It appears that the DOW and S&P 500 made significant sub-cycle bottoms on Aug. 2 and the NASDAQ made its sub-cycle bottom on July 30, all three in our last reversal zone. All three indices are now rallying into our current reversal zone (Aug. 20 - 28). In addition, the DOW made a secondary bottom last week (Aug. 15) which went lower than its Aug. 2 low and is now rallying strongly from it. This is very bullish. We are now watching for a top in this new reversal zone and especially for a top where one or two, but not all three indices make a new high. Such bearish divergence between these indices would be a strong signal to sell this market short. Right now the DOW is is a bit down from its all-time high of 26,617 made on Jan. 26 this year. The S&P and NASDAQ are a bit closer to their all time highs of 2,873 (S&P 500 on Jan. 26) and 7,933 (NASDAQ on July 25) so we could easily see one or two, but not all three indices make new highs this week or early next week in this reversal zone. Any significant top now could be followed by a very severe correction as it is late in several longer-term cycles for the broad stock market, and the final top for these cycles is due anytime over the next six or seven weeks (and most likely in one of our reversal zones). We are thus strongly motivated to sell short any significant top this week or early next week. On the sidelines of the broad stock market and watching for a top
This week and early next week is also a reversal zone for gold and silver. A medium-term as well as a longer-term cycle bottom is due in both metals any time now so we are on the lookout for a significant bottom to buy in this market. Last week's lows in both metals ($1162 in gold and $14.35 in silver) could have been it, but it would be better to see it in this week's reversal zone and especially with a bullish divergence signal (one but not both metals making a new weekly low). Let's wait and see if we can get that this week or early next. I may be tempted to buy even without bullish divergence on any dips in gold close to $1180 and dips in silver close to $14.50. Still on the sidelines of gold and silver.
Last Thursday's low in crude oil at $64.43 (Sept. contract chart) was in the current reversal zone for crude (Aug.16 - 28), and it is rallying sharply from there. That could have been a significant sub-cycle bottom although it could still drop lower for a bottom this week or early next week. The problem here is that even last week's low is very close to the start of the current medium-term cycle (which was on June 17 at $63). This suggests the possibility that the cycle is turning bearish. If that is the case then any rally now will not likely exceed $73 (and maybe not even $70) before turning down for a steep correction possibly down to the $50 area. If crude makes a new low this week, I will consider going long for a short-term rally; otherwise, I think I will wait to possibly sell short the top of any rally that stalls in the $70 - $73 area (or lower). On the sidelines of crude oil for now.