There are many technical, timing and cycle patterns now suggesting an imminent bottom and reversal in the precious metals, and next week appears to be the perfect time for it to happen. Gold prices made a low near $1777 intraday on Friday, but then snapped back to close the day at $1198. This is very bullish behavior. That low could easily be a double bottom to the $1073 low from July 19, and if so a relief rally in gold could already be starting. Silver gave an equally bullish signal on Friday as prices dipped to $14.38 intraday and then rallied back to close near the day's opening price around $14.65. I am going to enter long positions in both gold and silver tonight for tomorrow's market open. We can place stop losses at or near the recent lows in these metals ($1073 in gold and $14.38 in silver). If this week either gold or silver breaks last Friday's low without the other making a new weekly low, we will have a case of bullish intermarket divergence which could be followed by the start of a strong rally. The rally could get at least up to $1140 (and possibly $1170) in gold and up towards $17 (possibly $18) in silver. Note that even though this rally's potential is substantial and tradable, the medium-term trend for both gold and silver is still bearish, and prices will likely not get above the levels just mentioned before turning back down for a final plunge to a long-term cycle bottom in both metals near the end of the year (see my recent gold update on the homepage). But for now, it looks like the shorter term cycles are bottoming, and I am turning short-term bullish. Entering long positions now in both gold and silver.
The broad stock market fell strongly last week as investors worried about poor earnings reports from major companies such as Apple, IBM, and Caterpillar as well as data showing a slowing growth in the global economy. The DOW is now quickly moving back towards its July 7th low of 17,465 which is altering the current cycle pattern of this index and making it more difficult to interpret. This week is another strong reversal period for the markets, and equities are falling sharply into it so we should be looking for a bottom to buy. However, if the DOW breaks strongly below 17,465, we will have to rethink this strategy as a serious correction could be in progress that could negate any reversal. Directional momentum in the NASDAQ and S&P 500 are still supporting a bullish scenario for equities (they remain 100% bullish despite last week's losses) while the DOW is still mixed bullish and bearish. This month's Federal Reserve meeting is this week, and the market's reaction to it could be a turning point. Still on the sidelines of the broad stock market.
I had some technical problems last week with the data source that I use to analyze crude oil charts. This caused me to enter a long position prematurely and also necessitated an early sell of that position. Crude still appears to be forming a medium-term cycle low, and that could happen this week or next. There is now support for crude around $46.50, but the cycle bottom could go lower. We will continue to watch prices for a possible low to buy either this week or next. On the sidelines of crude oil for now.