MARKETS UPDATE (4:30 pm EDT)
This week and next is a major reversal zone for many financial markets so we should be watching for significant highs or lows that could be turning points for these markets. April 22 (Friday) is the center point of this reversal zone. The likelihood of a reversal is highest near that day.
The broad stock market continues to edge higher so we should be watching for a top to sell short this week or next. The medium-term cycles of the DOW, S&P 500 and NASDAQ may all be peaking now, and if so we should expect a significant multi week correction to follow that will take us to the final cycle bottoms (and start of the next cycle). The depth of that correction will tell us if the overall trend of this market will remain bullish (directional momentum is currently 100% bullish in all three indices). For the current trend to turn strongly bearish, these indices would have to break below the start of their current medium-term cycles (that would be 15,450 for the DOW and 1,810 in the S&P 500). I don't think that's going to happen (although it's possible, especially since the markets are nervous and susceptible to panic selling). We will now watch for signs of a top, ideally later in the week. Still on the sidelines but looking to sell short this week or next.
We will also watch for a turning point in gold and silver this week. Both metals have been rising, but prices could take a dip into this week's reversal zone. If they do that, we will look to buy what could turn out to be a final cycle bottom in gold and maybe even one in silver (although it looks like silver's cycle ended- and a new one began- on April 1). It's still possible for gold to get down to our original target area around $1170 - $1180. If silver's new cycle began on April 1, any silver correction will likely stay above $15. If precious metal prices don't fall but instead rise into the end of the week, we will look to sell short. This is possible because directional momentum is strongly bullish in both gold and silver. We need to keep in mind, however, that COT charts still show Commercial traders (smart money) to be bearish on these metals which is suggestive of an imminent correction. On the sidelines of both gold and silver for now.
The direction of the precious metals this week may be determined by the U.S. dollar. The U.S. Dollar Index surged up early last week from a support line at 94 but is now backing down again. If the dollar moves back to its support at $94 and then reverses back up this week, we could see gold and silver rise and fall as described above. Note that $93 is very important support for the dollar. If that breaks, the greenback could be in trouble and precious metal prices could soar.
Last Wednesday crude oil made a double top to its high from March 18 (both near $42.50 in the May contract chart). Prices then fell steeply (on Sunday reaching $36.61) but are up a bit today. Directional momentum in this market is currently mixed bullish and bearish. If prices can snap back up and exceed that double top area, it can turn bullish. On the other hand, if crude starts closing below the 45 day moving average (currently around $38.73 and rising) then the market could turn bearish and prices could be headed down below $30 again. We will remain on the sidelines of crude until the directional trend becomes clear.
This week and next is a major reversal zone for many financial markets so we should be watching for significant highs or lows that could be turning points for these markets. April 22 (Friday) is the center point of this reversal zone. The likelihood of a reversal is highest near that day.
The broad stock market continues to edge higher so we should be watching for a top to sell short this week or next. The medium-term cycles of the DOW, S&P 500 and NASDAQ may all be peaking now, and if so we should expect a significant multi week correction to follow that will take us to the final cycle bottoms (and start of the next cycle). The depth of that correction will tell us if the overall trend of this market will remain bullish (directional momentum is currently 100% bullish in all three indices). For the current trend to turn strongly bearish, these indices would have to break below the start of their current medium-term cycles (that would be 15,450 for the DOW and 1,810 in the S&P 500). I don't think that's going to happen (although it's possible, especially since the markets are nervous and susceptible to panic selling). We will now watch for signs of a top, ideally later in the week. Still on the sidelines but looking to sell short this week or next.
We will also watch for a turning point in gold and silver this week. Both metals have been rising, but prices could take a dip into this week's reversal zone. If they do that, we will look to buy what could turn out to be a final cycle bottom in gold and maybe even one in silver (although it looks like silver's cycle ended- and a new one began- on April 1). It's still possible for gold to get down to our original target area around $1170 - $1180. If silver's new cycle began on April 1, any silver correction will likely stay above $15. If precious metal prices don't fall but instead rise into the end of the week, we will look to sell short. This is possible because directional momentum is strongly bullish in both gold and silver. We need to keep in mind, however, that COT charts still show Commercial traders (smart money) to be bearish on these metals which is suggestive of an imminent correction. On the sidelines of both gold and silver for now.
The direction of the precious metals this week may be determined by the U.S. dollar. The U.S. Dollar Index surged up early last week from a support line at 94 but is now backing down again. If the dollar moves back to its support at $94 and then reverses back up this week, we could see gold and silver rise and fall as described above. Note that $93 is very important support for the dollar. If that breaks, the greenback could be in trouble and precious metal prices could soar.
Last Wednesday crude oil made a double top to its high from March 18 (both near $42.50 in the May contract chart). Prices then fell steeply (on Sunday reaching $36.61) but are up a bit today. Directional momentum in this market is currently mixed bullish and bearish. If prices can snap back up and exceed that double top area, it can turn bullish. On the other hand, if crude starts closing below the 45 day moving average (currently around $38.73 and rising) then the market could turn bearish and prices could be headed down below $30 again. We will remain on the sidelines of crude until the directional trend becomes clear.
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