Today the DOW and S&P 500 both made new weekly highs, but the NASDAQ did not. We thus have some more intermarket bearish divergence, and we are still in a reversal zone (it ends Wednesday). These markets could start correcting now, but they might wait for Wednesday's statement from the Federal Reserve (which follows this week's two day FOMC meeting). Most analysts are expecting the Fed to finally announce the second short-term interest rate hike since the financial crisis of 2008 - 2009 (the first hike was in December 2015), but the schedule for subsequent hikes (and the amount of those hikes) is not so clear. The broad stock market may already be factoring in a December hike, but if the Fed's statement mentions any plans for future hikes that look too hawkish (i.e. bigger hikes sooner than expected), equities could take a dive. Ideally, we would like to see a top by Wednesday and then a modest correction into the end of this month; however, this market is looking very bullish and could push higher over the next two weeks before correcting. Right now we will look to buy any correction that gets to the 19,000 area in the DOW and the 2,170 area in the S&P 500. We could get to those levels by the end of this week, but if these markets push higher past Wednesday, we may have to wait a bit longer for a corrective bottom to buy. Still on the sidelines of the broad stock market.
Gold made a new weekly low today while silver did not so we are starting the week with some bullish intermarket divergence between the precious metals. Nevertheless, directional momentum in both gold and silver is nearly 100% bearish at the moment, and we have the likely announcement of an interest rate hike from the Fed this Wednesday which could boost the U.S. dollar and put downward pressure on these metals. I think there is a good chance that these prices will move lower with gold possibly reaching the $1,070 area by the end of the month. If that happens, it may be a very good spot to buy. On the sidelines of both gold and silver for now.
Crude oil prices gapped up and surged to $54.51 (January contract chart) today before closing around $52.60. The cycle pattern in this market is still a little ambiguous, but it is starting to look like a new medium-term cycle started on Nov. 14. If that is the case, we may look to go long soon as prices could rise to the $65 level if the cycle's trend is bullish. Staying on the sidelines of crude oil for now.