We are technically now out of our recent reversal zone for the broad stock market (and other markets), although it could spill over into this week. As I've mentioned in earlier blogs, it seems there's a good chance the DOW and S&P 500 started new medium-term cycles in late June (especially the DOW). That means they are young and could be bullish. The NASDAQ, however, is most likely an older cycle ready to take its final steep correction down to its final cycle bottom (due anytime over the next several weeks).. This is why we entered a short position in the NASDAQ last week. (The DOW and S&P 500 could also correct down now, but if they are new cycles, the correction might be modest.) Today all three indices are edging a bit higher, but only the S&P 500 and NASDAQ are making new all-time highs. The DOW is still below its all-time high of 35,091 (at the time of this writing), so we still have intermarket bearish divergence between these indices. The NASDAQ opened with a rally, but has now lost about half of that gain. I am going to hold my short NASDAQ position for now. If the DOW manages to break to a new all-time high (above 35,091), I will consider covering this position. Otherwise, we will remain short.
In last Monday's blog on gold I wrote:
"There is also a good chance that gold could have started a new medium-term cycle last week. If that's the case, gold could be very bullish now and could rally beyond $1840. We are currently holding a long position in gold and are in the red from the unexpected dive gold took on June 17. If gold can rally back to the $1840 area, we may have the opportunity to negate most of that loss."
Well, prices haven't yet reached $1840, but it still looks like this could be a new, bullish cycle. I am going to hold my long position in gold for now and see if we can at least get up to the $1840 price area.
Silver's cycle labeling is a bit more ambiguous than gold's at the moment. It too may be a new cycle, but it could also be an older cycle moving down to its final cycle bottom. Let's stay on the sidelines of silver for now.
It looks like the U.S. Dollar Index made a significant high last Wednesday at 92.84 in our reversal zone specifically for currencies (July 6-14). It is late in the dollar's cycle, so we may see this index moving lower over the next few weeks. That would support the idea of a rally in the precious metals. If this index breaks above last Wednesday's high, however, we may have to abandon this bearish outlook for the dollar.
The current medium-term cycle in crude oil is also old, so a final peak and sharp correction to the final cycle bottom is due anytime now. That peak may have happened with last Tuesday's high of $76.98 (Aug. contract chart). If so, prices should fall lower this week. There's a chance, however, that last Thursday's low at $70.76 was a sub-cycle bottom. If that's the case, we could see prices rally to another new high. Last Thursday was a bit early for a sub-cycle low, so we will stick to the idea of lower prices ahead for now. We entered a short position in crude on June 23 at $73. Today prices are closing a little above $74. Let's keep our short position for now. A close above $75 will make us concerned, and we do not want to see last week's high at $76.98 exceeded.