CORRECTION: Yesterday I stated that last week gold broke above its previous week's high. That was incorrect. Neither gold nor silver broke above their highs from the previous week, so there was no intermarket bearish divergence signal last week. Both metals did break above those Dec. 21 highs today, however, with gold still remaining below its Nov. 9 high of $1965 (silver has been above its Nov. 9 high since mid-December). This gives us a bearish divergence signal now. Gold is getting pretty close to that $1965 high. Readers may recall from recent blogs that I've said gold's new medium-term cycle was turning bearish. That could still be true if gold turns down now before breaking above $1965. If it does break $1965, we will have to revise that bearish view. We will remain on the sidelines of both metals for now.
Both the DOW and S&P 500 made new weekly highs early today before falling dramatically. The NASDAQ, however, did not exceed last week's high before falling. This is a classic intermarket bearish divergence signal, and it may be heralding a significant correction now. We will watch this week to see if today's downturn will follow through to a significant sub-cycle correction. As long as that correction doesn't get too low, we will likely be looking to buy it. Still on the sidelines of the broad stock market.
In yesterday's blog on crude oil I wrote;
"Because of last week's holiday, we can extend last week's reversal zone into early this week. We will watch for a new top that could be a turning point for a correction. Like the broad stock market, this market seems bullish, so any corrective low could be a good buy spot."
Today crude did edge up to a new high ($49.83 - Feb. contract chart) on the early AM market before falling steeply. As with the broad stock market, this could be the start of a significant sub-cycle correction. We will stay on the sidelines for now and watch to see if prices continue lower this week.