MARKETS UPDATE (5:30 pm EDT)
After falling steeply last week, the broad stock market was entitled to a small relief rally, which it seems to have taken today. The S&P 500 and especially the NASDAQ rallied smartly today, although the DOW lagged behind and was much less enthusiastic. We don't enter our strong reversal zone until Wednesday (Aug. 23 - Sept. 8), so I don't think this market has found its bottom yet. The DOW and S&P 500 are still far from our ideal targets (33,500 and 4,200, respectively) for their final medium-term cycle bottoms, and there is plenty of time for them to move closer over the next three weeks. Let's hold on to our short positions in this market for now.
Gold prices are up just a bit, but silver prices are surging today. Despite this bullishness, however, silver is making a new weekly high and gold is not, and that sets up a bearish divergence signal. And this is happening as we enter a reversal zone specifically for the precious metals (Aug. 21 - Sept. 5, which is also overlapping with our general reversal zone mentioned above). This could put a damper on any rally in both metals as any new highs this week or next could also be significant cycle tops. There are also a lot of potential "pivot points" for both metals in this time frame. Tuesday and Wednesday we have one for gold, and Thursday and Friday, one for silver. Sept. 1 - 4 is also a potentially strong pivot point for silver. We may see a lot of volatility and price movement- both up and down - over the next several weeks in the precious metals, so it may be best to stay on the sidelines, especially as we are a little uncertain about the current cycle labeling of gold. My guess at this point is that the trend in both metals may be turning bearish and that any rally now will be short-lived, but we shall see how this plays out over the next three weeks. We remain on the sidelines of both metals for now.
The U.S. Dollar Index is down from Friday's 103.68 high which was just one day out of a reversal zone specifically for currencies. This means the greenback can fall now and give an upward thrust to precious metal prices, but we note that we enter yet another currency reversal zone on Thursday (Aug. 24 - Sept. 7), so we could also see a bottom in that time frame and the dollar turn back up. As I mentioned above, there may be quite a lot of volatility in these markets over the next several weeks.
Crude oil prices made a low last Thursday as it entered a reversal zone specifically for crude (Aug. 17 - 25). Prices rose Friday and again today as they tested the 15-day moving average before falling to close below it. We are in the center of this current reversal zone, so a top could be imminent and may have happened today. Last Thursday's low was not low enough for a final medium-term cycle bottom (which is due anytime now in this market), so I expect prices to go lower. We also like to see prices fall 2 - 5 weeks before we declare a final bottom. Thursday will be two weeks from the last high in crude ($84.89 on Aug. 10, Sept.contract chart). But we also have another reversal zone for crude Sept. 1 -11, so that would also be a good time for a final medium-term cycle bottom. A test or break below the 45-day moving average would be another desirable characteristic of a final cycle bottom. That average is now around $76.60 and rising slowly. We'll remain on the sidelines of crude for now as we wait for lower prices. Crude oil continues to look very bullish, so we will be looking to buy the bottom of this current cycle.
After falling steeply last week, the broad stock market was entitled to a small relief rally, which it seems to have taken today. The S&P 500 and especially the NASDAQ rallied smartly today, although the DOW lagged behind and was much less enthusiastic. We don't enter our strong reversal zone until Wednesday (Aug. 23 - Sept. 8), so I don't think this market has found its bottom yet. The DOW and S&P 500 are still far from our ideal targets (33,500 and 4,200, respectively) for their final medium-term cycle bottoms, and there is plenty of time for them to move closer over the next three weeks. Let's hold on to our short positions in this market for now.
Gold prices are up just a bit, but silver prices are surging today. Despite this bullishness, however, silver is making a new weekly high and gold is not, and that sets up a bearish divergence signal. And this is happening as we enter a reversal zone specifically for the precious metals (Aug. 21 - Sept. 5, which is also overlapping with our general reversal zone mentioned above). This could put a damper on any rally in both metals as any new highs this week or next could also be significant cycle tops. There are also a lot of potential "pivot points" for both metals in this time frame. Tuesday and Wednesday we have one for gold, and Thursday and Friday, one for silver. Sept. 1 - 4 is also a potentially strong pivot point for silver. We may see a lot of volatility and price movement- both up and down - over the next several weeks in the precious metals, so it may be best to stay on the sidelines, especially as we are a little uncertain about the current cycle labeling of gold. My guess at this point is that the trend in both metals may be turning bearish and that any rally now will be short-lived, but we shall see how this plays out over the next three weeks. We remain on the sidelines of both metals for now.
The U.S. Dollar Index is down from Friday's 103.68 high which was just one day out of a reversal zone specifically for currencies. This means the greenback can fall now and give an upward thrust to precious metal prices, but we note that we enter yet another currency reversal zone on Thursday (Aug. 24 - Sept. 7), so we could also see a bottom in that time frame and the dollar turn back up. As I mentioned above, there may be quite a lot of volatility in these markets over the next several weeks.
Crude oil prices made a low last Thursday as it entered a reversal zone specifically for crude (Aug. 17 - 25). Prices rose Friday and again today as they tested the 15-day moving average before falling to close below it. We are in the center of this current reversal zone, so a top could be imminent and may have happened today. Last Thursday's low was not low enough for a final medium-term cycle bottom (which is due anytime now in this market), so I expect prices to go lower. We also like to see prices fall 2 - 5 weeks before we declare a final bottom. Thursday will be two weeks from the last high in crude ($84.89 on Aug. 10, Sept.contract chart). But we also have another reversal zone for crude Sept. 1 -11, so that would also be a good time for a final medium-term cycle bottom. A test or break below the 45-day moving average would be another desirable characteristic of a final cycle bottom. That average is now around $76.60 and rising slowly. We'll remain on the sidelines of crude for now as we wait for lower prices. Crude oil continues to look very bullish, so we will be looking to buy the bottom of this current cycle.
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