MARKETS UPDATE (6:30 pm EST)
The DOW made a new high today while the S&P 500 and NASDAQ did not. Thus we have some more intermarket bearish divergence in the broad stock market. Technically, we are out of last week's reversal zone, but we are entering another one in the second half of this week. If these indices push higher into Friday we could see a downturn then; however, the DOW could turn here, and all three indices could still make bottoms by the end of the week. Our major strategy now is to look for a corrective bottom to buy. That may come this week, or it may be later in the month if this market rallies into Friday (the center of our next reversal zone). If we do see a rally into Friday, we may sell short for a brief but sharp correction into the end of the month. We will stay on the sidelines for now as we watch how these indices move into the end of the week.
We have two reversal zones relevant to gold and silver in December. One is centered on Dec. 9th (this Friday) and one on Dec. 23rd. Each reversal zone lasts about a week so these two are practically back to back. As a result, we may see a lot of volatility in precious metals this month. Today gold prices made a new weekly low at $1,159 but then closed above $1,171. Silver did not make a new weekly low so we continue to see intermarket bullish divergence in these metals. Gold and silver could rally now, but if they don't, we could see prices go lower into the end of the week. If this happens and silver can stay above $16.17, we may look to buy (silver). If silver breaks below there, we may have to abandon our long position in gold. As I've mentioned in recent blogs, gold and silver could be ready to turn very bullish, but it all depends on whether or not they started new medium-term cycles in November. They may have, but it is still not certain. If they are completing older cycles, prices could go considerably lower this month. If we do see rallying this week, we want to see gold close above $1,200. If it doesn't, we may have to abandon our bullish expectations. We should note here that the Fed will be making their decision about interest rates next week and many analysts are expecting an overdue rate hike. If that happens, it would likely give a boost to the U.S. dollar and push gold and silver prices down, but another delayed hike could tank the dollar and boost precious metal prices. Holding my long position in gold for now.
As with the precious metals, the cycle structure in crude oil is also unclear and ambiguous right now. There is a possibility that crude started a new medium-term cycle on November 14 with a low of $42.95 (Jan. contract chart). If that is the case and prices can clear $53 then crude could possibly go as high as $65. On the other hand, if crude is still completing an older cycle then we could soon see a reversal down and a fall back to $43 or lower for a final cycle bottom later this month. Today prices shot up to $52.42 intraday but closed considerably lower ($51.08). A reversal could start now, but prices could also edge a bit higher into a new reversal zone later this week and then turn down. If we get a rally into Friday that stays under $53, it may be a good spot to sell short. Otherwise, we will wait to buy a bottom near the end of the month. If crude prices break and close above $53, we will try and buy any subsequent short-term corrections. On the sidelines of crude oil for now.
The strong rally in the U.S. Dollar Index since early October is getting a bit long in the tooth, and last week the dollar started backing down from a strong reistance line around $102. Today the index broke briefly below 100 but settled just above there (100.14). There is support at 100, and we could now see the dollar rest or consolidate in the 100 - 102 range for a spell before making a strong directional move. As I discussed above, that move may be determined by the Federal Reserve meeting next week. A rate hike by the Fed could ignite a rally in the dollar and push it through that $102 resistance whereas another hike delay could send the greenback tumbling down. There is a strong reversal zone centered around Dec. 24 that is especially relevant to currencies so even if the dollar is given a boost by a Fed hike, that rally might be short-lived as it makes a new top around Christmas and then reverses to make a possible long-term cycle correction. We will watch this index carefully after next week's Fed meeting.
The DOW made a new high today while the S&P 500 and NASDAQ did not. Thus we have some more intermarket bearish divergence in the broad stock market. Technically, we are out of last week's reversal zone, but we are entering another one in the second half of this week. If these indices push higher into Friday we could see a downturn then; however, the DOW could turn here, and all three indices could still make bottoms by the end of the week. Our major strategy now is to look for a corrective bottom to buy. That may come this week, or it may be later in the month if this market rallies into Friday (the center of our next reversal zone). If we do see a rally into Friday, we may sell short for a brief but sharp correction into the end of the month. We will stay on the sidelines for now as we watch how these indices move into the end of the week.
We have two reversal zones relevant to gold and silver in December. One is centered on Dec. 9th (this Friday) and one on Dec. 23rd. Each reversal zone lasts about a week so these two are practically back to back. As a result, we may see a lot of volatility in precious metals this month. Today gold prices made a new weekly low at $1,159 but then closed above $1,171. Silver did not make a new weekly low so we continue to see intermarket bullish divergence in these metals. Gold and silver could rally now, but if they don't, we could see prices go lower into the end of the week. If this happens and silver can stay above $16.17, we may look to buy (silver). If silver breaks below there, we may have to abandon our long position in gold. As I've mentioned in recent blogs, gold and silver could be ready to turn very bullish, but it all depends on whether or not they started new medium-term cycles in November. They may have, but it is still not certain. If they are completing older cycles, prices could go considerably lower this month. If we do see rallying this week, we want to see gold close above $1,200. If it doesn't, we may have to abandon our bullish expectations. We should note here that the Fed will be making their decision about interest rates next week and many analysts are expecting an overdue rate hike. If that happens, it would likely give a boost to the U.S. dollar and push gold and silver prices down, but another delayed hike could tank the dollar and boost precious metal prices. Holding my long position in gold for now.
As with the precious metals, the cycle structure in crude oil is also unclear and ambiguous right now. There is a possibility that crude started a new medium-term cycle on November 14 with a low of $42.95 (Jan. contract chart). If that is the case and prices can clear $53 then crude could possibly go as high as $65. On the other hand, if crude is still completing an older cycle then we could soon see a reversal down and a fall back to $43 or lower for a final cycle bottom later this month. Today prices shot up to $52.42 intraday but closed considerably lower ($51.08). A reversal could start now, but prices could also edge a bit higher into a new reversal zone later this week and then turn down. If we get a rally into Friday that stays under $53, it may be a good spot to sell short. Otherwise, we will wait to buy a bottom near the end of the month. If crude prices break and close above $53, we will try and buy any subsequent short-term corrections. On the sidelines of crude oil for now.
The strong rally in the U.S. Dollar Index since early October is getting a bit long in the tooth, and last week the dollar started backing down from a strong reistance line around $102. Today the index broke briefly below 100 but settled just above there (100.14). There is support at 100, and we could now see the dollar rest or consolidate in the 100 - 102 range for a spell before making a strong directional move. As I discussed above, that move may be determined by the Federal Reserve meeting next week. A rate hike by the Fed could ignite a rally in the dollar and push it through that $102 resistance whereas another hike delay could send the greenback tumbling down. There is a strong reversal zone centered around Dec. 24 that is especially relevant to currencies so even if the dollar is given a boost by a Fed hike, that rally might be short-lived as it makes a new top around Christmas and then reverses to make a possible long-term cycle correction. We will watch this index carefully after next week's Fed meeting.
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