As I stated in my last blog, I am focusing on the end of this week as a likely significant turning point for most markets and am therefore watching carefully market directions into this Friday.
The broad stock market continues to look bullish today with the DOW rising over 100 points and the S&P 500 making a new all-time high (intraday). It is significant that the DOW is still below its Dec.31st all-time high of 16,588 as until this is exceeded we have a case of divergence with the S&P and NASDAQ indices which is bearish. My strategy now will be bullish and I am looking to go long on any short-term corrections as long as momentum remains strongly bullish. That may be this week if the market starts falling now and makes a significant low near Friday. If instead this market continues to rise into the week's end I will watch for a correction from that high (especially if it fails to exceed 16,588) into the following week. On the sidelines of this market.
Gold and silver prices were also quite bullish today and bullish directional momentum is very strong now in all precious metal sectors (mining company stocks, ETFs, and the metals themselves). Nevertheless, there are several short-term technical, cycle and timing signals that suggest a brief but sharp pullback now before this rally really takes off. Such a pullback would offer an excellent entry point to go long in both gold and silver. The situation here is similar to that in the broad stock market. If prices start to fall sharply into Friday I will be looking to buy at the end of the week. On the other hand, if gold and silver continue rising this week I will look for a top around Friday and then a correction into next week. Still on the sidelines and waiting to buy.
Crude oil continues to be strongly bullish but is short-term very overbought and looking toppy after its steep rise over the last five weeks. Cycles and timing are also suggesting a brief correction now which could manifest as a sharp drop in crude prices into this Friday. The alternate scenario would be a new high by Friday or early next week and then a drop in the price. I will be looking to buy any short-term correction assuming directional momentum remains bullish. There is now strong support for crude around $98 so that would be a good target for any correction. On the sidelines of this market.
The U.S. Dollar Index remains above its strong support at 80, but because directional momentum is currently 100% bearish in this index, it is vulnerable to a breakdown below that level. I am watching this closely as such a breakdown might kick the gold and silver rally into high gear immediately and bypass the correction we've been waiting for. We needn't worry too much, though, about missing a good entry point into the precious metals. Once the new long-term cycle in these metals begins there will be plenty of time to "get on board" as both gold and silver move towards new all-time highs.