MARKETS UPDATE (9:15 pm EST)
Today is a holiday in the U.S. (Martin Luther King Jr. Day) and the stock market was closed so it is a good time to review our strategy for this week.
The DOW made a new monthly low on Friday (17,244) but then rose back up to close the day with a 190 point gain. Despite the strong finish, that dip early in the day was enough to trigger a strong bearish momentum signal, and directional momentum in the DOW (as well as the S&P 500 and NASDAQ) is now mixed bullish and bearish. This downward shift in momentum as well as several other bearish factors (such as the breakdown of copper mentioned in my last blog) and the fact that we are nearing the end of the current cycle in the broad stock market means that we should now be looking for a point to sell this market short. There are two likely scenarios that could unfold now. Ideally, the DOW reverses from Friday's low and rallies weakly into the first week of February but stays below the Dec. 26 all-time high of 18,103. That would be the ideal setup to sell short in early February. If instead the DOW continues to fall and breaks below the 17,000 - 17,200 area, then equity markets will likely fall steeply into early February. That bottom support around 17,000 is critical and is thus a key level to watch as we remain on the sidelines.
Gold and silver both made new highs last week and directional momentum is now nearly 100% bullish for both metals. Nevertheless, the precious metals are rising into the center of a timing window (ending this Friday) for a possible reversal so we should be watching for at least a short-term backing down of prices which could present us with a good opportunity to buy. There is resistance for gold a little above the $1300 area so prices may edge up to that point over the next few days and then start to fall. I will consider going long if gold pulls back towards $1250 this week or next as this market looks very bullish right now. Still on the sidelines.
Crude oil is almost certainly in the process of forming a significant long-term cycle bottom that should be completed by the first week of February. The low of Jan.13 at $44.20 may have already been it, but since I suspect this market is being manipulated, it wouldn't surprise me to see it push lower, perhaps into early February. We have already exceeded the lower target of $45 for the current correction so we should be considering a long position now; however, I feel we need to be cautious with this market, especially since directional momentum remains strongly bearish. I would like to see a bullish shift in momentum before considering a long position. Once this cycle bottom is in, there is a possibility of a rally to $60 or higher. Remaining on the sidelines for now.
Today is a holiday in the U.S. (Martin Luther King Jr. Day) and the stock market was closed so it is a good time to review our strategy for this week.
The DOW made a new monthly low on Friday (17,244) but then rose back up to close the day with a 190 point gain. Despite the strong finish, that dip early in the day was enough to trigger a strong bearish momentum signal, and directional momentum in the DOW (as well as the S&P 500 and NASDAQ) is now mixed bullish and bearish. This downward shift in momentum as well as several other bearish factors (such as the breakdown of copper mentioned in my last blog) and the fact that we are nearing the end of the current cycle in the broad stock market means that we should now be looking for a point to sell this market short. There are two likely scenarios that could unfold now. Ideally, the DOW reverses from Friday's low and rallies weakly into the first week of February but stays below the Dec. 26 all-time high of 18,103. That would be the ideal setup to sell short in early February. If instead the DOW continues to fall and breaks below the 17,000 - 17,200 area, then equity markets will likely fall steeply into early February. That bottom support around 17,000 is critical and is thus a key level to watch as we remain on the sidelines.
Gold and silver both made new highs last week and directional momentum is now nearly 100% bullish for both metals. Nevertheless, the precious metals are rising into the center of a timing window (ending this Friday) for a possible reversal so we should be watching for at least a short-term backing down of prices which could present us with a good opportunity to buy. There is resistance for gold a little above the $1300 area so prices may edge up to that point over the next few days and then start to fall. I will consider going long if gold pulls back towards $1250 this week or next as this market looks very bullish right now. Still on the sidelines.
Crude oil is almost certainly in the process of forming a significant long-term cycle bottom that should be completed by the first week of February. The low of Jan.13 at $44.20 may have already been it, but since I suspect this market is being manipulated, it wouldn't surprise me to see it push lower, perhaps into early February. We have already exceeded the lower target of $45 for the current correction so we should be considering a long position now; however, I feel we need to be cautious with this market, especially since directional momentum remains strongly bearish. I would like to see a bullish shift in momentum before considering a long position. Once this cycle bottom is in, there is a possibility of a rally to $60 or higher. Remaining on the sidelines for now.
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