Anyone who has been reading this blog for the last few weeks will know that even though I am long-term bullish on gold and silver I have been cautious about going long recently as several technical, cycle, and timing factors have been pointing to the possibility of an imminent sharp correction in prices. Today we are seeing that correction as gold prices dropped over 2% and silver lost nearly 2.5%. It appears that gold price manipulators may have engineered the recent gold rally into what had appeared to be a breakout in terms of several technical indicators. This may have been to get many buyers in just before selling gold short and reaping a big profit from the "fake out". Fortunately, we were not deceived by this as there were other technical signals that made me suspicious of the rally. It looks like the ideal situation of a significant low in precious metals into the second half of July may be setting up here so we are now on the lookout for signs of a bottom to buy. There is strong support for gold in the $1280 - $1300 area which may hold this correction. If prices move lower we could see a new bottom for the long-term cycle, but timing now is more important than price and I will be looking to buy at some point over the next few weeks. Still on the sidelines and waiting to buy.
The broad stock market continues to look bullish (directional momentum in the DOW, S&P 500 and NASDAQ is still nearly 100% for all three indices) and the DOW gained 111 points today. Rallying could continue into the end of this week, but we are entering a time period (from now into the first half of August) when a major reversal in this market is likely. It is late in the chart cycles of the DOW, S&P 500 and NASDAQ so a significant correction in these markets is due soon. New highs into the end of this week could create an ideal spot to sell short so we will look for that. A less likely (but possible) scenario would be for the market to pull back a bit into Friday and then rally again for new highs into late July/early August. In either case we are looking to sell short soon what could be a significant correction of perhaps 8 -15%. On the sidelines for now.
Crude oil prices seem to be finding support just above $100. Ideally, a significant reversal in this market would be towards the end of this week. This and the fact that directional momentum in crude charts is now mixed bullish and bearish makes me hesitant to go long at the moment, even though we are at my price target for a bottom. If prices rise strongly into Friday we could be setting up for another major move down and the market could turn bearish. I am going to wait and observe a few more days of price movement before making a trade here. Still on the sidelines.