Gold and silver are the main news in the markets right now. For the first time in five months of showing nearly 100% bearish momentum, both gold and silver price charts are now flashing medium-term bullish signals. As I suggested in a recent blog, there is a good possibility gold and silver will be moving up and down in a fairly narrow range over the next few months as it forms a strong "base" before finally and decisively "breaking out" and taking off towards a major long-term rally marking the start of a new long-term cycle in these metals. Although the final bottom of this base may already be in (at $1183 in gold and $18.25 in silver), my research and analysis point to a possible deeper low in gold (and maybe silver) which could bring it closer to $1000 before the end of the year. Long-term investors may wish to wait for more definite signals of the final bottom being in, but short and medium-term traders can now be alert for some profitable trading as a momentum shift is in progress. There is some resistance in gold around $1350 and then at $1400. Today gold is up strongly (spot price reached $1339), but market conditions continue to be volatile for all of this week, and there are some technical indicators suggesting a price pullback tomorrow or Wednesday. We will therefore wait for a small pullback to possibly go long for a rally towards $1400. Note that my strategy is twofold here: first, to take advantage of a possible short-term rally, and second, to start putting at least some money in precious metals should the cycle bottoms already be in. Once we are more certain of the final cycle bottoms, we can put more money into this market with confidence knowing that both gold and silver are likely to hit new all time highs soon and will probably greatly exceed those highs over the next several years (see An Overview of Financial Markets for the Next Six Months). Still on the sidelines today but looking to go long on a brief pullback.
The broad stock market negated its intermarket bearish divergence signal from last week as both the DOW and S&P 500 both broke to new all-time highs by Friday. Nevertheless, I feel that some sort of correction is imminent and that this reversal will occur by the middle of next week. Because momentum is still strongly bullish we may get a little more rallying this week into resistance areas around 15,620 in the DOW and a little over 1700 in the S&P 500. Still on the sidelines here, but we may sell short soon if these resistance zones hold and we get a bearish shift in momentum.
Crude oil prices dropped significantly today, and it's looking like Friday's high at a little over $109 may be the high from which our anticipated correction begins. Momentum is still 100% bullish, however, so we will stay on the sidelines for now. Friday of this week is the centerpoint of another time zone for likely reversals in all markets so, as with the broad stock market, we may see crude prices edge up a bit more into the end of the week before reversing.