MARKETS UPDATE with IMPORTANT GOLD UPDATE (7:30 pm EST)
On Friday, Federal Reserve Chairman Jerome Powell delivered a speech suggesting the Fed was satisfied with the effect its aggressive rate hiking policy has had on curbing inflation and could be ready to pull back on any hikes for the immediate future. Investors and traders put a dovish spin on Powell's speech as equity markets rallied strongly, but even more striking was the surge in gold prices. Powell's dovish tone seemed to depress the U.S. Dollar Index and push up precious metals. Gold rose to $2073 and closed at $2071, which is breaking above its all-time high of $2070 from August 2020. This was the signal we were waiting for to confirm that gold ended a long-term 23 year cycle (and started a new one) with its low of $1616 on Sept. 28, 2022.
But wait, there's more! Gold surged to $2122 (!) in late Sunday trading before plunging back to $2025 today. What is going on here? Apparently an "irrational exuberance" for gold on Friday triggered a "gold rush" into the week-end resulting in a short-term blow-off top and crash (the result of a tipping point being reached when a large number of buyers decide it's a good time to take profits, thus triggering a panic sell-off). Does this mean our bullish "breakthrough" signal to a new all-time high is negated? Not necessarily.
We had been expecting a sharp correction in this market. Last Wednesday we took profits in our long gold position and I wrote:
"The medium-term cycle in both metals is also ripe for a steep sub-cycle corrective "dip"....we will wait for a substantial corrective drop in gold and plan on buying it again (along with silver)....within the next week or two. Any sub-cycle correction now should at least test the 15-day moving average for both metals."
So we were expecting a top and substantial corrective "dip", but nothing of this magnitude! We note that despite the "blow-off" top in gold, the correction so far has been minimal and is still above the 15-day moving average.(now around $2006). We will watch for a sub-cycle corrective low now. If we get one that stabilizes between the 15-day and 45-day moving averages, we will be looking to buy again as there's a good chance prices will rise to exceed Sunday's $2122 "blow-off" high.
Silver's surge on Sunday was not as dramatic as gold's, but today's price plunge in silver was on par with gold. Prices are approaching the 15-day moving average (now at $24.18), and as with gold, we will watch for a buy spot soon, ideally between the 15-day and 45-day moving averages. For now, we remain on the sidelines of both metals..
Not surprisingly, the U.S. Dollar Index bounced back up today. We are about to enter a reversal zone specifically related to currencies Dec. 6 - 18. If the dollar continues to push up into this time frame, it would put further downward pressure on the metals, but then a potential top and reversal back down could send the metals back up - a scenario that would fit well with our current cycle analysis of gold and silver. Let's watch for it.
The broad stock market also turned down today from Friday's highs, but not by much. We are still waiting for a corrective "dip" in this market to buy. Last week's intermarket bearish divergence signal (the DOW breaking above its summer high without the S&P 500 and NASDAQ doing the same) is still in force (until those latter two break their July highs - they are close), and we are in the center of a weak general reversal zone, so a reversal may be starting now. If not, and these indices continue to push higher, we may have to wait a bit longer for that corrective low to buy. We are still on the sidelines of this market.
After closing above the 15-day moving average last Wednesday, crude oil prices broke down below it again and are now challenging the Nov. 16 low of $72.37 (Jan. 2024 contract chart). In last Thursday's blog on crude I wrote:
"We have a reversal zone specifically for crude oil coming up Dec. 5 - 13 that overlaps with our general reversal zone Dec. 12 - 21. That could be a good time frame for the final bottom of an older cycle and a possible spot to buy."
If prices go below $72.37 inside these reversal zones (starting tomorrow), we may start looking for a good spot to buy, assuming crude's medium-term cycle is old (i.e. began on Aug. 23). We have to be careful, however, because if the medium-term cycle is younger (i.e. began Oct. 6), then a final cycle bottom is not due for at least six more weeks, and prices could fall a lot lower. We are staying on the sidelines of crude for now.
