MARKETS UPDATE (2:30 pm EST)
All financial markets continue to exhibit high volatility which will likely persist at least through the third week of April. We need to be especially cautious, flexible and nimble with our trading during this period. We may do more short-term trading (not day trading) than usual.
Last Tuesday (March 27) we went short in the broad stock market. In last Wednesday's blog I wrote:
"Because the current reversal zone extends into next Monday, it is possible for the DOW, S&P 500 and NASDAQ to make another bottom near their Feb. 9 lows over the next several days, and possibly with a bullish divergence signal [i.e. one or two but not all three breaking those low(s)]. If that happens, we may take a quick (and small) profit on our short position as the market could rally again. If all three indices break below their Feb. 9 lows then we will likely hold our short position..."
Equities are falling again toward those Feb. 9 lows as we come to the end of the reversal zone (let's extend it into Wednesday). As I write this, the DOW, S&P 500, and NASDAQ are all breaking below their lows from last week, which is a bearish sign and supports the idea that this market will continue lower for at least several more weeks. If all three indices break their Feb. 9 lows it will confirm that bearish view even more. (Those Feb. 9 lows are DOW - 23,360, S&P 500 - 2,532, and NASDAQ - 6,630). Nevertheless, it is still possible for these indices to make a short-term bottom this week or next followed by a brief but sharp rally. A bullish divergence signal [i.e. one or two, but not all three indices breaking below their Feb. 9 low(s)] would be a sign this is happening. If that happens by Wednesday, we may look to take profits in our short position to sidestep a potential short-term rally.
*Note- As I stated last week, traders who did not get to short the market last Tuesday should stay on the sidelines for now. We will likely see a short-term bottom to this correction either now or sometime next week followed by a sharp (but short-term) rally. That rally will give traders another opportunity to sell short for the longer-term correction most likely into May.
Stay tuned for trade alerts this week. Holding my short position in the broad stock market.
Gold and silver prices are rallying today which is encouraging to our bullish view of this market. We need to see gold and silver break above last week's highs ($1356 and $16.79, respectively) soon, however, to avert a possible short-term scenario of prices moving lower to complete an older cycle bottom. (Note that even if this happens, the longer-term picture for these metals is still quite bullish). Right now let's stick with the idea that gold may have started a new medium-term cycle on March 1 and silver may have started a new medium-term cycle on March 20. If this is the case then both metals would be very bullish and about to rally strongly. We are still holding our long position in gold but are out of silver. If these metals back down again, it is still possible we could see one metal make a new low without the other (bullish divergence), and that would give us a good opportunity to go long in silver. Staying long in gold for now.
Crude oil is falling strongly with the broad stock market today. Last week's high of $65.55 (May contract chart) could have been the final medium-term cycle top, and crude could now be falling to the final cycle bottom due sometime near the end of this month through mid-May. That bottom could be near $60, but it is possible for it to go lower. On the other hand, if the broad stock market stabilizes and starts to rally again (as described at the start of this post) then crude could follow suit and push back up to make a new cycle high (above $65.55) before falling to its final cycle bottom. That would be a good shorting opportunity if it happens. For now, we will stay on the sidelines of crude oil.
All financial markets continue to exhibit high volatility which will likely persist at least through the third week of April. We need to be especially cautious, flexible and nimble with our trading during this period. We may do more short-term trading (not day trading) than usual.
Last Tuesday (March 27) we went short in the broad stock market. In last Wednesday's blog I wrote:
"Because the current reversal zone extends into next Monday, it is possible for the DOW, S&P 500 and NASDAQ to make another bottom near their Feb. 9 lows over the next several days, and possibly with a bullish divergence signal [i.e. one or two but not all three breaking those low(s)]. If that happens, we may take a quick (and small) profit on our short position as the market could rally again. If all three indices break below their Feb. 9 lows then we will likely hold our short position..."
Equities are falling again toward those Feb. 9 lows as we come to the end of the reversal zone (let's extend it into Wednesday). As I write this, the DOW, S&P 500, and NASDAQ are all breaking below their lows from last week, which is a bearish sign and supports the idea that this market will continue lower for at least several more weeks. If all three indices break their Feb. 9 lows it will confirm that bearish view even more. (Those Feb. 9 lows are DOW - 23,360, S&P 500 - 2,532, and NASDAQ - 6,630). Nevertheless, it is still possible for these indices to make a short-term bottom this week or next followed by a brief but sharp rally. A bullish divergence signal [i.e. one or two, but not all three indices breaking below their Feb. 9 low(s)] would be a sign this is happening. If that happens by Wednesday, we may look to take profits in our short position to sidestep a potential short-term rally.
*Note- As I stated last week, traders who did not get to short the market last Tuesday should stay on the sidelines for now. We will likely see a short-term bottom to this correction either now or sometime next week followed by a sharp (but short-term) rally. That rally will give traders another opportunity to sell short for the longer-term correction most likely into May.
Stay tuned for trade alerts this week. Holding my short position in the broad stock market.
Gold and silver prices are rallying today which is encouraging to our bullish view of this market. We need to see gold and silver break above last week's highs ($1356 and $16.79, respectively) soon, however, to avert a possible short-term scenario of prices moving lower to complete an older cycle bottom. (Note that even if this happens, the longer-term picture for these metals is still quite bullish). Right now let's stick with the idea that gold may have started a new medium-term cycle on March 1 and silver may have started a new medium-term cycle on March 20. If this is the case then both metals would be very bullish and about to rally strongly. We are still holding our long position in gold but are out of silver. If these metals back down again, it is still possible we could see one metal make a new low without the other (bullish divergence), and that would give us a good opportunity to go long in silver. Staying long in gold for now.
Crude oil is falling strongly with the broad stock market today. Last week's high of $65.55 (May contract chart) could have been the final medium-term cycle top, and crude could now be falling to the final cycle bottom due sometime near the end of this month through mid-May. That bottom could be near $60, but it is possible for it to go lower. On the other hand, if the broad stock market stabilizes and starts to rally again (as described at the start of this post) then crude could follow suit and push back up to make a new cycle high (above $65.55) before falling to its final cycle bottom. That would be a good shorting opportunity if it happens. For now, we will stay on the sidelines of crude oil.
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