the second week, and it's in the center of the reversal zone. Let's wait and see if prices can go lower next week and then consider going long. We are still on the sidelines of crude.
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