MARKETS UPDATE (5:30 pm EDST)
The four major markets we follow (equities, gold, silver, and crude oil) are all very difficult to call at the moment. They are at turning points where they can either reverse down strongly or break out (up) strongly. Much of our recent difficulty in trading is because there is great ambiguity in the cycle patterns of these markets now. That won't last forever, and as the days pass, the cycle and sub-cycle patterns will define themselves more clearly.
In the broad stock market, the DOW's cycle pattern is the most unclear right now so we will focus more on the S&P 500 and especially the NASDAQ. The S&P 500 is probably an old medium-term cycle that is ready to peak (if it hasn't already) and take its final sharp and deep correction down to its final cycle bottom. But it's also possible this index started a new medium-term cycle with its low of 3000 on June 29. In that case, the S&P 500 would be more bullish, and any correction would not be so deep. Because the NASDAQ seems most clearly to be an older cycle ready to take its final correction down, we have been focusing on this index (specifically the NASDAQ 100 - Sept. contract chart) for our trading.
Today all three indices made new weekly highs so we will have no WEEKLY bearish divergence through Friday.
But as the S&P 500 and NASDAQ made new all-time highs, the DOW still traded below its all-time high from February (29,568). Thus we still a very strong bearish divergence signal in this market. In terms of bullishness, the NASDAQ is in a "break out" mode as it has broken above several resistance levels recently. We were, in fact, stopped out of our short position in this index last week as it broke and closed above 11,500. So we have mixed bullish and bearish signals right now, and that makes me reluctant to sell short right now, even though the market is overbought and this index is ripe for a steep correction. We enter a new reversal zone tomorrow (Aug. 25 - Sept. 3). Let's see if the NASDAQ can push higher into this reversal zone for a final top and another opportunity to sell short. We are out of this market for now.
As with the broad stock market, it is not clear if the current cycles in gold and silver are new or old. If gold is completing an older cycle, it will likely move down and take out its Aug. 12th low of $1874 over the next few weeks. Alternatively, a newer cycle could rally now and test or exceed $2089 (the all-time high from Aug. 7). An older cycle in silver could fall as low as $20, but a newer cycle could rally to test the $30 level. It could go either way here so let's stay on the sidelines of both metals for now.
Crude oil is most likely completing an older medium-term cycle that peaked with its high of $43.68 on Aug. 5. If so, prices should fall now and find a final cycle bottom somewhere below $40 over the next several weeks. We might look to buy there. Should prices instead rally and exceed that $43.68 high, we may get another top to sell short this week or next week in our new reversal zone. Staying on the sidelines of crude for now.
The four major markets we follow (equities, gold, silver, and crude oil) are all very difficult to call at the moment. They are at turning points where they can either reverse down strongly or break out (up) strongly. Much of our recent difficulty in trading is because there is great ambiguity in the cycle patterns of these markets now. That won't last forever, and as the days pass, the cycle and sub-cycle patterns will define themselves more clearly.
In the broad stock market, the DOW's cycle pattern is the most unclear right now so we will focus more on the S&P 500 and especially the NASDAQ. The S&P 500 is probably an old medium-term cycle that is ready to peak (if it hasn't already) and take its final sharp and deep correction down to its final cycle bottom. But it's also possible this index started a new medium-term cycle with its low of 3000 on June 29. In that case, the S&P 500 would be more bullish, and any correction would not be so deep. Because the NASDAQ seems most clearly to be an older cycle ready to take its final correction down, we have been focusing on this index (specifically the NASDAQ 100 - Sept. contract chart) for our trading.
Today all three indices made new weekly highs so we will have no WEEKLY bearish divergence through Friday.
But as the S&P 500 and NASDAQ made new all-time highs, the DOW still traded below its all-time high from February (29,568). Thus we still a very strong bearish divergence signal in this market. In terms of bullishness, the NASDAQ is in a "break out" mode as it has broken above several resistance levels recently. We were, in fact, stopped out of our short position in this index last week as it broke and closed above 11,500. So we have mixed bullish and bearish signals right now, and that makes me reluctant to sell short right now, even though the market is overbought and this index is ripe for a steep correction. We enter a new reversal zone tomorrow (Aug. 25 - Sept. 3). Let's see if the NASDAQ can push higher into this reversal zone for a final top and another opportunity to sell short. We are out of this market for now.
As with the broad stock market, it is not clear if the current cycles in gold and silver are new or old. If gold is completing an older cycle, it will likely move down and take out its Aug. 12th low of $1874 over the next few weeks. Alternatively, a newer cycle could rally now and test or exceed $2089 (the all-time high from Aug. 7). An older cycle in silver could fall as low as $20, but a newer cycle could rally to test the $30 level. It could go either way here so let's stay on the sidelines of both metals for now.
Crude oil is most likely completing an older medium-term cycle that peaked with its high of $43.68 on Aug. 5. If so, prices should fall now and find a final cycle bottom somewhere below $40 over the next several weeks. We might look to buy there. Should prices instead rally and exceed that $43.68 high, we may get another top to sell short this week or next week in our new reversal zone. Staying on the sidelines of crude for now.
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