MARKETS UPDATE (3:00 pm EST)
We are seeing an unusual medium-term cycle manifesting in the broad stock market right now. This cycle is unusually bullish and is most likely expanding (distorting) beyond its normal length. It looks like the DOW and S&P 500 are rallying now from a sub-cycle corrective low from Dec. 29. This means it's possible we may not see the final cycle top in these two indices for several more weeks. Interestingly, the NASDAQ appears to have already started a new medium-term cycle off its Dec. 6 corrective low at 6,734. Because the start of a new cycle is almost always bullish, it's not surprising to see this index rallying strongly now, but it could turn bearish when the DOW and S&P 500 reach their tops and then start to take a significant correction down with them. Our immediate focus is still to sell short at the final tops to the DOW and S&P 500 cycles.
We are now in the middle of a reversal zone for equities (and other markets). Because of this distortion in the broad stock market cycles, I am going to extend this reversal zone a bit into Tuesday of next week. Today all three indices (DOW, S&P 500, NASDAQ) are making new highs. The S&P 500 cash chart, however, is just barely exceeding last week's high, and the S&P 500 March contract chart touched but did not exceed last week's high. This might be a case of intermarket bearish divergence, but all three indices need to close in the lower part of today's range to confirm that. This is not a strong enough signal to make me want to sell short now, especially with directional momentum still 100% bullish in this market. We will continue to watch for signs of a top this week as well as early next week (which could give us a stronger bearish divergence signal). Still on the sidelines of the broad stock market.
Gold and silver prices have been falling from last Thursday's highs ( $1326 in gold and $17.37 in silver). Those highs were early in the current reversal zone (Jan. 3 - 12) so we could be falling into a sub-cycle low now. Ideal targets for that low would be around $1290 in gold and $16.60 in silver. If instead these metals start pushing higher to challenge or exceed last week's high(s) then we will watch for a top this week as we are still in this reversal zone through Friday.
As I've stated in previous blogs, it looks like both gold and silver started new medium-term (and possibly longer-term) cycles on Dec. 12 and could turn very bullish now. This is why we are looking to go long on any significant correction that stays above those Dec. 12 lows ($1236 in gold and $15.63 in silver). On the sidelines of gold and silver but looking to go long soon.
Like the precious metals, crude oil could have made a top last Thursday at $61.21 (Feb. contract chart) and could now be falling to a sub-cycle low that should stay above $55.88. Crude likely started a new medium-term cycle on Dec. 7 (at $55.88) so the current pullback should just be modest and corrective as new cycles are usually bullish. A good target for this correction would be around $59. We will look to buy if prices can get there. We are still in the reversal zone all week, however, so prices could still push higher and exceed last Thursday's high. If that happens, we may look to sell short at a new top this week for that correction down to $59 (or lower). On the sidelines of crude oil for now.
We are seeing an unusual medium-term cycle manifesting in the broad stock market right now. This cycle is unusually bullish and is most likely expanding (distorting) beyond its normal length. It looks like the DOW and S&P 500 are rallying now from a sub-cycle corrective low from Dec. 29. This means it's possible we may not see the final cycle top in these two indices for several more weeks. Interestingly, the NASDAQ appears to have already started a new medium-term cycle off its Dec. 6 corrective low at 6,734. Because the start of a new cycle is almost always bullish, it's not surprising to see this index rallying strongly now, but it could turn bearish when the DOW and S&P 500 reach their tops and then start to take a significant correction down with them. Our immediate focus is still to sell short at the final tops to the DOW and S&P 500 cycles.
We are now in the middle of a reversal zone for equities (and other markets). Because of this distortion in the broad stock market cycles, I am going to extend this reversal zone a bit into Tuesday of next week. Today all three indices (DOW, S&P 500, NASDAQ) are making new highs. The S&P 500 cash chart, however, is just barely exceeding last week's high, and the S&P 500 March contract chart touched but did not exceed last week's high. This might be a case of intermarket bearish divergence, but all three indices need to close in the lower part of today's range to confirm that. This is not a strong enough signal to make me want to sell short now, especially with directional momentum still 100% bullish in this market. We will continue to watch for signs of a top this week as well as early next week (which could give us a stronger bearish divergence signal). Still on the sidelines of the broad stock market.
Gold and silver prices have been falling from last Thursday's highs ( $1326 in gold and $17.37 in silver). Those highs were early in the current reversal zone (Jan. 3 - 12) so we could be falling into a sub-cycle low now. Ideal targets for that low would be around $1290 in gold and $16.60 in silver. If instead these metals start pushing higher to challenge or exceed last week's high(s) then we will watch for a top this week as we are still in this reversal zone through Friday.
As I've stated in previous blogs, it looks like both gold and silver started new medium-term (and possibly longer-term) cycles on Dec. 12 and could turn very bullish now. This is why we are looking to go long on any significant correction that stays above those Dec. 12 lows ($1236 in gold and $15.63 in silver). On the sidelines of gold and silver but looking to go long soon.
Like the precious metals, crude oil could have made a top last Thursday at $61.21 (Feb. contract chart) and could now be falling to a sub-cycle low that should stay above $55.88. Crude likely started a new medium-term cycle on Dec. 7 (at $55.88) so the current pullback should just be modest and corrective as new cycles are usually bullish. A good target for this correction would be around $59. We will look to buy if prices can get there. We are still in the reversal zone all week, however, so prices could still push higher and exceed last Thursday's high. If that happens, we may look to sell short at a new top this week for that correction down to $59 (or lower). On the sidelines of crude oil for now.
RSS Feed