MARKETS UPDATE (10:00 pm EDT)
In last Tuesday's blog on the broad stock market I wrote:
"The chance of one (or more) index (indices) making a new all-time high before the end of next week is small, but we can't completely rule out that possibility. However, even if that happens, we are still expecting a 4-year cycle high by the end of this month (if it did't already happen in July) and a subsequent fall of 16% - 26% to the 4-year cycle bottom by the end of the year."
This still applies, but it looks like the chances of new all-time highs is now not so small, at least for the DOW and S&P 500. Both of these indices rose sharply last week, and both are now testing resistance near their recent all-time highs. However, we are in the center of a strong reversal zone (Aug. 13 - 23). The DOW may also be forming a "triple-top", which is a bearish signal. The NASDAQ is still well below its all-time high from July 11, so if the DOW and/or the S&P 500 do make new all-time highs this week, we would also most likely have a strong bearish divergence signal.
I entered a short position in the DOW on Aug. 8, so this trade is now about 3% in the red. Nevertheless, the above analysis makes a good case for holding this short position a bit longer. (The bullish alternative is the possibility that the recent Aug. 5 deep lows were the start of a new medium-term cycle.) I am also keeping in mind that we are expecting a 4-year cycle top to be completed by the end of August, and it might even be in already with the recent July highs in all three indices. This 4-year cycle top should be followed by a 16% - 26% correction in the broad stock market. While the NASDAQ's recent Aug. 5 low came close to a 16% loss, the DOW and S&P 500 losses on Aug.5 were only 7% and 10%, respectively, so it looks like the 4-year cycle bottom is still ahead. I am holding my short position in the DOW (broad stock market) for now.
My short position in silver (entered on Aug. 1) is also in jeopardy today as prices closed slightly above my entry price and also just above the 45-day moving average. While this is bullish behavior, we note that we are in the center of a strong reversal zone, and we also observe that gold made a new all-time high last Friday while silver remains well below its all-time high. This gives us a strong bearish divergence signal inside this reversal zone. Thus, a significant downturn could be imminent. Alternatively, there is a slight chance that the Aug. 8 low at $26.52 could have been the start of a new medium-term cycle. If that's the case, prices could be very bullish. For now, I am going to hold my short silver position with a stop loss based on a weekly close above $30.
Gold's medium-term cycle started on June 7, and it is late in the cycle when a final top is due before a corrective decline into the final cycle bottom. We are also expecting a longer-term (50 week) cycle to bottom simultaneously with the medium-term cycle which means the correction should be deeper than a normal medium-term correction. Friday's new all-time high in gold with bearish divergence to silver (no new all-time high) inside the current reversal zone suggests an imminent downturn in both metals. We are currently on the sidelines of gold and will remain there for now.
Crude oil is falling again, and prices are now back below both the 15-day and 45-day moving averages. This is bearish behavior, but there is a strong support area from $74 down to $72 (Sept. contract chart), and prices are falling steeply into the center of our current reversal zone. That means a reversal back up could be imminent, i.e. a bottom anytime by the end of this week. I am remaining on the sidelines of crude for now as the short-term trend of this market is still ambiguous.
In last Tuesday's blog on the broad stock market I wrote:
"The chance of one (or more) index (indices) making a new all-time high before the end of next week is small, but we can't completely rule out that possibility. However, even if that happens, we are still expecting a 4-year cycle high by the end of this month (if it did't already happen in July) and a subsequent fall of 16% - 26% to the 4-year cycle bottom by the end of the year."
This still applies, but it looks like the chances of new all-time highs is now not so small, at least for the DOW and S&P 500. Both of these indices rose sharply last week, and both are now testing resistance near their recent all-time highs. However, we are in the center of a strong reversal zone (Aug. 13 - 23). The DOW may also be forming a "triple-top", which is a bearish signal. The NASDAQ is still well below its all-time high from July 11, so if the DOW and/or the S&P 500 do make new all-time highs this week, we would also most likely have a strong bearish divergence signal.
I entered a short position in the DOW on Aug. 8, so this trade is now about 3% in the red. Nevertheless, the above analysis makes a good case for holding this short position a bit longer. (The bullish alternative is the possibility that the recent Aug. 5 deep lows were the start of a new medium-term cycle.) I am also keeping in mind that we are expecting a 4-year cycle top to be completed by the end of August, and it might even be in already with the recent July highs in all three indices. This 4-year cycle top should be followed by a 16% - 26% correction in the broad stock market. While the NASDAQ's recent Aug. 5 low came close to a 16% loss, the DOW and S&P 500 losses on Aug.5 were only 7% and 10%, respectively, so it looks like the 4-year cycle bottom is still ahead. I am holding my short position in the DOW (broad stock market) for now.
My short position in silver (entered on Aug. 1) is also in jeopardy today as prices closed slightly above my entry price and also just above the 45-day moving average. While this is bullish behavior, we note that we are in the center of a strong reversal zone, and we also observe that gold made a new all-time high last Friday while silver remains well below its all-time high. This gives us a strong bearish divergence signal inside this reversal zone. Thus, a significant downturn could be imminent. Alternatively, there is a slight chance that the Aug. 8 low at $26.52 could have been the start of a new medium-term cycle. If that's the case, prices could be very bullish. For now, I am going to hold my short silver position with a stop loss based on a weekly close above $30.
Gold's medium-term cycle started on June 7, and it is late in the cycle when a final top is due before a corrective decline into the final cycle bottom. We are also expecting a longer-term (50 week) cycle to bottom simultaneously with the medium-term cycle which means the correction should be deeper than a normal medium-term correction. Friday's new all-time high in gold with bearish divergence to silver (no new all-time high) inside the current reversal zone suggests an imminent downturn in both metals. We are currently on the sidelines of gold and will remain there for now.
Crude oil is falling again, and prices are now back below both the 15-day and 45-day moving averages. This is bearish behavior, but there is a strong support area from $74 down to $72 (Sept. contract chart), and prices are falling steeply into the center of our current reversal zone. That means a reversal back up could be imminent, i.e. a bottom anytime by the end of this week. I am remaining on the sidelines of crude for now as the short-term trend of this market is still ambiguous.
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