MARKETS UPDATE (3:30 pm EST)
We are now at the center of the current reversal zone for the broad stock market, and all three major market indices (DOW, S&P 500, and NASDAQ) are rising into it. This means that the market should be forming a top now (or by early next week) from which some sort of correction will follow. In Monday's blog I wrote:
"Because the DOW and S&P 500 likely started new medium-term cycles on Nov. 4, their current trend is bullish (in fact, directional momentum in both charts is now 100% bullish) so any corrective reversal should not be serious and could give us a good entry point to go long. This could be around 18,500 in the DOW and 2,140 in the S&P 500."
We will still watch for this, but we should also keep in mind that on occasion (it is not common) markets can break out (or break down if the trend has been bearish) in a reversal zone instead of changing direction. If these indices continue to make new highs past the end of next week, we will have to consider that possibility. For now, I will continue to wait for a modest correction with the intention to go long.
In Monday's gold and silver blog I wrote:
"It is still not clear if these metals are falling into the final bottoms of their old medium-term cycles now or if both metals started new medium-term cycles in October. If these are new cycles then there is a good chance prices will continue lower at least into the end of December and possibly longer. But if we have older cycles bottoming now or next week, these metals could reverse and turn quite bullish. Ideally, we want to see gold move closer to $1,190 and silver closer to $16 later this week or early next week (the center of the reversal zone). If this happens, we will be looking to buy, especially if we see intermarket bullish divergence where one metal makes a new low while the other does not."
Well, gold prices dropped to $1,172 yesterday which was considerably below our target price to buy. That could be a bearish signal, and it could mean that this is a newer cycle and prices are headed lower into December. Silver prices dropped to $16.18 yesterday which was close to our target; however, there was no case of intermarket bullish divergence (both metals made new weekly lows). Caution is advised here. Yes, we are in the center of a reversal zone for these metals, but these bearish signals are making me reluctant to buy right now. I will analyze this situation further over the week-end. We may still consider a long position early next week. On the sidelines of both gold and silver.
Crude oil prices surged to a high of $49.20 (January contract chart) on Tuesday but are now falling strongly (closing today close to $46). Tuesday was technically within the current reversal zone for crude (although very early), but this reversal zone continues into the end of next week. If prices fall below (or even just come close to) $43 before next Friday, we could see a final bottom to a possibly older medium-term cycle within this same reversal period. That could be a good spot to buy. It is still not clear if the Nov. 14th low was the start of a new medium-term cycle in crude. Next week's price movements could clarity this. Still on the sidelines of crude oil.
We are now at the center of the current reversal zone for the broad stock market, and all three major market indices (DOW, S&P 500, and NASDAQ) are rising into it. This means that the market should be forming a top now (or by early next week) from which some sort of correction will follow. In Monday's blog I wrote:
"Because the DOW and S&P 500 likely started new medium-term cycles on Nov. 4, their current trend is bullish (in fact, directional momentum in both charts is now 100% bullish) so any corrective reversal should not be serious and could give us a good entry point to go long. This could be around 18,500 in the DOW and 2,140 in the S&P 500."
We will still watch for this, but we should also keep in mind that on occasion (it is not common) markets can break out (or break down if the trend has been bearish) in a reversal zone instead of changing direction. If these indices continue to make new highs past the end of next week, we will have to consider that possibility. For now, I will continue to wait for a modest correction with the intention to go long.
In Monday's gold and silver blog I wrote:
"It is still not clear if these metals are falling into the final bottoms of their old medium-term cycles now or if both metals started new medium-term cycles in October. If these are new cycles then there is a good chance prices will continue lower at least into the end of December and possibly longer. But if we have older cycles bottoming now or next week, these metals could reverse and turn quite bullish. Ideally, we want to see gold move closer to $1,190 and silver closer to $16 later this week or early next week (the center of the reversal zone). If this happens, we will be looking to buy, especially if we see intermarket bullish divergence where one metal makes a new low while the other does not."
Well, gold prices dropped to $1,172 yesterday which was considerably below our target price to buy. That could be a bearish signal, and it could mean that this is a newer cycle and prices are headed lower into December. Silver prices dropped to $16.18 yesterday which was close to our target; however, there was no case of intermarket bullish divergence (both metals made new weekly lows). Caution is advised here. Yes, we are in the center of a reversal zone for these metals, but these bearish signals are making me reluctant to buy right now. I will analyze this situation further over the week-end. We may still consider a long position early next week. On the sidelines of both gold and silver.
Crude oil prices surged to a high of $49.20 (January contract chart) on Tuesday but are now falling strongly (closing today close to $46). Tuesday was technically within the current reversal zone for crude (although very early), but this reversal zone continues into the end of next week. If prices fall below (or even just come close to) $43 before next Friday, we could see a final bottom to a possibly older medium-term cycle within this same reversal period. That could be a good spot to buy. It is still not clear if the Nov. 14th low was the start of a new medium-term cycle in crude. Next week's price movements could clarity this. Still on the sidelines of crude oil.
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