All financial markets continue to manifest mixed directional signals and indecisiveness at a time when cycles are suggesting major turning points are imminent in several of these markets. This makes trading difficult and dangerous right now and I am starting to think it may be best to refrain from all medium and long-term trading until the potential volatility of this month has passed. I will, however, continue to watch for any short-term trading opportunities that seem profitable.
Last week strong bearish momentum signals appeared in the DOW and the nearby contract chart for the S&P 500, and so the broad stock market (DOW, S&P 500 and NASDAQ) is now back to being uniformly mixed bullish and bearish in its directional momentum. (The DOW and S&P 500 had been showing more bullish momentum over the last few weeks, but that bullish energy is now subsiding). Technical and cycle studies are pointing to a significant correction in the broad stock market that should begin before the end of May, so the trick here will be to identify the turning point to sell short. If the DOW rallies into next week's reversal zone we may see that turning point then, but if it falls instead we may have to wait for a bounce from the low that forms before a more serious correction begins. Out of the broad stock market for now.
Silver seems poised to turn down any day now, but there are some technical indicators suggesting gold could move higher. While it is possible for gold and silver to diverge a bit from each other short-term, any major moves will be done in unison. If gold can exceed and close above $1360, we may see both metals start to break upside. I think there is more evidence, however, to support the idea that gold and silver will fall lower and perhaps move down to a final cycle low sometime in May. We will have to wait and see. I am reluctant to trade silver right now, even short-term, because of its high volatility, but if we get a sell signal in gold this week I may consider a short-term short position. On the sidelines of both metals.
After falling steeply last week, the U.S. Dollar Index seems to be finding at least temporary support at 79.4 and is now rallying. If this rally continues it will likely push precious metal prices down, but if the dollar turns down again (especially if the index breaks below 79) we could see the metals take off. Directional momentum is now mixed bullish and bearish in this market too, so it could go either way.
In my last blog I noted that directional momentum in crude oil charts had become 100% bullish. This momentum continues as crude attempts to break through its March 3rd high between $104 -$105. Today's crude prices were not able to clear that hurdle. From a cycles point of view it is important for crude to exceed that high to maintain its bullishness. Early next week could be an important turning point for crude, so we want to watch how prices move into that time. If prices back down now (before exceeding the $104 - $105 high) and directional momentum remains bullish, we could see a good buying opportunity at a low next week. Still out of this market.