On Friday, Federal Reserve Chairman Jerome Powell delivered a speech suggesting the Fed was satisfied with the effect its aggressive rate hiking policy has had on curbing inflation and could be ready to pull back on any hikes for the immediate future. Investors and traders put a dovish spin on Powell's speech as equity markets rallied strongly, but even more striking was the surge in gold prices. Powell's dovish tone seemed to depress the U.S. Dollar Index and push up precious metals. Gold rose to $2073 and closed at $2071, which is breaking above its all-time high of $2070 from August 2020. This was the signal we were waiting for to confirm that gold ended a long-term 23 year cycle (and started a new one) with its low of $1616 on Sept. 28, 2022.
But wait, there's more! Gold surged to $2122 (!) in late Sunday trading before plunging back to $2025 today. What is going on here? Apparently an "irrational exuberance" for gold on Friday triggered a "gold rush" into the week-end resulting in a short-term blow-off top and crash (the result of a tipping point being reached when a large number of buyers decide it's a good time to take profits, thus triggering a panic sell-off). Does this mean our bullish "breakthrough" signal to a new all-time high is negated? Not necessarily.
We had been expecting a sharp correction in this market. Last Wednesday we took profits in our long gold position and I wrote:
"The medium-term cycle in both metals is also ripe for a steep sub-cycle corrective "dip"....we will wait for a substantial corrective drop in gold and plan on buying it again (along with silver)....within the next week or two. Any sub-cycle correction now should at least test the 15-day moving average for both metals."
So we were expecting a top and substantial corrective "dip", but nothing of this magnitude! We note that despite the "blow-off" top in gold, the correction so far has been minimal and is still above the 15-day moving average.(now around $2006). We will watch for a sub-cycle corrective low now. If we get one that stabilizes between the 15-day and 45-day moving averages, we will be looking to buy again as there's a good chance prices will rise to exceed Sunday's $2122 "blow-off" high.
Silver's surge on Sunday was not as dramatic as gold's, but today's price plunge in silver was on par with gold. Prices are approaching the 15-day moving average (now at $24.18), and as with gold, we will watch for a buy spot soon, ideally between the 15-day and 45-day moving averages. For now, we remain on the sidelines of both metals..
Not surprisingly, the U.S. Dollar Index bounced back up today. We are about to enter a reversal zone specifically related to currencies Dec. 6 - 18. If the dollar continues to push up into this time frame, it would put further downward pressure on the metals, but then a potential top and reversal back down could send the metals back up - a scenario that would fit well with our current cycle analysis of gold and silver. Let's watch for it.
The broad stock market also turned down today from Friday's highs, but not by much. We are still waiting for a corrective "dip" in this market to buy. Last week's intermarket bearish divergence signal (the DOW breaking above its summer high without the S&P 500 and NASDAQ doing the same) is still in force (until those latter two break their July highs - they are close), and we are in the center of a weak general reversal zone, so a reversal may be starting now. If not, and these indices continue to push higher, we may have to wait a bit longer for that corrective low to buy. We are still on the sidelines of this market.
After closing above the 15-day moving average last Wednesday, crude oil prices broke down below it again and are now challenging the Nov. 16 low of $72.37 (Jan. 2024 contract chart). In last Thursday's blog on crude I wrote:
"We have a reversal zone specifically for crude oil coming up Dec. 5 - 13 that overlaps with our general reversal zone Dec. 12 - 21. That could be a good time frame for the final bottom of an older cycle and a possible spot to buy."
If prices go below $72.37 inside these reversal zones (starting tomorrow), we may start looking for a good spot to buy, assuming crude's medium-term cycle is old (i.e. began on Aug. 23). We have to be careful, however, because if the medium-term cycle is younger (i.e. began Oct. 6), then a final cycle bottom is not due for at least six more weeks, and prices could fall a lot lower. We are staying on the sidelines of crude for now.
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