MARKETS UPDATE (4:30 pm EST)
Our timing was good last week when we sold short the broad stock market on Wednesday as it made a peak before falling on Thursday and Friday. It looks like we could be on track for the final correction to the bottom of the medium-term cycle that began on Feb. 9 in all three stock market indices (DOW, S&P 500, and NASDAQ). The final lows for these cycles will most likely be below 23,300 in the DOW and below 2,550 in the S&P 500 and could happen anytime between May and June. All of this assumes the current cycle is bearish, which it looks to be. Nevertheless, we can't rule out the possibility of the trend suddenly turning bullish due to the unstable and volatile trading (and geopolitical) environment we have been in recently. There is a small chance that all three market indices already bottomed with their lows on April 2 and started new medium-term cycles then. If that is the case, this market could be very bullish now. Any break above 25,800 in the DOW and 2,807 in the S&P 500 would support that idea. Right now, however, we are well below those highs and will stick to the bearish idea of a final cycle bottom due in May or June. Holding my short position in the broad stock market.
Last week (April 16), the U.S. Dollar Index made a new monthly low (89.37) near the center of a reversal zone specifically relevant to currencies. That could have been a significant turning point as the greenback is rallying strongly from there and is now approaching a strong resistance area around 91. If the dollar can clear that resistance, it will support the idea that a new longer-term cycle started with the low of 89 on March 26, and that could be very bullish. As readers may know, over the last several months I have been very bearish on the U.S. dollar as technical charts were showing that a final support level around 88 was in danger of breaking and leading to a steep plunge to the next support level around 80. All of this was dependent on the dollar remaining below a very strong band of resistance at 90 - 91 which now seems like it could be surmounted. We need to watch this very closely as a major trend change in the U.S. dollar would affect our longer-term view of the precious metals.
Speaking of precious metals, our timing was also good last week in this market as we unloaded our long positions in both gold and silver for a decent profit (especially in silver) near the peak of both metals on Thursday before prices started falling on Friday. We got out in the nick of time as gold and silver are plummeting today in response to the dollar rally discussed above. The potential bullishness of the dollar now is threatening our bullish view of the precious metals, at least in the short to medium term. If gold can stay above $1304 and silver above $16.13 then our bullish view is still valid, but if the price plunge continues below those levels we may see a trend change in the precious metals from bullish to bearish. As I stated above, the key thing to watch now is the dollar and whether or not it can "break out" and clear that resistance at 91. On the sidelines of gold and silver.
The cycle structure of crude oil is still ambiguous. We may have seen a cycle peak last Thursday at $69.55 (June contract chart) in a reversal zone specifically for crude, but we are now out of that reversal period. If prices can edge higher this week, we may not see a top to this cycle until mid-May. Like many of the other financial markets, this market recently seems to be manifesting a significant trend change. In this case from mixed bullish and bearish to mostly bullish. Out of crude oil for now.
Our timing was good last week when we sold short the broad stock market on Wednesday as it made a peak before falling on Thursday and Friday. It looks like we could be on track for the final correction to the bottom of the medium-term cycle that began on Feb. 9 in all three stock market indices (DOW, S&P 500, and NASDAQ). The final lows for these cycles will most likely be below 23,300 in the DOW and below 2,550 in the S&P 500 and could happen anytime between May and June. All of this assumes the current cycle is bearish, which it looks to be. Nevertheless, we can't rule out the possibility of the trend suddenly turning bullish due to the unstable and volatile trading (and geopolitical) environment we have been in recently. There is a small chance that all three market indices already bottomed with their lows on April 2 and started new medium-term cycles then. If that is the case, this market could be very bullish now. Any break above 25,800 in the DOW and 2,807 in the S&P 500 would support that idea. Right now, however, we are well below those highs and will stick to the bearish idea of a final cycle bottom due in May or June. Holding my short position in the broad stock market.
Last week (April 16), the U.S. Dollar Index made a new monthly low (89.37) near the center of a reversal zone specifically relevant to currencies. That could have been a significant turning point as the greenback is rallying strongly from there and is now approaching a strong resistance area around 91. If the dollar can clear that resistance, it will support the idea that a new longer-term cycle started with the low of 89 on March 26, and that could be very bullish. As readers may know, over the last several months I have been very bearish on the U.S. dollar as technical charts were showing that a final support level around 88 was in danger of breaking and leading to a steep plunge to the next support level around 80. All of this was dependent on the dollar remaining below a very strong band of resistance at 90 - 91 which now seems like it could be surmounted. We need to watch this very closely as a major trend change in the U.S. dollar would affect our longer-term view of the precious metals.
Speaking of precious metals, our timing was also good last week in this market as we unloaded our long positions in both gold and silver for a decent profit (especially in silver) near the peak of both metals on Thursday before prices started falling on Friday. We got out in the nick of time as gold and silver are plummeting today in response to the dollar rally discussed above. The potential bullishness of the dollar now is threatening our bullish view of the precious metals, at least in the short to medium term. If gold can stay above $1304 and silver above $16.13 then our bullish view is still valid, but if the price plunge continues below those levels we may see a trend change in the precious metals from bullish to bearish. As I stated above, the key thing to watch now is the dollar and whether or not it can "break out" and clear that resistance at 91. On the sidelines of gold and silver.
The cycle structure of crude oil is still ambiguous. We may have seen a cycle peak last Thursday at $69.55 (June contract chart) in a reversal zone specifically for crude, but we are now out of that reversal period. If prices can edge higher this week, we may not see a top to this cycle until mid-May. Like many of the other financial markets, this market recently seems to be manifesting a significant trend change. In this case from mixed bullish and bearish to mostly bullish. Out of crude oil for now.
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