MARKETS UPDATE (2:45 pm EST)
We are now at the center of a time period (the first two weeks of August) for a significant directional reversal in the broad stock market and the DOW, S&P 500 and NASDAQ are all falling into it. This means the reversal should be up. Cycle studies also indicate that a new cycle is about to begin in the DOW and that is also bullish (at least short-term). The DOW made a low last Thursday at 16,334 and then rallied 185 points on Friday so the new cycle may already be starting. The only problem is that directional momentum in the DOW is presently 100% bearish (momentum in the S&P 500 and NASDAQ is still mixed bullish and bearish) so these markets could go lower this week. There is support for the DOW in the 16,400 area, but there is another support level around 16,200. Timing and cycles are suggesting we buy now (or within the next several days), but I want to see at least a short-term bullish momentum signal in the DOW before doing so. It looks like we could get a strong rally into the end of this month, but then another correction is likely that could be severe (10% or more). Still out of this market but looking for a spot to buy this week.
The precious metals market is giving us a lot of mixed signals right now as gold and silver prices can't seem to decide if they want to break out or correct down some more. One could make a case for either scenario. The short-term technical picture was leaning more towards bearish, but there are now several bullish signals appearing in the charts suggestive of a strong rally soon. As I suggested in my gold market update last Wednesday, if gold's current rally cannot break through the $1330 - $1340 area, prices will probably turn down again. Directional momentum remains mixed bullish and bearish in both precious metals and in gold and silver mining company stocks. I will consider shorting this market if gold prices rise into that $1330 - $1340 area and stall. A clear break above $1340, however, would be a strong bullish signal and would increase the likelihood of gold breaking out now. One current factor pointing to an imminent rally in gold is the overbought U.S. Dollar Index which is overdue for a correction after its steep rise over the last five weeks. A sharp dollar drop could kick-start a breakout in gold and silver. There is currently strong support for gold around $1280. Until prices break below that level or break above the $1340 resistance, the direction of gold and silver remains unclear. We may have some short-term trading opportunities if prices approach the upper or lower limits of this range, but for now I am remaining on the sidelines.
Crude oil prices made a bottom last Thursday at $96.55 and they seem to be reversing up now. The cycle picture for this market, however, appears to be turning bearish. This means that any rally now may not be significant, and there is a good chance prices will turn down again to make new lows. If crude prices stay below $100, we may have a good shorting opportunity in this market soon. Out of this market for now.
We are now at the center of a time period (the first two weeks of August) for a significant directional reversal in the broad stock market and the DOW, S&P 500 and NASDAQ are all falling into it. This means the reversal should be up. Cycle studies also indicate that a new cycle is about to begin in the DOW and that is also bullish (at least short-term). The DOW made a low last Thursday at 16,334 and then rallied 185 points on Friday so the new cycle may already be starting. The only problem is that directional momentum in the DOW is presently 100% bearish (momentum in the S&P 500 and NASDAQ is still mixed bullish and bearish) so these markets could go lower this week. There is support for the DOW in the 16,400 area, but there is another support level around 16,200. Timing and cycles are suggesting we buy now (or within the next several days), but I want to see at least a short-term bullish momentum signal in the DOW before doing so. It looks like we could get a strong rally into the end of this month, but then another correction is likely that could be severe (10% or more). Still out of this market but looking for a spot to buy this week.
The precious metals market is giving us a lot of mixed signals right now as gold and silver prices can't seem to decide if they want to break out or correct down some more. One could make a case for either scenario. The short-term technical picture was leaning more towards bearish, but there are now several bullish signals appearing in the charts suggestive of a strong rally soon. As I suggested in my gold market update last Wednesday, if gold's current rally cannot break through the $1330 - $1340 area, prices will probably turn down again. Directional momentum remains mixed bullish and bearish in both precious metals and in gold and silver mining company stocks. I will consider shorting this market if gold prices rise into that $1330 - $1340 area and stall. A clear break above $1340, however, would be a strong bullish signal and would increase the likelihood of gold breaking out now. One current factor pointing to an imminent rally in gold is the overbought U.S. Dollar Index which is overdue for a correction after its steep rise over the last five weeks. A sharp dollar drop could kick-start a breakout in gold and silver. There is currently strong support for gold around $1280. Until prices break below that level or break above the $1340 resistance, the direction of gold and silver remains unclear. We may have some short-term trading opportunities if prices approach the upper or lower limits of this range, but for now I am remaining on the sidelines.
Crude oil prices made a bottom last Thursday at $96.55 and they seem to be reversing up now. The cycle picture for this market, however, appears to be turning bearish. This means that any rally now may not be significant, and there is a good chance prices will turn down again to make new lows. If crude prices stay below $100, we may have a good shorting opportunity in this market soon. Out of this market for now.
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