Equity markets were down slightly today following record highs in all three major market indices (DOW, S&P 500, NASDAQ) made last Friday. It is too early to tell if a correction is starting. It could be, especially since last Friday was the dead center (most likely turning point) of the current reversal zone; however, that reversal zone extends into the end of this week so there is still time for the broad stock market to make new highs and then reverse from a top before Friday. We are looking to buy the bottom of any modest subcycle correction now although we need to keep in mind the possibility of this market "breaking out" to higher levels instead of reversing (a real possibility considering the bullish "Trumphoria" that seems to be propelling equity markets since the election). If we don't see this market turn down by Friday, we will have to consider that bullish scenario. Still on the sidelines and waiting to buy the bottom of a modest correction.
Crude oil's cycle is currently presenting us with a picture similar to that of gold and silver (see today's earlier blog on the precious metals). I am not sure if crude started a new medium-term cycle with its recent low on Nov. 14 ($42.95 - Jan. contract chart) or if the old cycle is still in the process of bottoming and will go back down to that low or even lower for a final bottom either in this week's reversal zone or in the next one at the end of December. If this is a new cycle then this market is probably bullish and prices will likely hold above $45 as the market rallies to challenge the recent high at $49.20. But if it is an older cycle still bottoming, we could see that $43 level tested or penetrated as early as this week. If that happens, we will look to buy. We will stay on the sidelines of crude until the cycle becomes more clear.
The U.S. Dollar Index nearly touched the 102 mark last week on Thursday. That was the center of the current reversal zone (which is applicable to currency markets), and the dollar has been falling over the last several days. There are technical signs that the overbought dollar is topping out now and could take a significant correction or at least consolidate in a narrow range for awhile before pushing higher to break that 102 mark. If the Fed decides not to raise interest rates in December, this could push the dollar lower and also trigger a rally in the precious metals. We will have to wait and see how this plays out.