Not much has changed since my last two blog posts. Several financial markets still seem poised to make a decisive directional move, but also seem reluctant to do so. The Easter holiday on Sunday in the U.S. and today in Canada is probably contributing to market sluggishness so we could see more action in tomorrow's markets.
The broad stock market is up a bit today. This is the last week of a major reversal period for equities. We are watching for signs of a final medium-term cycle bottom which is now due in all three major market indices (DOW, S&P 500, and NASDAQ). That bottom could end up below the March 27 lows of these indices, but if only one or two of these indices (but not all three) break(s) below the March 27 low(s) then we would have an intermarket bullish divergence signal in this reversal zone which could be a good spot to take profits in our short position and maybe even go long. We will watch for that set-up this week. Holding my short position in the broad stock market for now.
We were stopped out of our gold and silver long positions last week, and we may have been the victims of a "whipsaw" rally that got us out prematurely. Both metals still look poised for a correction down to their final medium-term cycle bottoms. Directional momentum, however, is now nearly 100% bullish in gold and silver charts so prices could still push higher. We are now moving out of a reversal zone for the precious metals, and if we are going to get a reversal these prices need to top out over the next few days. Both metals are already exceeding last week's highs so we won't have any intermarket bearish divergence this week. This makes me very reluctant to sell short now. I am going to stay on the sidelines for now. If we miss selling short this correction, we may just have to wait to buy the bottom of the medium-term cycle if and when it comes.
The cycle structure of the U.S.Dollar Index is very ambiguous at the moment, i.e. it could be either very bullish or very bearish. A major reversal zone for currencies is ending this week and the dollar is falling. If we get a significant reversal here, that may give us more clues as to the longer-term direction of the dollar. If the dollar starts to break down, we could see precious metal prices take off.
Crude oil most likely started a new medium-term cycle from its low in late March and has been rallying strongly from there. From a high of $53.76 (May contract chart) last week (in a reversal zone), crude seems to taking a sub-cycle correction. A normal target for this correction would be in the $50 - $51 area. If we get there this week that might be a good spot to buy. On the sidelines of crude oil.