The strong equity rally Wednesday and Thursday triggered by the Fed's announcement of yet another delay in hiking interest rates seems to be taking a breather today and is backing off a bit from yesterday's high's. The DOW was unable to break above 18,450 (at least on its first try). In Wednesday's blog I wrote:
"We should see the broad stock market now rally into October, but first the DOW needs to break above a strong resistance at 18,400 - 18,450 (this is a "gap down" area from Sept.8-9 and is the right side of a "bearish island reversal"- see my blog on Sept. 12)."
Has the euphoria over the delayed rate hike subsided? (After all, Janet Yellen did strongly hint that one was coming before the end of the year.) We will have to wait a few more days to see if investor sentiment is turning negative. As long as the DOW and S&P 500 remain above their Sept. 14 lows, I think there is a good chance that the DOW will overcome that 18,450 level and equities will rally higher into October. Remaining on the sidelines of the broad stock market for now.
Gold and silver prices are also backing down a bit from their two day rally. I wrote in Wednesday's blog:
"If today's rally is not just a temporary knee-jerk reaction to the Fed then we should see it continue at least into mid-October with silver soon breaking above its Sept. 6 high of $20.12 ..... Volatility is still high in these markets, however, so we don't want to get too confident in our bullish position until we see this rally gain a little more momentum over the next few days. "
Silver got to $20.06 yesterday but is now back under $20 so we need to watch this carefully. Short-term technical signals for both metals still look quite bullish, however, and the next reversal zone for these metals is several weeks away. This suggests more rallying. Holding my long positions in both gold and silver.
Crude oil prices are plunging today and have lost nearly all of their strong gains from Wednesday and Thursday. It still looks like Tuesday's low at $43.06 (November contract chart) was a subcycle bottom so we should look to buy this correction as long as it stays above that low. I may enter a long position on Sunday or early next week. Stay tuned. On the sidelines of crude oil for now.