MARKETS UPDATE (6:00 pm EDST)
In last Wednesday's blog on the broad stock market I wrote:
" ...I would prefer to wait until next week for a possible bearish divergence signal that would be a better point for a reversal. When the reversal occurs, we will be looking for a brief sub-cycle correction to buy close to the 15-day moving average..."
We got that bearish divergence signal today as the NASDAQ made a new weekly high while the DOW and S&P 500 did not. After marking their highs this morning, all three indices are closing in negative territory (with the DOW losing 592 points). A reversal is likely starting now. If this market is to be short-term bullish, this correction should not be deep. Good targets now would be around 22,000 in the DOW and 2,600 in the S&P 500 or close to the 15-day moving averages of both indices (those targets are just a bit below those averages). Our ideal scenario is to see a sub-cycle correction to these levels and then a reversal back up and more rallying for at least a few more weeks. If this correction pushes significantly below these targets, however, we may have to abandon our short-term bullish view. For now, I anticipate buying the bottom of this correction. Still on the sidelines of this market.
Gold and silver prices are falling into the center of our current general reversal zone (April 13 - 27) now, and as with the broad stock market, we are looking for a low spot (sub-cycle correction) to buy. Some technical factors are pointing to Wednesday or Thursday for an ideal bottom. Gold is already in a good target price range (around $1685), but it could still go lower. A good target for silver would be around $1430, considerably below today's closing price of $15.27. Let's wait a few days to see if prices move down some more and give us a good buy spot later this week. On the sidelines of gold and silver.
Interestingly, we have a reversal zone specifically for currencies coming up this week and next (April 22 - 30), and the U.S. Dollar Index has been rising. If the dollar can make a new weekly high into this reversal zone at the same time the precious metals are making sub-cycle lows, a turn-down in the dollar could support the rally we want to see in gold and silver. We will watch for this.
The big news in the financial world today was an unprecedented historical crash in crude oil prices. By early afternoon crude had lost nearly 100% of it's value. It then plunged further (at 2:30 pm it posted a NEGATIVE 300% LOSS) and closed the day still in negative territory(- $13, May contract chart). COVID-19's negative impact on global demand for crude as well as the recent price war between Saudi Arabia and Russia is clearly having a negative impact on this market. Nevertheless, this collapse into negative pricing is having even veteran financial analysts shaking their heads in wonderment. As one trader put it: "If you owned oil at the end of this day and you wanted to sell, you would have to pay someone $13/ barrel just to take it away."
Needless to say, we are happy to be on the sidelines of crude oil today. We had been anticipating a sub-cycle low, but certainly not THIS low. Our cycle analysis of this market is useless at the moment, and we will have to wait until prices stabilize (if they do) before we can make any sense of this market going forward.
We are without doubt in strange financial times.
In last Wednesday's blog on the broad stock market I wrote:
" ...I would prefer to wait until next week for a possible bearish divergence signal that would be a better point for a reversal. When the reversal occurs, we will be looking for a brief sub-cycle correction to buy close to the 15-day moving average..."
We got that bearish divergence signal today as the NASDAQ made a new weekly high while the DOW and S&P 500 did not. After marking their highs this morning, all three indices are closing in negative territory (with the DOW losing 592 points). A reversal is likely starting now. If this market is to be short-term bullish, this correction should not be deep. Good targets now would be around 22,000 in the DOW and 2,600 in the S&P 500 or close to the 15-day moving averages of both indices (those targets are just a bit below those averages). Our ideal scenario is to see a sub-cycle correction to these levels and then a reversal back up and more rallying for at least a few more weeks. If this correction pushes significantly below these targets, however, we may have to abandon our short-term bullish view. For now, I anticipate buying the bottom of this correction. Still on the sidelines of this market.
Gold and silver prices are falling into the center of our current general reversal zone (April 13 - 27) now, and as with the broad stock market, we are looking for a low spot (sub-cycle correction) to buy. Some technical factors are pointing to Wednesday or Thursday for an ideal bottom. Gold is already in a good target price range (around $1685), but it could still go lower. A good target for silver would be around $1430, considerably below today's closing price of $15.27. Let's wait a few days to see if prices move down some more and give us a good buy spot later this week. On the sidelines of gold and silver.
Interestingly, we have a reversal zone specifically for currencies coming up this week and next (April 22 - 30), and the U.S. Dollar Index has been rising. If the dollar can make a new weekly high into this reversal zone at the same time the precious metals are making sub-cycle lows, a turn-down in the dollar could support the rally we want to see in gold and silver. We will watch for this.
The big news in the financial world today was an unprecedented historical crash in crude oil prices. By early afternoon crude had lost nearly 100% of it's value. It then plunged further (at 2:30 pm it posted a NEGATIVE 300% LOSS) and closed the day still in negative territory(- $13, May contract chart). COVID-19's negative impact on global demand for crude as well as the recent price war between Saudi Arabia and Russia is clearly having a negative impact on this market. Nevertheless, this collapse into negative pricing is having even veteran financial analysts shaking their heads in wonderment. As one trader put it: "If you owned oil at the end of this day and you wanted to sell, you would have to pay someone $13/ barrel just to take it away."
Needless to say, we are happy to be on the sidelines of crude oil today. We had been anticipating a sub-cycle low, but certainly not THIS low. Our cycle analysis of this market is useless at the moment, and we will have to wait until prices stabilize (if they do) before we can make any sense of this market going forward.
We are without doubt in strange financial times.
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