MARKETS UPDATE (6:40 pm EST)
On Friday we covered our short positions in the broad stock market and I wrote:
"We enter another reversal zone next week and still another stronger reversal zone Christmas week so we should still be on the lookout for a top in this market as the medium-term cycle is coming to an end and a correction is now due. We may get another bearish divergence signal next week, but at this point I would prefer to see a top near the Christmas and New Year's holiday as that would be a better reversal point for a correction."
Well, we won't be getting that bearish divergence signal this week as all three market indices (DOW, S&P 500, and NASDAQ) rallied strongly today and all made new highs. The "Santa Claus" rally could be cranking up. It's a bit late to be chasing this rally, and because this week is a reversal zone (a weak one - the strong one is next week), I don't feel comfortable going long. Let's stay on the sidelines for now and wait to see if we get a bearish divergence signal next week. This market is severely overbought, and the medium-term cycle structure tells us that a top and steep correction are due very soon in the DOW and S&P 500.
Gold and silver may have completed their medium-term cycle bottoms last Tuesday (gold at $1237 and silver at $15.64), but that was not in a reversal zone and there was no bullish divergence signal which keeps open the possibility of prices moving lower this week or next week (which is a very strong reversal zone specifically for the precious metals). Still, prices have been rallying sharply from last week's lows so we have to consider the possibility of new medium-term cycles starting then (which could be very bullish). Gold needs to start closing above $1270 and silver above $16.40 to make the case for new cycles starting last Tuesday. Even if we have new cycles, we have to be careful about going long because, as with the broad stock market, this week is a reversal zone for gold and silver and next week is an even stronger one so rallies may not get far before turning down again. We will remain on the sidelines of gold and silver for now.
On Dec. 11, I wrote on crude oil:
"Crude oil's medium-term cycle bottom is also overdue now. Last week's low at $55.82 (Jan. contract chart) on Thursday was barely within a reversal zone for crude and was not really low enough for a normal correction, but since we are late in this cycle it is possible that was it. If that was the end of the cycle (and the start of a new one) then crude could be bullish now and easily exceed its Nov. 27 high of $58.99. I am not convinced that last week's low was the cycle bottom, however, and it's still possible for crude to turn down and move towards a more "normal" corrective bottom below $55, perhaps into the next reversal zone in the last two weeks of December."
Well, that low at $55.82 is holding, but prices have not yet exceeded $58.99 so this market's direction is still undecided. It is still possible for prices to move below $55 over the next two weeks to form a final cycle bottom by the end of the month. If this happens, it could be a good buy spot as directional momentum in crude is currently almost 100% bullish. On the sidelines of crude for now.
On Friday we covered our short positions in the broad stock market and I wrote:
"We enter another reversal zone next week and still another stronger reversal zone Christmas week so we should still be on the lookout for a top in this market as the medium-term cycle is coming to an end and a correction is now due. We may get another bearish divergence signal next week, but at this point I would prefer to see a top near the Christmas and New Year's holiday as that would be a better reversal point for a correction."
Well, we won't be getting that bearish divergence signal this week as all three market indices (DOW, S&P 500, and NASDAQ) rallied strongly today and all made new highs. The "Santa Claus" rally could be cranking up. It's a bit late to be chasing this rally, and because this week is a reversal zone (a weak one - the strong one is next week), I don't feel comfortable going long. Let's stay on the sidelines for now and wait to see if we get a bearish divergence signal next week. This market is severely overbought, and the medium-term cycle structure tells us that a top and steep correction are due very soon in the DOW and S&P 500.
Gold and silver may have completed their medium-term cycle bottoms last Tuesday (gold at $1237 and silver at $15.64), but that was not in a reversal zone and there was no bullish divergence signal which keeps open the possibility of prices moving lower this week or next week (which is a very strong reversal zone specifically for the precious metals). Still, prices have been rallying sharply from last week's lows so we have to consider the possibility of new medium-term cycles starting then (which could be very bullish). Gold needs to start closing above $1270 and silver above $16.40 to make the case for new cycles starting last Tuesday. Even if we have new cycles, we have to be careful about going long because, as with the broad stock market, this week is a reversal zone for gold and silver and next week is an even stronger one so rallies may not get far before turning down again. We will remain on the sidelines of gold and silver for now.
On Dec. 11, I wrote on crude oil:
"Crude oil's medium-term cycle bottom is also overdue now. Last week's low at $55.82 (Jan. contract chart) on Thursday was barely within a reversal zone for crude and was not really low enough for a normal correction, but since we are late in this cycle it is possible that was it. If that was the end of the cycle (and the start of a new one) then crude could be bullish now and easily exceed its Nov. 27 high of $58.99. I am not convinced that last week's low was the cycle bottom, however, and it's still possible for crude to turn down and move towards a more "normal" corrective bottom below $55, perhaps into the next reversal zone in the last two weeks of December."
Well, that low at $55.82 is holding, but prices have not yet exceeded $58.99 so this market's direction is still undecided. It is still possible for prices to move below $55 over the next two weeks to form a final cycle bottom by the end of the month. If this happens, it could be a good buy spot as directional momentum in crude is currently almost 100% bullish. On the sidelines of crude for now.
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