The broad stock market is giving us a lot of mixed signals right now and that is going to keep us on the sidelines today.
The DOW and S&P 500 today broke below their Oct. 29 lows. This is a bearish sign. If these indices did start new medium-term cycles on Oct. 29, it would mean that this market could continue down for at least 7 more weeks and possibly longer. On the other hand, if Oct. 29 was not the start of new cycles then both these indices could just be completing the final bottom to an older cycle which would also be bearish but for a much shorter period of time - they would likely find a final bottom within 2 weeks. One bullish sign now is that the NASDAQ has not (yet) broken the Nov. 20 low (6830) that may have started its new medium-term cycle. This gives us a bullish divergence signal until that low breaks. After diving early in the day, all three indices seem to be recovering and closing in positive territory. This is also bullish behavior.
What should we be watching for amidst all these mixed signals and possibilities? Well, if the NASDAQ breaks significantly below 6830, that would support the idea of a longer-term breakdown in this market. But if that low holds then it is possible for the DOW and S&P 500 to complete their cycle bottoms quickly (within 2 weeks) and then see a strong new rally start in all three indices. Tuesday-Wednesday this week could be a significant turning point for this market. If we see the DOW and S&P 500 edge lower over the next day or two with the NASDAQ holding above 6830, we may consider going long.
Gold and silver prices are backing down a bit from last week's highs. These two metals could now be turning down to complete their final medium-term cycle bottoms over the next few weeks. If silver breaks below $13.89 with gold staying above $1161 (bullish divergence), we'll have a good opportunity to go long in both metals. On the sidelines of this market for now.
Crude oil is a little tricky to call right now. It appears that a medium-term cycle bottom could have been made on Nov. 29 at $49.41. That was in the center of a general reversal zone. But prices seemed reluctant to rally strongly from there, and they are now descending again towards $50 as we near the end of another reversal zone specifically for crude (it ends Wednesday). We could be seeing a double bottom here or the start of a descent to even lower prices (directional momentum in crude is currently 100% bearish). We are looking to go long at the bottom of this cycle, but let's stay on the sidelines for now until we see stronger bullish signals.