MARKETS UPDATE (4:00 pm EST)
In last Thursday's blog on the broad stock market I wrote:
"...we did not get any intermarket bearish divergence signal. We usually like to see that before a significant reversal. There is therefore still the possibility of this market pushing higher into the next reversal zone (Feb. 26 - March 7)."
It looks like that is happening as all three indices (DOW, S&P 500, NASDAQ) rallied strongly this morning. Today directional momentum in the S&P 500 and NASDAQ turned 100% bullish (the DOW is still mixed bullish and bearish) so it appears equities want to go up. President Trump's announcement today that a new U.S.-China trade deal is "very close" may be giving this market some of its lift. We are also getting new weekly highs in all three indices today which means we will have no bearish divergence signal again this week. The center point of the new reversal zone we are entering tomorrow (Feb. 26 - March 7) is next Monday. Although this market is now touching our minimal target areas for a top (26,200 in the DOW and 2,800 in the S&P 500) and could turn down any time now, I am reluctant to sell short. I am inclined to wait for a possible bearish divergence signal early next week. Let's stay on the sidelines for now and see how the market moves this week. If we do get a sharp correction now, we will wait to buy at the bottom which could end up in either one of the two reversal zones I mentioned last Thursday (Feb. 26 - March 7 or March 12 - 21 ).
It looks like gold may have made its final medium-term cycle top at $1346 on Feb. 19 (last Tuesday) and is now headed down to the final cycle bottom (and start of a new cycle). A good target for the bottom would be around $1280. That could come next week or it could fall into the middle of March for a final low. Any sudden rally above last week's high would negate this scenario and could give us a new high to sell short in the upcoming reversal zone for precious metals (Feb. 26 - March 7, same as for equities), but I think it's more likely that the top is in and we will instead wait for a cycle bottom to buy. On the sidelines of gold.
Silver's current medium-term cycle top may also be in with last week's high at $16.20, but silver's short-term chart looks a little more bullish than gold's so we also can't rule out silver's prices pushing higher into this week's and next week's reversal zone. If this happens, it could give us a very good shorting opportunity. If it doesn't, we will wait for the final cycle bottom to buy. A good target for silver's cycle bottom would be around $14.75. On the sidelines of silver.
Crude oil prices are dropping sharply today. This may be the start of a sharp sub-cycle correction in this market from last week's high of $57.81 (April contract chart). A good target for this correction would be $50 - $51. Ideally, that low would happen in the upcoming reversal zone for crude (March 5 - 14). We will watch for this as an opportunity to buy. If prices instead push higher into that time frame, we might get a (short-term) shorting opportunity (probably above $60) and will have to wait a little longer for a sub-cycle correction and bottom to buy (probably a little above $51). On the sidelines of crude oil for now.
In last Thursday's blog on the broad stock market I wrote:
"...we did not get any intermarket bearish divergence signal. We usually like to see that before a significant reversal. There is therefore still the possibility of this market pushing higher into the next reversal zone (Feb. 26 - March 7)."
It looks like that is happening as all three indices (DOW, S&P 500, NASDAQ) rallied strongly this morning. Today directional momentum in the S&P 500 and NASDAQ turned 100% bullish (the DOW is still mixed bullish and bearish) so it appears equities want to go up. President Trump's announcement today that a new U.S.-China trade deal is "very close" may be giving this market some of its lift. We are also getting new weekly highs in all three indices today which means we will have no bearish divergence signal again this week. The center point of the new reversal zone we are entering tomorrow (Feb. 26 - March 7) is next Monday. Although this market is now touching our minimal target areas for a top (26,200 in the DOW and 2,800 in the S&P 500) and could turn down any time now, I am reluctant to sell short. I am inclined to wait for a possible bearish divergence signal early next week. Let's stay on the sidelines for now and see how the market moves this week. If we do get a sharp correction now, we will wait to buy at the bottom which could end up in either one of the two reversal zones I mentioned last Thursday (Feb. 26 - March 7 or March 12 - 21 ).
It looks like gold may have made its final medium-term cycle top at $1346 on Feb. 19 (last Tuesday) and is now headed down to the final cycle bottom (and start of a new cycle). A good target for the bottom would be around $1280. That could come next week or it could fall into the middle of March for a final low. Any sudden rally above last week's high would negate this scenario and could give us a new high to sell short in the upcoming reversal zone for precious metals (Feb. 26 - March 7, same as for equities), but I think it's more likely that the top is in and we will instead wait for a cycle bottom to buy. On the sidelines of gold.
Silver's current medium-term cycle top may also be in with last week's high at $16.20, but silver's short-term chart looks a little more bullish than gold's so we also can't rule out silver's prices pushing higher into this week's and next week's reversal zone. If this happens, it could give us a very good shorting opportunity. If it doesn't, we will wait for the final cycle bottom to buy. A good target for silver's cycle bottom would be around $14.75. On the sidelines of silver.
Crude oil prices are dropping sharply today. This may be the start of a sharp sub-cycle correction in this market from last week's high of $57.81 (April contract chart). A good target for this correction would be $50 - $51. Ideally, that low would happen in the upcoming reversal zone for crude (March 5 - 14). We will watch for this as an opportunity to buy. If prices instead push higher into that time frame, we might get a (short-term) shorting opportunity (probably above $60) and will have to wait a little longer for a sub-cycle correction and bottom to buy (probably a little above $51). On the sidelines of crude oil for now.
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